IMO Imexag Pty Ltd v Sun Asia Export Corporation Pty Ltd
[2019] VSC 449
•5 July 2019
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S CI 2018 00703
| IMEXAG PTY LTD (ACN 138 683 342) | Plaintiff |
| v | |
| SUN ASIA EXPORT CORPORATION PTY LTD (ACN 167 964 724) | Defendant |
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JUDGE: | Gardiner AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 26 June 2018, 8 August 2018 (last filed submissions 6 September 2018) |
DATE OF JUDGMENT: | 5 July 2019 |
CASE MAY BE CITED AS: | IMO Imexag Pty Ltd v Sun Asia Export Corporation Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2019] VSC 449 |
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CORPORATIONS – Corporations Act 2001 (Cth), s 459G – Application to set aside statutory demand by reason of alleged genuine disputes and offsetting claims in respect of the debt and for ‘some other reason’ under s 459J of the Corporations Act 2001 (Cth) – Where defendant’s evidence raises matters which point to the existence of controversies which warrant further investigation in conventional inter partes proceedings – Whether matters sufficiently raised in the plaintiff’s ’21 day affidavit’ demonstrate a genuine dispute or offsetting claim – Where the totality of evidence demonstrates controversies giving rise to genuine disputes and claims such that application to set aside statutory demand not apt for resolution of controversies – Statutory demand set aside.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R Hapgood, solicitor on 26 June 2018, Mr P Fary of Counsel on 8 August 2018 | Hapgood Legal |
| For the Defendant | Mr A Richardson | Celtic Legal Pty Ltd |
TABLE OF CONTENTS
Introduction......................................................................................................................................... 1
Legal principles.................................................................................................................................. 4
Imexag’s affidavit evidence in support of the application....................................................... 11
6 February 2016 invoice 4................................................................................................. 13
27 February 2015 invoice 4............................................................................................... 14
5 March 2015 invoice 10.................................................................................................... 14
9 March 2015 invoice 11.................................................................................................... 15
9 March 2015 invoice 12.................................................................................................... 15
23 March 2015 invoice 13.................................................................................................. 15
Payments to Sun Asia by Imexag.................................................................................... 16
Amounts owned by Sun Asia to Imexag........................................................................ 16
Agreement to pay $2.00 per carton for fruit sales......................................................... 17
Arbitration between Sun Asia and Nongfu................................................................... 17
The PRF Short Payment.................................................................................................... 17
Sun Asia’s affidavit evidence......................................................................................................... 20
Imexag’s affidavit evidence in reply............................................................................................. 26
Sun Asia’s submissions in opposition to the application........................................................ 27
Imexag’ s submissions in support of the application................................................................ 29
Sun Asia’s submissions in opposition......................................................................................... 32
Conclusion......................................................................................................................................... 33
HIS HONOUR:
Introduction
By an originating process filed 26 February 2018, the plaintiff, Imexag Pty Ltd (‘Imexag’), makes application under s 459G of the Corporations Act 2001 (Cth) (‘the Act’) to set aside a statutory demand dated 24 January 2018 (‘the Demand’) which was served on it on 6 February 2018 by the defendant, Sun Asia Export Corporation Pty Ltd (‘Sun Asia’). The Demand was accompanied by an affidavit of the director of Sun Asia, Mr Geoffrey Shannon (‘Mr Shannon’), sworn 24 January 2018 which is in compliance with s 459E(3) of the Act. The application has been made within the time prescribed by s 459G(2) of the Act.
The Demand claims that Imexag is indebted to Sun Asia for a total of $444,195.00. The debts claimed are identified in the schedule to the Demand as ‘Invoices pertaining to services provided by the Creditor’ as follows:
Date of invoice Tax invoice number Amount 6 February 2015 4 $109,221.00 27 February 2015 4[1] $224,640.00 5 March 2015 10 $224,640.00 9 March 2015 11 $112,320.00 9 March 2015 12 $84,720.00 23 March 2015 13 $58,654.00 Less payments -$370,000.00 Total amount due $444,195.00 [1]There are two invoices with tax invoice number 4.
Imexag relies on three affidavits of its director Mr Jeremy Jager (‘Mr Jager’), sworn 23 February 2018 (‘First Jager Affidavit’), 27 April 2018 (‘Second Jager Affidavit’) and 11 July 2018 (‘Third Jager Affidavit’)[2] as well as an affidavit of Richard John Hapgood (‘Mr Hapgood’) sworn on 25 June 2018 and filed on 11 July 2018. Mr Hapgood is Imexag’s solicitor.
[2]This affidavit is titled ‘Second Further Affidavit of Jeremy Jager’.
Sun Asia relies on three affidavits of Mr Shannon, being the affidavit accompanying the demand sworn 24 January 2018 (‘First Shannon Affidavit’), the affidavit sworn 11 April 2018 and filed 12 April 2018 (‘Second Shannon Affidavit’) and the affidavit of 17 July 2018 (‘Third Shannon Affidavit’).
Both parties also filed and served written submissions and, subsequent to the hearings on 26 June 2018 and on 8 August 2018 respectively, supplementary submissions, the last of which were filed by Sun Asia on 6 September 2018. In all, each party filed and served 3 sets of submissions.
On the first day of the hearing of the application on 26 June 2018, Mr Hapgood appeared for Imexag. He indicated that Sun Asia had previously served a statutory demand on Imexag on 28 April 2016 (‘2016 demand’) claiming the same debt as claimed in the Demand and that the 2016 demand was subsequently withdrawn. The circumstances of the withdrawal were unclear and required clarification. The hearing of the application was adjourned to enable the parties to clarify the position in that regard. In addition, because Sun Asia contended that arguments that Imexag sought to raise were not available to it by reason of the ‘Graywinter’ principle discussed below, the adjournment also enabled Imexag to consider its position in relation to that issue.
Mr Fary of Counsel was subsequently briefed to appear for Imexag. On the second day of the hearing of the application on 8 August 2018, he stated that since the first hearing, Sun Asia had made a concession the effect of which reduced the debt claimed by it by $100,000. Further, he stated that Imexag no longer maintained its disputes in respect of the claims by Sun Asia contained within invoices number 10 and 11 (and part of invoice 12 in respect of the ‘Crimson Grapes’).[3]
[3]See Imexag’s submissions dated 1 August 2018 at paragraphs 7(c)(iii),(iv), 9.
Because of what I would describe as the unsatisfactory, confusing and conflicting evidence filed by both parties and the concessions made by Imexag at the second day of the hearing of the application, I requested that the parties file supplementary submissions setting out the parties’ positions in light of the concessions made.
The Third Shannon Affidavit deals with the issue of the 2016 demand. Mr Shannon deposes that the 2016 demand related to the same debt as the Demand, but was withdrawn on advice from his solicitors. It is now common ground that the 2016 demand has no relevance to this application.
Imexag contends that the Demand should be set aside pursuant to s 459G of the Act, on the basis that there is a genuine dispute between Imexag and Sun Asia in respect of certain of the invoices listed in the schedule to the Demand.[4] In addition, it contends that it has offsetting claims which arise by reason that Sun Asia has failed to account for payments made by Imexag in relation to what is referred to in the evidence as the ‘2016 harvest fee’ and the ‘PRF short payment,’ described below. In Imexag’s submissions dated 1 August 2018 there is an additional set off amount claimed for the sum of $25,000 for ’27 February invoice 4 loss’.
[4]Invoices dated 6 February 2015 (invoice 4), 27 February 2015 (invoice 4), 9 March 2015 (in relation to the Flame Seedless Grapes), 23 March 2015 (invoice 13).
In Imexag’s submissions, Mr Fary sought to rely on evidence filed by Sun Asia in contending that Imexag was contracting as the agent of a disclosed principal and was not liable for the invoices which remained the subject of controversy. In my view, such a contention was not available to Imexag on an application of the ‘Graywinter’ principle and it was confined to matters it ‘raised’ in the First Jager Affidavit.
