In the matter of Austpac Resources N.L

[2022] NSWSC 1668

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of Austpac Resources N.L. [2022] NSWSC 1668

Hearing dates:

24 October 2022

Date of orders:

24 October 2022

Decision date:

24 October 2022

Jurisdiction:

Equity - Corporations List

Before:

Black J

Decision:

The creditor’s statutory demand is set aside and the defendant is to pay the plaintiff’s costs of and incidental to the originating process as agreed or as assessed.

Catchwords:

CORPORATIONS — Winding up — Statutory demand — Application to set aside — Whether there is a genuine dispute about the existence or amount of the debt — Whether the demand should be set aside on other grounds

Legislation Cited:

Corporations Act 2001 (Cth), ss 459G, 459H, 459J

Cases Cited:

- Bampton v Viterra Limited (2015) 123 SASR 80; [2015] SASCFC 87

- Creata (Aust) Pty Ltd v Faull (2017) 125 ACSR 212; [2017] NSWCA 300

- Hodgson v Amcor Limited (2012) 264 FLR 1; [2012] VSC 94

- Lachlan v HP Mercantile Pty Ltd (2015) 89 NSWLR 198; [2015] NSWCA 130

- Re Jana Pty Ltd [2022] NSWSC 