However, the matter does not end there. I consider that the state of the evidence filed by the parties is such that the demand ought be set aside and the parties’ claims be litigated in a conventional inter partes forum. In coming to that view I have had regard to the policy underpinning applications of this kind which requires that such applications are designed to determine whether, on the totality of the evidence, the creditor’s claim is of such a degree of clarity that, if not paid, the creditor should have available to it the presumption of insolvency providing a ground for a winding up. Although Imexag bears the onus in this application of demonstrating the evidence of a genuine dispute or offsetting claim and despite the application of the ‘Graywinter’ principle in this context, it would be artificial and perverse to ignore what I consider to be the complex, unsatisfactory and confusing evidence filed not only by Imexag but also by Sun Asia.
As the authorities concerned with these applications make clear, it is not my function to attempt to unravel the evidence if it is not presented coherently. My function is to determine whether on the evidence there is a genuine dispute or offsetting claim and not attempt, unless the position is absolutely clear, to conduct what amounts to a taking of account or determination of the substantive dispute between the parties.[5]
[5]See Spacorp Australia Pty Ltd v Myer Stores Ltd [2001] VSCA 89, [4] in which Brooking JA and Charles JA held that unless it is ’as plain as a pikestaff that there is no debt … judges should … be at pains to perform the admittedly delicate task of disposing of that question without expressing a view on what we have called the ultimate question’.
In going about the consideration of this application I cannot conscientiously ignore or put Sun Asia’s evidence to one side in dealing with the application. Cross examination on the affidavits is most unusual in these applications and even if it had been allowed, I am not certain it would have resulted in providing any greater clarity as to the trading position between the parties. At the end of the day, I consider that Imexag has satisfied me that the disputes and claims it makes are genuine. Ironically because of the state of the evidence, Imexag was assisted in that regard by the evidence put up by Sun Asia to oppose Imexag’s position, which is evidence that I consider points to the existence of the controversies which are not apt for resolution in this forum.
Legal principles
The principles to be applied in considering what constitutes a genuine dispute or offsetting claim are the subject of numerous authorities of state Supreme Courts and the Federal Court of Australia. Both parties have referred correctly to those principles in their written submissions. In the decision of the Court of Appeal in this State of Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (in liq) (‘Malec’),[6] the principles applicable in applications to set aside statutory demands were succinctly collected and summarised as follows (citations omitted):
[6][2015] VSCA 330, [47]-[51].
The terms of s 459H of the Corporations Act and the authorities make clear that, on an application to set aside a statutory demand, the applicant is required only to establish a genuine dispute or offsetting claim. The applicant is required to evidence the assertions relevant to the alleged dispute or offsetting claim only to the extent necessary for that primary task. It is not necessary for the applicant to advance a fully evidenced claim. Therefore, the task faced by an applicant is by no means at all a difficult or demanding one.
In determining such an application, it is not necessary or appropriate for a court to engage in an in-depth examination or determination of the merits of the alleged dispute. This is because an application alleging a genuine dispute or offsetting claim is akin to one for an interlocutory injunction and requires the applicant to establish that there is a ‘plausible contention requiring investigation’ of the existence of either a dispute as to the debt or an offsetting claim. It is therefore 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. Further, the determination of the ‘ultimate question’ of the existence of the debt at a substantive hearing should not be compromised.
The court is required to determine whether the dispute or offsetting claim is ‘genuine’. It has been said that the criterion of a ‘genuine’ dispute requires that the dispute be bona fide and truly exist in fact and that the grounds for alleging the existence of a dispute be real and not spurious, hypothetical, illusory or misconceived. It has also been observed that the dispute or offsetting claim should have a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion. It must also have sufficient factual particularity to exclude the merely fanciful or futile. A rigorous curial approach is essential to the effective operation of the statutory scheme.
The court is not required to accept uncritically 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, as it may not have sufficient prima facie plausibility to merit further investigation as to its truth. The court is also not required to accept uncritically a patently feeble legal argument or an assertion of facts unsupported by evidence, although this should not be read as suggesting that the applicant must formally or comprehensively evidence the basis of its dispute or off-setting claim. Except in such extreme cases, the court should not embark upon an inquiry as to the credit of a witness or a deponent whose evidence is relied on by the applicant to set aside a statutory demand.
Solarite Air Conditioning Pty Ltd v York International Australia Pty Ltd involved a demand for payment of a debt alleged to be due under a contract for the supply of goods. The applicant relied on four matters, each of which had the potential to affect the respondent’s entitlement to be paid the entire amount of the debt. Barrett J held that all four matters were sufficiently plausible to raise a genuine dispute. He relevantly stated:
The [applicant] will fail in [the] task [of establishing a genuine dispute] only if … the contentions upon which it seeks to rely … are so devoid of substance that no further investigation is warranted. Once the [applicant] 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 [applicant], it must find that a genuine dispute exists, even where any case apparently available to be advanced against the [applicant] seems stronger.
In Powerhouse Australasia Pty Ltd v Viarc Pty Ltd (‘Powerhouse’),[7] Dodds‑Streeton J considered the approach and standard to be applied when dealing with applications of this type:
While it is not a very exacting standard, on the other hand mere, assertion of a dispute or off-setting claim, mere bluster or advancing grounds which are illusory or spurious or insufficiently particularised will not suffice. The Court must not enter into the merits of the dispute, but it is not crossing the line in relation to its legitimate role in these applications to consider evidence which ‘bears on whether or not the asserted dispute or off-setting claim is genuine’. Indeed, that is its necessary function.[8] [emphasis added]
[7][2006] VSC 508.
[8]Ibid [48].
The authorities which have described and considered what has become known as the ‘Graywinter’ principle have their genesis in the decision of Sundberg J in Graywinter Properties Pty Ltd v Gas & Fuel Corp Superannuation Fund.[9] The principle requires that in an application under s 459G, the supporting affidavit must set out the material facts relied upon to show a genuine dispute or offsetting claim. While the evidence in support of the existence of the alleged dispute or claim may be augmented by later affidavit evidence, the application may not introduce grounds which were not raised in the original evidence.
[9](1996) 21 ACSR 581.
There are a number of authorities which consider the issue of whether an affidavit in support of an application to set aside a demand has ‘raised’ a genuine dispute, offsetting claim or ‘some other reason’ by reason of which the demand should be set aside.[10] In Saferack Pty Ltd v Marketing heads Australia Pty Ltd[11], Barrett J, agreeing with the Full Court of the Supreme Court of Western Australia in Meadowfield Pty Ltd v Gold Coast Holdings Pty Ltd[12] held at paragraph 25 that:
With the benefit of the analysis by Austin J in POS Media and White J in Hansmar Investments, I am persuaded that my earlier approach is indeed too strict. In the Graywinter case itself, the minimum requirement with respect to a supporting affidavit was said by Sundberg J to be that it must “contain a statement of the material facts on which the applicant intends to rely to show a genuine dispute” [emphasis added]. That was, of course, a s.459H(1)(a) case. But the same reasoning applies where the challenge is under s.459J. In endorsing the approach taken by Sundberg J, the Full Court of the Supreme Court of Western Australia, in Meadowfield Pty Ltd v Gold Coast Holdings Pty Ltd [2001] WASCA 360, said that the supporting affidavit is “required to reveal a genuine dispute” [emphasis added]. These statements, coupled with the approaches taken by Austin J and White J and the decision of Santow J in Callite, persuade me that a ground is “raised”, as referred to in Energy Equity, if the ground is evident from the supporting affidavit, even if only because it can be discerned from some annexed document the content of which “reveals” it.
[10]See Process Machinery Australia Pty Ltd t/as DCL Engineering v ACN 057 260 590 Pty Ltd [2002] NSWSC 45; Hansmar Investments Pty Ltd v Perpetual Trustee Co Ltd [2007] NSWSC 103; POS Media Online Ltd v B Family Pty Ltd (2003) 21 ACLC 533; Saferack Pty Ltd v Marketing heads Australia Pty Ltd (2007) NSWSC 1143.
[11][2007] NSWSC 1143.
[12][2001] WASCA 360.
An illustration of the application of the ‘Graywinter’ principle is to be found in King Furniture Australia Pty Ltd v Higgs (‘King Furniture’),[13] an application involving a statutory demand for unpaid employment entitlements. The plaintiff sought to rely upon calculations as to bonuses and raise an alleged cross-claim for breach of an employment contract which were not raised expressly or by necessary inference in the plaintiff’s ’21 day affidavit’. Ward J held that there was insufficient identification in the initial affidavits of any ground based on the alleged cross-claim for breach of Mr Higgs’ employment contract to permit the raising of that ground. Her Honour observed:
102.I accept that the circumstances in which King Furniture did not (apparently due to its former accountant's unfortunate medical condition and the time apparently required in order to review the books of the company after the new accountant was retained) appreciate within 21 days after service of the statutory demand that there was an issue as to whether additional or unaccounted for payments allegedly earlier made to Mr Higgs would have provided a basis on which to dispute the demand or to raise an offsetting claim, if operating to preclude King Furniture now seeking to set aside the demand, may be seen as unfair to King Furniture. Had that information been available within the 21-day period (and had it not been challenged by Mr Higgs, as it was not challenged when the matter came before me) then there can be little doubt that a genuine dispute would have been established and (if quantified in an appropriate manner) a genuine offsetting claim.
103.In those circumstances, reliance on the statutory demand (with the consequent effect of the presumption of insolvency arising) seems harsh. However, it is clear that the outcome of an application such as this is not to be determined by a judge's subjective view as to what is fair in the circumstances.
[13][2011] NSWSC 234 (‘King Furniture’) [102], [103].
King Furniture is an illustration of the strict manner in which the ‘Graywinter’ principle operates. It goes to the Court’s jurisdiction as to what evidence it is entitled to have regard to in considering the application. Her Honour considered that the principle applies even where the party making the affidavit is not aware of the facts which it would seek to raise as a ground of genuine dispute or offsetting claim. In my view, as a corollary, it applies a fortiori to circumstances where an applicant was aware of the matters sought to be later raised but, for one reason or another, it did not.
The awareness of the plaintiff of matters capable of being raised as a genuine dispute or offsetting claim was considered to be of significance in the case of B.S.B. Mining Pty Ltd v Ranger Resources Pty Ltd (‘BSB Mining’),[14] which was referred to by Mr Richardson, Counsel for Sun Asia. In BSB Mining, it became evident during argument before Randall AsJ that the plaintiffs had a potential genuine dispute which was not raised in its ’21 day affidavit’. In that case, the defendant creditor had issued proceedings in the District Court of Queensland against the director of the plaintiff which the plaintiff contended was concerned with the same transaction which was the subject of the claim made in the statutory demand. The plaintiff contended that there was a genuine dispute described in the defence prepared by it in the District Court of Queensland proceedings and sought an adjournment for the purpose of filing evidence in that regard. Randall AsJ held that even if the defence was produced in the proceeding before him and it contained a ‘reasonably available inference’ capable of demonstrating a genuine dispute or offsetting claim, it had not been produced in the 21 day period and he therefore had no jurisdiction to permit an adjournment to facilitate the filing of further affidavits. His Honour regarded it as being significant that even though the defence in the District Court of Queensland proceedings had not been formulated at the time of making the s 459G application, the director of the plaintiff had knowledge of all the facts and matters to be relied upon in the defence.
[14][2018] VSC 263 (‘BSB Mining’) [3], [35], [42].
This application involves a consideration of the application of the ‘Graywinter’ principle where the applicant seeks to contend the existence of a dispute based on matters not raised in the ‘21 day affidavit’ but rather sourced from matters contained in the defendant’s evidence. In that regard, Imexag seeks to contend that in its dealings with Sun Asia, Imexag was contracting as an agent for a disclosed principal and therefore was not liable to Sun Asia. I have not been taken to any authority, and my own research has not revealed any authority, in which there has been a genuine dispute or offsetting claim put into evidence by the defendant, which the plaintiff then has successfully been able to rely upon despite not having raised it in its 21 day affidavit.
Mr Fary referred me to the decision of Re Spartan Sporting Goods Pty Ltd [2017] NSWSC 1146 (‘Spartan Sporting Goods’). In that case, the alleged creditor, MCG Training Pty Ltd (‘MCG’) served a creditor’s statutory demand on the plaintiff, Spartan Sporting Goods Pty Ltd (‘Spartan’). In its ’21 day affidavit’, Spartan deposed that it was a guarantor of Planet Sports Pty Ltd (‘Planet Sports’), in respect of Planet Sports’ obligations to MCG pursuant to an asset sale agreement. Spartan deposed in its ‘21 day affidavit’ that the money allegedly owed to MCG was not owed, as Planet Sports had not received what it was promised under the asset sale agreement. Proceedings on this very issue were subsequently commenced by MCG against Planet Sports, after the 21 day period for Spartan to raise the existence of such a proceeding had already lapsed. Despite this, Black J ultimately held that the issue of the dispute between MCG and Planet Sports was sufficiently raised in Spartan’s ‘21 day affidavit’ so as to permit Spartan to rely on the existence of the proceedings between MCG and Planet Sports as demonstrative of a genuine dispute.
In his ex tempore judgment, his Honour stated:
9Here, the first affidavit of Mr Galbraith discloses that the basis of the dispute is that there is a genuine dispute as to the existence of the debt claimed in the Demand, and that genuine dispute is founded on the proposition that Planet Sports did not receive what was to be received under the Asset Sale Agreement. The affidavit does not go further to say that there were proceedings, which were the working out of that dispute, as to whether Planet Sports had received what it claimed to be entitled to receive under the Asset Sale Agreement, and as to MCG's claim for debt against it …
10It seems to me that what is required to disclose the dispute must be determined, in its factual context, and that s 459G of the Corporations Act is sufficiently satisfied where what was disclosed is that there was a dispute as to whether MCG was entitled to payment, by reason of what had been delivered to Planet Sports. In this case, the fact that that dispute had at that point generated proceedings, which later came to the attention of MCG, is a particular of the dispute rather than a discrete and unconnected matter. In these circumstances, it seems to me that this matter can be raised consistently with the requirements of s 459G of the Act, as applied by the Graywinter principle.
Mr Fary also referred me to the decision of Financial Solutions Australasia Pty Ltd v Predella Pty Ltd (‘Financial Solutions’).[15] In this case the appellant took an assignment of a debt owed by the respondent under two loan agreements. The appellant then served the respondent with a statutory demand seeking to enforce its debt claim. The statutory demand did not attach the deed of assignment or loan agreements. The respondent then applied to have the statutory demand set aside and deposed in its ‘21 day affidavit’ that it had not sighted the deed of assignment or loan agreements and that it held a bona fide belief that the assignment could be void. It was held by the Supreme Court of Western Australia that the affidavit supporting the application sufficiently supported the assertion of a genuine dispute and disclosed the material facts on which it was based.[16]
[15](2002) 26 WAR 306 (‘Financial Solutions’).
[16]Ibid 317, [36].
In my view, the decisions of King Furniture, BSB Mining, Spartan Sporting Goods and Financial Solutions, do not deal with the specific scenario of the type under consideration here. Spartan Sporting Goods and Financial Solutions are perhaps examples of what might be described as more liberal applications of the ‘Graywinter’ principle whereas King Furniture and BSB Mining are incidences of stricter applications of the principle. However each are cases turning on their own facts. As indicated above, I do not consider that Imexag’s ‘21 day affidavit’ sufficiently discloses the material facts required to demonstrate that in its dealings with Sun Asia, Imexag was contracting as an agent for a disclosed principal and therefore was not liable to Sun Asia. However, there remain other matters which constitute plausible contentions requiring investigation some of which also emerge in Sun Asia’s evidence.
I now turn to the evidence filed by the parties.
Imexag’s affidavit evidence in support of the application
In the First Jager Affidavit, the only affidavit filed within the 21 day period after service of the statutory demand, Mr Jager states that Imexag is a broker of fruit to wholesalers. Mr Jager states that he has over 30 years of experience in ‘brokering’ fruit to wholesalers. I take that to mean that he (and Imexag) acts as an intermediary between growers and wholesalers. Ten years ago he commenced trading under the auspices of Imexag.
Mr Jager states that:
(a) Nongfu Shanghai (‘Nongfu’) is a fruit wholesaler in the Shanghai market and a ‘client’ of Imexag;
(b) Sun Asia is a company associated with Mr Shannon which ‘assists agricultural producer [sic] who are in debt by taking an equity stake in their business or assets’;
(c) Michael Tripodi is an Australian grape grower;
(d) Pin Rang Fong (‘PRF’) is a Chinese purchaser of grapes and a ‘client’ of Imexag; and
(e) River King is a Chinese purchaser of grapes and a ‘client’ of Imexag.
Mr Jager states that in or about October 2014 he met with Mr Shannon. Mr Jager stated to Mr Shannon that he had numerous customers in China. Mr Shannon stated that he had a number of farms in Australia that produced grapes and asked Mr Jager to arrange for the Chinese buyers to come to Australia to ‘show them what we have got’. He states that the Chinese parties were looking for a single supplier that could supply approximately 100 containers of grapes. Mr Shannon indicated that Sun Asia was able to do that. Mr Jager states that during this time he regularly travelled between Australia and China to secure Chinese buyers for the sale of grapes. He targeted Nongfu for the introduction to Sun Asia as he had known Nongfu and worked with them over many years.
Other than describing the Chinese parties as ‘clients’, Mr Jager does not elaborate upon the nature of Imexag’s contractual relationship with them. That is to say he does not describe them in terms of principal and agent, rather, the position he outlines is not developed beyond one in which he sources fruit for those parties from growers.
Mr Jager states that he arranged for the introduction of Nongfu to Mr Shannon so as to enable the transaction between the parties to proceed smoothly. He stated that it is not uncommon to introduce buyers to suppliers to assist the transaction. Again, it is not at all clear from his evidence what the nature of his role is – is he an agent of the vendor of the grapes or of the purchaser?
Mr Jager arranged for representatives of Nongfu to come to Australia to meet with Mr Shannon. Mr Jager states that Mr Shannon inquired as to how Mr Jager wanted to be paid for his involvement. He told Mr Shannon that he required a payment to be paid on the first deposit received from Nongfu of $2.00 for each box supplied under the contract and states that Mr Shannon agreed to this. Mr Shannon told Mr Jager that in the following year the rate would have to be increased and he states Mr Shannon agreed to this. I pause at this point to observe that the transaction described by Mr Jager is one whereby Mr Shannon (Sun Asia) agrees to pay Mr Jager (Imexag) $2.00 commission per box for introducing the purchasers of grapes to Sun Asia. The typical transaction described by Mr Jager has the appearance of Imexag being Sun Asia’s agent in those circumstances rather than being a principal or an agent for Nongfu. This would seem to be confirmed by Mr Jager deposing that subsequently Sun Asia and Nongfu signed a contract for the sale of grapes by Sun Asia to Nongfu during the 2015 season whereby Imexag would receive $58,000 commission (from Sun Asia) in respect of the introduction from the proceeds of sale of the grapes. But as I have said the position in that regard is not at all clear.
I now turn to Mr Jager’s evidence in relation to each of the invoices the subject of the demand. I have included those invoices which are conceded as they still have contextual relevance.
6 February 2016 invoice 4
X Mr Jager states that some time prior to 6 February 2015 he had a conversation with Mr Shannon regarding the sale of Flame and Menindee Grapes to Nongfu. He told Mr Shannon that Nongfu had told him that the Flame and Menindee Grapes were unsaleable in China because Crimson Grapes, an apparently more attractive and saleable variety, had by then entered the market that season. Mr Jager states that Mr Shannon asked if he could take the grapes. In response, Mr Jager asked Mr Shannon if he could sell them in the domestic market and Mr Shannon said he could not. Mr Jager states that he told Mr Shannon that he would take them on consignment for export. Mr Jager subsequently arranged for the transportation of three containers of the grapes from Sun Asia to China at Imexag’s expense in the sum of $24,000.
On 6 February 2015, Sun Asia issued invoice number 004 to Imexag claiming the total sum of $109,221.00 for Menindee and Flame Seedless Grapes. Mr Jager states that he arranged for Hua Shen, a Chinese wholesaler, to take the grapes on the basis that the buyer would do the best that they could in the market and that all clearance and transport costs would be deducted from the price paid to Imexag. He states that these are standard terms for the sale of fresh fruit to the Chinese market. He states that Hua Zhi sent a handwritten document accounting for the proceeds of sale and the costs. Mr Jager states the costs of clearing and delivering the goods to China exceeded the value of goods in the market place.
Mr Jager deposes that when goods are sold on consignment, which he says is very common, the invoice would normally state that the goods are sold on consignment or alternatively he would receive a delivery docket stating the number of containers of grapes sent to various customers. He stated that typically Mr Shannon did not mention on invoices that goods were being sold on consignment.
Mr Jager contends that as the quality of grapes supplied was poor, the cost of delivering the grapes to China exceeded their value in the marketplace and therefore no monies are owed to Sun Asia in relation to this invoice. Confusingly, Mr Jager states that Imexag ‘became aware that the quality of grapes supplied was poor when we were contacted by Nongfu, who informed us they were not happy with the quality of the goods supplied’.
27 February 2015 invoice 4
Mr Jager states that on 27 February 2015 Sun Asia issued invoice number 004 to Imexag claiming $224,640 for 7,488 boxes of Crimson seedless grapes. Mr Jager states that the quality of grapes was poor and that Imexag was contacted by Nongfu and advised they were not satisfied with the quality of grapes supplied. Mr Jager states that the costs of clearing the goods exceeded the sale price of the grapes and Imexag and Nongfu suffered a loss of $50,000, half of which Imexag had to bear. The reason that Imexag had to bear half the loss is not explained and it seems inconsistent with the contention that Imexag was contracting as agent for Nongfu, the disclosed principal, in the transaction because, in the normal course, if that were the case, Imexag would not be exposed to any loss.
5 March 2015 invoice 10
On 5 March 2015, Sun Asia issued invoice number 10 to Imexag claiming $224,640.00 for 7,488 boxes of Crimson seedless grapes and which contained the description ‘(order for PFF Shanghai)’. Mr Jager states that the grapes received were of poor quality. Imexag was contacted by Nongfu who advised they were not satisfied with the quality of the goods supplied.
Despite this, on the second day of the hearing and in its supplementary submissions of 9 August 2018, Imexag conceded liability for the full value of the invoice and conceded the amount is owing.[17] The reasons for making the concessions were not explained (other than to say in the supplementary submissions of 9 August 2018 that ‘the grapes were purchased by PFF’, which appears to be recorded on the invoice itself).
[17]See paragraphs 7(c)(iii), 8 and 9 of Imexag’s outline of submissions filed 11 July 2018 and dated 1 August 2018.
9 March 2015 invoice 11
On 9 March 2015, Sun Asia issued invoice number 11 to Imexag claiming $112,320.00 with the description ‘4 x 40ft containers Crimson’, ‘Farm H’ and ‘(order for Heng Jin)’. Imexag now accepts that it is liable for the full value of the Crimson Grapes invoiced and concedes the amount owing.[18] Imexag’s supplementary submissions of 9 August 2018 explain the reason for the concession as being ‘because the grapes were purchased by Heng Jin’.[19]
[18]See paragraph 7(c)(iv) of Imexag’s outline of submissions filed 11 July 2018 and dated 1 August 2018.
[19]See paragraph 15 of Imexag’s supplementary submissions dated 9 August 2018.
9 March 2015 invoice 12
On 9 March 2015, Sun Asia issued invoice number 12 to Imexag claiming the sum of $109,221.00 with the descriptions including ‘840 Flame Seedless @ $27.00 each’, ‘200 Menindee free’ and ‘10410 Crimsons @$30.00 each total $312,300.00’. Mr Jager states that the Flame Seedless and Menindee Grapes supplied should have been sold 1.5 months prior and as a result the buyers did not want to buy those varieties by that time. He states that Nongfu would not accept the grapes, even on consignment, and he was forced to dispose of the grapes or give them away. In its submissions dated 1 August 2018 Imexag concedes that it does not dispute the amounts owed pursuant to invoice 12 apart from the sum of $22,680 for the Flame Seedless Grapes.
23 March 2015 invoice 13
On 23 March 2015, Sun Asia issued invoice number 13 to Imexag claiming $58,654.00 with the narrative ‘Refund owed due to supply contract no 1 being terminated’, ‘69264 box’s @1.00 ea total $69,264.00, Less Crimsons supplied 10610 $10,610, and ‘Balance to be refunded $58,654.00’. Mr Jager states that Invoice 13 was for a sum of money paid to Imexag by Sun Asia as an introduction fee when Nongfu signed a contract with Sun Asia. Sun Asia paid the deposit which was a non-refundable one off payment for services provided. He states that Invoice 13 appears to be an attempt by Sun Asia to recover the introduction fee, which Sun Asia is not entitled to claim.
Payments to Sun Asia by Imexag
Mr Jager deposes that a number of payments were made by Imexag to what is described as a ‘division’ of Sun Asia (called Sunraysia) as advance payments for the orders contained in the invoices as follows:[20]
[20]The final payment of $10,000 on 14 July 2015 was said to have been made to Sun Asia.
Date Sum ($) 2 February 2015 $70,000 4 March 2015 $100,000 13 March 2015 $200,000 9 April 2015 $30,000 27 April 2015 $50,028 14 July 2015 $10,000
Mr Jager states that Sun Asia has failed to acknowledge and account for the payments made after 13 March 2015.
Amounts owned by Sun Asia to Imexag
X Mr Jager deposes that on or around February 2015, Mr Shannon told Mr Jager that he was short of funds and needed to pay $100,000 to a barrister Dr Wolff, who was acting as Counsel for Sun Asia in a matter involving Sun Asia and Nongfu.[21] He states that he agreed to pay Dr Wolff on Sun Asia’s behalf in order to secure access to the coming crop, as he believed Sun Asia needed financial assistance at the time. Mr Jager states that on 27 February 2015, 9 February 2016, 3 March 2016 and 2 May 2016, Imexag made various payments totalling $100,000[22] to Dr Wolff at the direction and request of Mr Shannon on behalf of Sun Asia in respect of moneys owed by Sun Asia to Dr Wolff. Those payments are the subject of the concession made by Sun Asia referred to at paragraph 7 above.
[21]The First Jager Affidavit erroneously refers to Dr Wolff as the arbitrator. The transcript of the hearing makes it clear that he appeared as Counsel for Sun Asia.
[22]I note that the First Jager Affidavit indicates that Imexag paid $10,000, $50,000, $5,000 and $15,000 respectively to Dr Wolff which does not equate to the $100,000 said to be paid to Dr Wolff.
Agreement to pay $2.00 per carton for fruit sales
Mr Jager deposes that in mid-January 2016, he had a conversation with Mr Shannon in which Mr Shannon agreed on behalf of Sun Asia to pay $2.00 per carton for fruit sales arranged by Imexag. He states that he arranged for sales from Sun Asia to PRF and River King and that Mr Shannon confirmed by email that he would honour the $2.00 per carton agreement. He states that the total number of cartons sold was 16,868, meaning Sun Asia was obliged to pay Imexag a sum (apparently rounded down) to $33,736.00 (‘2016 harvest fee’). He states that no payment has been received in respect of that obligation. This is put as an offsetting claim.
Arbitration between Sun Asia and Nongfu
Mr Jager deposes that in February 2016, Sun Asia and Nongfu attended an arbitration in Sydney in which the parties were Sun Asia and Nongfu. Dr Wolff was Counsel for Sun Asia. He states that on 1 February 2016, he signed a document headed ‘JEREMY JAGE (sic) /IMEXAG STATEMENT AS AT 16.12.15’ which provided that Mr Jager agreed to pay $100,000 direct into Dr Wolff’s account. He states that at the time of signing the document he told Mr Shannon that the invoices listed at the top of the page were in dispute, that he was not acknowledging liability for those invoices and that he was only agreeing to make the payment to Dr Wolff described above.
The PRF Short Payment
Mr Jager deposes that in early 2016, PRF ordered 20 containers of grapes from Imexag. Imexag then ordered 20 containers of grapes from Sun Asia to fill the PRF order. He states that PRF paid $200,000 to Imexag in advance for the supply of those grapes and that Imexag then paid $200,000 in advance to Sun Asia. He states that Sun Asia only supplied two out of the 20 containers to PRF, to the value of only $125,000, but invoiced Imexag for 20 containers. He states that Sun Asia is therefore indebted to Imexag for $75,000 for failure to account for the payment (‘PRF short payment’) and that other than denying the conversation, Sun Asia does not address this in its evidence. He states that on 21 March 2016, Mr Shannon sent an email to him stating:
Jeremy, here again is the statement which this stock went to PRF.
Once a payment is received for $100,000 against this account, we will release a further container to PRF.
There is nothing more to discuss on this matter.
So far we have applied a further $100,000 off this statement due to the $237,6000.00 [sic] paid to date less 2 X containers sent this year.
Therefore the current outstanding amount is $344,195.00.
We look forward to the further payment to be received.
Mr Jager concludes his affidavit by way of summary, deposing that the debt the subject of the Demand is disputed as follows:
(a) the grapes the subject of the first invoice numbered 4 dated 6 February 2015 were supplied on consignment;
(b) the grapes the subject of invoice 10, 11 and 12 were defective. I have observed, there were subsequent concessions by Imexag that the amounts in invoice 10 and 11 and part of 12 are payable);
(c) Imexag has a set off in respect of:
(i) the payments to Dr Wolff (this is accepted);
(ii) the PRF short payment ($75,000);
(iii) the 2016 harvest fee (rounded down to approximately $33,736.00);
(d) further or alternatively to subparagraph (c), Sun Asia has failed to account for payments made in respect of the grapes; and
(e) the introduction fee the subject of invoice 13 ($58,654) is not refundable.
Mr Jager states that Imexag has made payments or has set offs against the alleged debt claimed in the Demand totalling $894,929.00. He states that Sun Asia has invoiced for $201,165.00 for grapes not fit for sale, failed to account for $90,028.00 in payments made to Sun Asia or its ‘subsidiary’ Sunraysia, and failed to account for $233,736.00 for payments made or losses incurred by Imexag. He states that Sun Asia is indebted to Imexag for $80,886.00 and that he has not taken action to pursue the debt as he understands Sun Asia will have little capacity to meet the debt. I note that in Imexag’s submissions dated 1 August 2018, Imexag asserts that Sun Asia is indebted to it for the sum of $80,914.00 plus a further $244,640 for Nongfu claimed grapes. The First Jager Affidavit concludes by Mr Jager saying that Sun Asia owes Imexag further amounts that are not set out in his affidavit but will be set out ‘if the matter proceeds to hearing’.
I observe at this juncture that there is no suggestion in the First Jager Affidavit that Imexag was contracting as an agent of a disclosed principal.
As stated above, Imexag has filed four affidavits in this proceeding. For reasons set out below, I have in effect put the Third Jager Affidavit and the affidavit of Mr Hapgood to one side. The Third Jager Affidavit rehearses matters raised in the First and Second Affidavits. Further, Imexag filed submissions on 1 August 2018 and supplementary submissions on 9 August 2018 which provide Imexag’s final contentions and concessions with respect to what amounts are owed pursuant to the various invoices in dispute and overtake to a considerable degree the position maintained in its affidavits. The Affidavit of Mr Hapgood is concerned with the payment to Dr Wolff, which as has been described is no longer the subject of dispute between the parties. Mr Hapgood also deposed that his firm wrote to Celtic Legal, the solicitors for Sun Asia, on 13 June 2018 requesting a copy of the determination or settlement agreement in the arbitration referred to in evidence by Sun Asia. Mr Hapgood deposed that as at the date of his affidavit there had been no response from Sun Asia to that email. The relevance of the settlement agreement between Nongfu and Sun Asia is that it would reveal what the outcome of the arbitration was and in particular what monies if any Nongfu was required to pay Sun Asia.
Sun Asia’s affidavit evidence
In the Second Shannon Affidavit, sworn 11 April 2018, the only substantive affidavit filed by Sun Asia, Mr Shannon deposes that Mr Jager previously provided evidence orally and by way of witness statement in a previous dispute between Sun Asia and Nongfu, a reference to the arbitration between Sun Asia and Nongfu which has been mentioned. He asserts that Mr Jager’s previous evidence completely contradicts the First Jager Affidavit. In that regard, Mr Shannon states that there are a number of false allegations contained within Mr Jager’s First Affidavit. He states that Mr Jager’s assertion that Nongfu is a client of Imexag is incorrect, as Imexag was Nongfu’s agent, not client. In my view, the fact that Sun Asia refers to Imexag as Nongfu’s agent, regardless of what Sun Asia interprets that relationship to mean in this case reveals that there is a genuine dispute and controversy as to the relationship between Imexag and Nongfu. Further, as I note below, in Sun Asia’s First Submissions, it contends that the debts arise in the context of Sun Asia supplying Nongfu with large volumes of grapes. Mr Shannon states further that Sun Asia does not take equity stakes in agricultural businesses or their assets, that the description of grape seasons is incorrect and that it was Mr Jager’s suggestion that he bring the Chinese buyers over to meet with Sun Asia as Imexag ‘needed a seller that could handle the volume Nongfu required’.
Mr Shannon states that Mr Jager’s assertion that he agreed to pay Mr Jager $2.00 for each box mentioned in the contract is incorrect and that Mr Jager requested to be paid $1.00 per box from the first order of 69,264 boxes of grapes. He states that this amount was to be paid from the initial deposit of $415,584.00 and that a bonus of a further $1.00 would be payable if Nongfu paid the agreed bonus of $2.00 per box.
Mr Shannon exhibits to his 11 April 2018 affidavit several emails and a draft contract. The first email, sent on 29 November 2014 from Mr Jager to Mr Shannon states[23]:
[23]See exhibit GS-1 to the Second Shannon Affidavit.
Hi Geoff,
Contract with Nong Fu:
I have attached a copy of the contract modified as a word file; altered/ included sections in yellow
My draft copy of Annexure “B” is only an indication of the form expected; you’ll have to consult with Joe et al on the numbers of what can be sent when.
We do not need to get SGS inspection as independent verification of the grape volume.
Contract with IMEXAG
Please get me a contract re commission payment:
-A$1 / ctn to be transferred ($69,264) on receipt of the first funds ($415,584 – within 48 hours of receipt of funds to your account
-A$1 / ctn to be transferred if and when Nong Fu pays $2 / ctn over the $30 / ctn minimum guarantee – within 48 hours of receipt of funds to your account
Also send me the Sun Asia bank account details; I expect contract agreed by tomorrow & funds sent on Monday.
I can be contracted on +86 18754259917
On 30 November 2014, Mr Shannon emailed Mr Jager stating:
Hi Jeremy,
I will draft a contract un (sic) this afternoon regarding our agreement between you and Sun Asia Export Corporation Pty Ltd.
It is agreed that you
1. Receive $1.00 per box upon receipt of in (sic) initial deposit being paid. (sic) which will be $69,264.00 given we are to supply 69,284 box’s (sic) of Crimson Grapes.
2. When Nongfu pays the balance being $2.00 per box, Imexag Pty Ltd is to receive 50% being a further $1.00 per box.
I will draft a Heads of Agreement setting out those terms.
As for 5% discount to apply if the delivery falls short prior to 19 February, I feel that the discount would only apply to what actually is not supplied. I.E if say we only supply 15 Containers prior to 19 February, then the 5% discount would only apply to the 5 Containers and not the whole order. Please confirm that is how Mr. Ma understands such penalty to apply.
On 30 November 2014, Mr Shannon emailed Mr Jager attaching the proposed contract referred to in his earlier email of that day, being a document titled Supply Agreement between Sun Asia and Nongfu and stating:
Hi Jeremy,
Please see agreement between Imexag and Sun Asia.
Please also note that I have included Sunraysia Investment Corporation Pty Ltd bank account, as this is Joe’s company that will be supplying all the grapes.
We have to payout deposits to the other two parties who are supplying part of the early Crimsons.
On 30 November 2014 Mr Jager responded to Mr Shannon stating:
Thanks.
Looks fine, will sign it and return for your signature.
In the meantime, pls get me the altered contract with Ma for his signature. Or, if you’re happy with my alternations, I will get it in front of him as is.
Later on 30 November 2014, Mr Shannon responded to Mr Jager stating ‘I am happy with your alterations, please have Mr Ma executed [sic].’
On 1 December 2014 Mr Jager emailed Mr Shannon stating:
Hi Geoff,
Ma will want to send either to my account, or to Sun Asia – since he has agreements with both. Sunraysia is not an entity he knows or has agreements with. It’s easy for transfers to be made once the funds are received in an account Ma is prepared to send to. These guys have been burnt badly this year and need to know the entity they are sending funds into.
On 1 December 2014, Mr Shannon emailed Mr Jager stating:
Hi Jeremy, ‘I [sic] will provide Stacks Trust account then. We are not covered the other way and my partners will be out.
Let me know, I will forward Stacks The Law Firm Trust account.
On 1 December 2014, Mr Jager responded to Mr Shannon stating ‘that should work’ and ‘Pls send the account, and I will put it on our agreement as well’.
On 1 December 2014, Mr Shannon emailed Mr Jager stating:
Hi Jeremy,
Please despot [sic] funds into
Stacks The Law Firm Trust Account
Bank of Queensland
BSB – 124001
ACCOUNT NO – 20760248
REFERENCE – Sun Asia Export Corporation Pty Ltd
Please also send an email that the funds are to be released as per Sun Asia Export Corporation Pty ltd direction including payment to
Imexag Pty Ltd for $69,264.00 within 48 hours in receipt of cleared funds.
On 1 December 2014, Mr Jager emailed Mr Shannon stating:
X Hi Geoff.
I have placed this trust account in the agreement with Nong Fu.
We expect this agreement completed this morning.
Clayton, please confirm if you will execute the transfer to IMEXAG account ($69,264) on receipt of funds received from Nong Fu for the deposit on the grapes.
Bank details as attached,
On 4 December 2014, Mr Shannon emailed Mr Jager forwarding an email from Gaye Tripodi (the director of Sun Asia) sent at 3.02pm that same day containing what appears to be 9 attachments, stating:
Hi Jeremy,
Please see executed contract as requested. Sorry for the Delay but given Gaye Tripodi is now the companies [sic] Director as previously advised the document required Gaye [sic] signature.
Mr Shannon exhibits a copy of the agreement between Sun Asia ‘as seller’ and Nongfu ‘as buyer’ for the sale of grapes during the 2015 season executed on 2 December 2014. I shall not detail its terms here save to say that it mentions Mr Jager, as being the agent of Nongfu ‘who would be responsible for inspecting the quality and quantity of the goods’ (cls 1.4, 2.2). Mr Shannon is described as “the seller’s agent” (cl 2.2). Imexag is not mentioned at all in the agreement. The agreement provides that payment is to be made to Sun Asia’s nominated account (its Queensland solicitor’s account).
Mr Shannon states that Mr Jager was incorrect in stating that Imexag received $58,000 in respect of the introduction fee, and that Imexag in fact received the sum of $69,264.00 which he contends is evidenced by GS-3 to Mr Shannon’s Second Affidavit. I note that GS-3 is not evidence of a transaction or payment receipt but is the email sent from Mr Jager to Mr Shannon on 29 November 2014 setting out an agreement between the parties. Mr Shannon further states that these monies were not paid in respect of a monthly introduction fee but were for a simple commission per box fee.
Mr Shannon deposes that Mr Jager’s assertion that Mr Jager had said Imexag would take the grapes on consignment for export is incorrect. He states that Sun Asia did not agree to any consignment of grapes and all grapes were sold “at the shed door”. He states that this is confirmed by Mr Jager’s evidence at the arbitration between Sun Asia and Nongfu. Mr Shannon exhibits a transcript of the arbitration hearing. I note that in the transcript of Mr Shannon’s evidence at the arbitration there is reference by Mr Shannon to a transaction in relation to Mr Jager in which he is said to have said ‘I’ll help you don’t worry I’ll try and sell [Nongfu’s grapes ] to someone else’, which Mr Fary contended was a reference to and supports the allegation of the consignment sale by Imexag referred to in Mr Jager’s affidavit of the unwanted Flame and Menindee Grapes the subject of invoice 4 of 6 February 2015. It will be recalled that it was Mr Jager’s evidence that the invoice was not payable because the quality of the grapes to be sold on consignment was poor and the cost of clearing the goods exceeded the sale price. In the transcript of Mr Shannon’s evidence[24] there is a reference to grapes being sold at less ‘than what it was costing us to pack’. Mr Fary contended that one would not expect Mr Jager’s evidence to contain any more detailed elaboration about the consignment arrangement.
[24]See exhibit GS-4 of the Second Shannon Affidavit at pages 177-178.
Mr Fary submits that given Sun Asia has thus put into evidence matters which contradict its own case, it is incumbent upon Sun Asia to explain how the evidence can be reconciled with its own case.
Mr Shannon deposes that Mr Jager’s assertion that Imexag arranged for transportation of three containers of grapes is incorrect and that Sun Asia had no involvement in freight.
Mr Shannon deposes that paragraph 36 of the First Jager Affidavit in relation to the sale of grapes on consignment, is incorrect and is at odds with the oral evidence given by Mr Jager at the arbitration hearing which is contained in the transcript of the hearing.
Mr Shannon further states that paragraph 38 of the First Jager Affidavit is incorrect, that the grapes supplied were of good quality and that this was confirmed by Mr Jager’s witness statement sworn in the arbitration proceedings between Sun Asia and Nongfu.[25]
[25]See exhibit GS-5 to the Second Shannon Affidavit.
Mr Shannon deposes that there is no basis for Mr Jager to dispute invoice 4 dated 6 February 2015. He states that invoice 4 dated 27 February 2015 was not in respect of grapes supplied to Nongfu as Nongfu had its own contract with Sun Asia. He exhibits an email from Mr Shannon to Mr Jager dated 6 February 2015 entitled ‘Supply contract no 2 executed’ which states[26]:
Dear all,
Please see executed contract.
We look forward to remittance advice.
[26]See exhibit GS-6 to the Second Shannon Affidavit.
The supply contract is headed ‘Supply Agreement’ with the date ‘4th February 2015’ and is between Sun Asia and Nongfu.
Mr Shannon states that there were no sub-quality grapes supplied in respect of invoice 10 dated 5 March 2015.
In reply to Mr Jager’s assertion that no money is due for the Flame Seedless or Menindee Grapes as they were supplied late and not wanted by Nongfu or other buyers, Mr Shannon states that Sun Asia and Nongfu had their own contract.[27]
Mr Shannon observes that there has never been an introduction fee paid to Imexag and that the invoice 13 issued on 23 March 2015 was a simple refund for an over payment made by Sun Asia to Imexag, as 58,654 less boxes of crimsons were supplied than Sun Asia had paid for and Sun Asia is therefore entitled to the repayment.
Mr Shannon points out that the payments made to Dr Wolff referred to in the First Jager Affidavit total $65,000, not $100,000, but as stated previously the parties are now in agreement on this issue.
Mr Shannon denies that the conversation deposed to by Mr Jager and described as the ‘2016 harvest fee’ ever took place. Mr Shannon also denies that the time of signing the document in which Mr Jager agreed to make payment to Dr Wolff that Mr Jager told Mr Shannon he disputed the ‘invoices listed at the top of the page’. Mr Shannon exhibits a copy of the document signed by Mr Jager which he contends confirms the debt owed to Sun Asia.[28]
[28]See exhibit GS-7 to the Second Shannon Affidavit.
The Third Shannon Affidavit, which has been referred to above, is only relevant in that it confirmed that the 2016 demand was withdrawn on advice from his solicitors but that no terms of settlement were signed and that the claim was not compromised.
Imexag’s affidavit evidence in reply
In Mr Jager’s Second Affidavit, Mr Jager replies to the matters raised in Mr Shannon’s Second Affidavit.
He deposes that the background to the arbitration was that Sun Asia was seeking to recover monies from Nongfu for the supply of grapes. He states that, where the documentation which was the subject of the arbitration referred to him personally as acting as agent, this was not correct and it should have identified Imexag as agent of Nongfu. He stated that the arbitration concerned claims by Sun Asia against Nongfu arising from 3 contractual documents dated 11 November 2014, 2 December 2014 and 4 February 2015.
The remainder of Mr Jager’s affidavit for the most part ‘joins issue’ with Mr Shannon’s affidavit by numerous denials and in that regard merely refers to and repeats the matters to which he has already deposed to in the First Jager Affidavit.
Sun Asia’s submissions in opposition to the application
In paragraph 4 of Sun Asia’s first set of submissions, which are undated (‘Sun Asia’s First Submissions’), Sun Asia submits that:
‘the debt arises in the context of the defendant supplying the company, Shanghai Nongfu Fruit (“the buyer”) with large volumes of grape varieties from the Buronga, New South Wales region. The grapes were ultimately delivered by container to Minhan District, Shanghai, China during the period between January 2015 to March 2015. The plaintiff acted as the buyers [sic] agent and was responsible for all payments.’[29]
[29]See paragraph 4 of Sun Asia’s First Submissions.
It referred to exhibit GS-2 of the Second Shannon Affidavit in support of the contentions that the contractual agreement is between Sun Asia and Nongfu. There is no provision in the documents making Imexag liable.
In relation to the invoice dated 6 February 2015 (no 4), Sun Asia complains that Imexag’s contentions as to a consignment arrangement are vague and do not rise above assertion. Sun Asia submits the Court should consider the absence of evidence relied upon by Imexag in determining whether or not there is a genuine dispute.
In relation to the invoice dated 27 February 2015 (no 4) Sun Asia complains that Imexag’s evidence is not supported by any substantive evidence and is not particularised. Sun Asia submits that no evidence is relied upon to support Imexag’s contentions that ‘the quality of grapes supplied was poor’, ‘the cost of clearing the goods exceeded the sale price of the grapes’ or that ‘Nongfu suffered a loss of $50,000, half of which Imexag had to bear’. Sun Asia contrasts these unsupported assertions with matters contained in the document titled ‘Witness Statement of Jeremy Jager’ signed by Mr Jager dated 16 December 2015 and used by Sun Asia at the arbitration which relevantly states:
… I am the agent of Nongfu. Since all sales were valued at the ‘farm gate’, to ensure Nongfu took possession of the fruit they needed someone to perform a number of roles, inclusive of (a) confirmation of the quality on departure through inspection of the fruit in the pack houses, (b) arrangement of tracking to get the goods to the airport, and (c) …
…
I can confirm I witnessed all shipments leave the packing shed destined for Shanghai Nongfu Fruit.
….
Each shipment surpassed the requirements set out in the contracts no 1 & no 2 between Sun Asia Export Corporation Pty Ltd and Shanghai Nongfu Fruit Ltd.
In the second week of February 2015, with Miss Liu Yan Fang, I travelled to Guangzhou to inspect fruit sent to Nongfu via Hong Kong.
…
There were more than 80 pallets of grapes in storage. All the pallets were wrapped in plastic – which of course if very bad for fruit since it stops the circulation of cold air.
…
This procedure of wrapping the pallets of Grapes in plastic was implemented by Nongfu staff, this was not how the pallets left the packing shed in Buronga.
Sun Asia relied upon the decisions of Malec and Powerhouse as authority for the proposition that the Court must not uncritically accept Imexag’s evidence which Sun Asia contends is inconsistent with undisputed contemporary documents or other statements by the same deponent.
Sun Asia criticised Imexag’s contentions with respect to invoice dated 5 March 2015 (No 10), however as stated previously, Imexag has conceded this invoice, as the grapes were ‘purchased by PFF’.
Similarly, Sun Asia’s complaints concerning Imexag’s evidence in relation to the 9 March 2015 invoice number 11 are now irrelevant as that invoice is conceded. Imexag also concede invoice 12 in respect of the Crimson Grapes. As to the Flame Seedless Grapes, and Imexag’s claim that the grapes were supplied late and were worthless, Sun Asia says Imexag has failed to properly particularise this claim.
Sun Asia submits Imexag’s claim in respect of invoice dated 23 March 2015 (no 13), was an attempt to claw back an introduction fee, was not properly particularised and is contrary to the balance statement signed by Mr Jager and exhibited to the Second Shannon Affidavit.
Sun Asia submits that the payments Imexag allegedly made to Sun Asia were again not properly particularised. Sun Asia complains the claim is again contrary to the balance statement signed by Mr Jager in which Mr Jager agreed to pay $100,000 to Dr Wolff.
Sun Asia then filed a second set of submissions designed to address the issues that arose at the first day of hearing (‘Sun Asia’s Second Submissions’).
Sun Asia’s Second Submissions assert that Imexag did not ‘raise’ within the First Jager Affidavit the argument that Imexag was only the agent for Nongfu and was therefore not liable to Sun Asia and that the contrary can be inferred from the First Jager Affidavit.
Sun Asia submitted that Imexag’s claim that the amount claimed in the Demand was resolved by a settlement reached at the arbitration between Sun Asia and Nongfu, is a further matter which Imexag is precluded from raising by virtue of the ‘Graywinter’ principle.
Imexag’ s submissions in support of the application
Imexag filed submissions on 4 May 2018. In considering this application I have put these submissions to one side as the contentions made at the hearing on 8 August 2018 have been overtaken by Imexag’s submissions of 1 August 2018 and supplementary submissions of 9 August 2018.
Imexag’s submissions of 1 August 2018 tabulate which invoices are disputed and which have been conceded and identify the summary of claims, payments made, balance owing after payment and set off.
In its submissions of 9 August 2018, Imexag submits, in summary, that the invoices are disputed on the following grounds:
Date of invoice Tax invoice number Ground(s) of dispute 6 February 2015 4 (a) Grapes taken on consignment by Imexag
(b) Grape quality poor (not fit for purpose)
27 February 2015 4 Grape quality poor (not fit for purpose)
Invoice included in the February 2016 Arbitration between Sun Asia and Nongfu5 March 2015 10 Imexag approved invoice, grapes purchased by PFF Shanghai[30] 9 March 2015 11 Imexag approved invoice, grapes purchased by Heng Jin[31] 9 March 2015 12 Imexag approved invoice in respect of crimson grapes only ($374,160.00 approved)[32]
Disputes Flame Seedless ($22,680) and Menindee Grapes ($0.00)23 March 2015 13 Sun Asia attempted to recover the introduction fee paid to Imexag and Sun Asia had no right to a refund of the introduction fee [30]See paragraph 9 of Imexag’s outline of submissions filed 11 July 2018 and dated 1 August 2018.
[31]See paragraph 9 of Imexag’s outline of submissions dated 1 August 2018.
[32]See paragraph 7(c)(iv) of Imexag’s outline of submissions filed 11 July 2018 and dated 1 August 2018.
In its submissions of 1 August 2018, Imexag contends that it provided evidence that it has paid a total of $90,028.00 in addition to the $370,000 admitted by Sun Asia.
In relation to the PRF Short Payment, Imexag submits that Sun Asia has made no submissions denying this claim and therefore the claim should be accepted.
Imexag submits that the details of the supply agreements between Sun Asia and Nongfu make clear that Imexag is not a party to the agreements other than as agent for Nongfu. It submits that if Sun Asia is relying upon the construction of the Memorandum of Understanding in GS2 then Sun Asia has incorrectly interpreted that clause. In any case Imexag submits the Memorandum is superseded by the first Supply Agreement dated 2 December 2014.
Imexag submits that the grapes were not of merchantable quality, demonstrated by the evidence given in the arbitration by Sun Asia. Further, Imexag submits that the terms of agreement in this market are of an informal nature akin to ‘handshake’ agreements as described by Mr Shannon in transcript of evidence at the arbitration.[33]
[33]See exhibit GS-4 to the Second Shannon Affidavit.
Imexag submits that the ‘Nongfu grape claim’ is merely a response to the evidence provided by Sun Asia as properly interpreted under the Supply Agreement and not a new claim introduced by Imexag.
Imexag contends that in the alternative, if the Nongfu grape claim for $224,640.00 is considered to be a further claim offending the ‘Graywinter’ principle, which it does not accept, then the denial of facts provided in evidence by Sun Asia will result in a substantial injustice to Imexag if it is forced to pay this amount where there is no contractual obligation to do so.
In its supplementary submissions dated 9 August 2018, Imexag submits that Sun Asia has sought to rely on an arbitration between Nongfu and Sun Asia which clearly identifies Imexag as agent for a disclosed principal. Imexag complains that the evidence filed by Sun Asia is substantially incomplete and tellingly does not disclose what has been recovered by Sun Asia from Nongfu and presumably if no amount was recovered Sun Asia would have said so.
Imexag submits that even if the agency ground is not available to Imexag because of the ‘Graywinter’ principle, the evidence adduced by Sun Asia supports Imexag’s contention that there is a genuine dispute on the basis of the consignment arrangement. Imexag submits the Court should view Sun Asia’s denials which great scepticism given it has not been able to explain its contradictory material and has disingenuously attempted to deny payments to ‘Sunraysia’.
Sun Asia’s submissions in opposition
Sun Asia filed, at my request, supplementary submissions on 6 September 2018 (‘Sun Asia’s Third Submissions’). Sun Asia has referred in its submissions to the decisions of Spartan and BSB Mining which have been considered above. I agree with Sun Asia’s position in this regard and as I have stated I consider that Imexag is prevented from relying on matters not raised in the First Jager Affidavit.
Sun Asia submits that Imexag had the opportunity to investigate other matters, including whether or not there was a determination of the arbitrator or whether there was a form of settlement between the parties and what the outcome was. Sun Asia submits that if the Court were to accept Imexag’s submission that Sun Asia must explain how the contradictory material reconciles with its own case, then this would have the extraordinary effect of shifting the onus of proof onto Sun Asia and it is for Imexag to establish that there is a genuine dispute or offsetting claim.
Sun Asia submits that the Court should be sceptical of Imexag’s assertions in the following context:
(a) Imexag has been unable to produce any additional documentary evidence or third party evidence in support of its claims that the grapes supplied by Sun Asia were defective;
(b) Mr Jager stated in the signed witness statement dated 16 December 2015 that:
I can confirm I witnessed all shipments leave the packing shed destined for Shanghai Nongfu Fruit …
Rudge Inspection Services was made fully away of the export quality requirements of grapes for China. On presentation of all the relevant export registration of the properties inspected by Nongfu, Rudge confirmed that all relevant documentation for export to China was in order, and indeed it was;
(c) the statement of debt outstanding dated 1 February 2016, which is described as ‘Jeremy Jager Imexag Statement as at 16.12.15’ and signed by Mr Jager. This refers to each of the invoices that are the subject of the Demand and the original balance of $444,195;
(d) the evidence given by Mr Jager at the arbitration on 2 February 2016, that Imexag is responsible for payment of the grapes if Nongfu is unable to pay;
(e) Imexag has been unable to produce any additional documentary or third party evidence in support of its claims that the parties had agreed to sell the grapes on a consignment basis; and
(f) Imexag has been unable to produce any additional documentary or third party evidence that it has an offsetting claim relating to an agreement struck with Mr Shannon in January 2016.
Sun Asia’s Third Submissions reiterate the same criticisms put forward in relation to Imexag’s disputes as to each of the invoices the subject of the Demand. In relation to the invoice dated 9 March 2015 (no 12), Sun Asia complains that Imexag’s claim that the Flame Seedless Grapes ‘should have been sold 1.5 months prior’ makes it impossible to infer whether the grapes were supplied late or sold late, and on what basis this occurred.
Sun Asia submits that Imexag’s claim with respect to the 2016 harvest fee is unsubstantiated and that there is no evidence showing correspondence from the suggested purchasers. Similarly, Sun Asia submits that Imexag’s claims that it advanced $200,000 to Sun Asia for grapes to be supplied in early 2016 is not substantiated.
Conclusion
As I have remarked earlier in these reasons, the foregoing summation of the evidence and analysis together with the respective submissions made by the parties expose in my view a factual scenario involving controversies which are not appropriate or possible to resolve in an application to set aside a statutory demand.
The case law dealing with the relevant principles to be applied in this type of application emphasise the comparatively low threshold an applicant is required to establish to succeed in these applications.
The evidence filed by the parties is, as I have remarked, unsatisfactory and on occasion somewhat incoherent but the position is clear enough for me to determine a view that the matter should be the subject of an inter partes trial where discovery and cross examination will enable the position involving the trading relationship between the parties both as to liability and quantum to be properly examined.
For this reason the statutory demand dated 24 January 2018 and served on Imexag by Sun Asia should be set aside. The usual order is that costs should follow the event but if the parties seek to contend otherwise then they should file short written submissions not exceeding 3 pages by 15 July 2019.
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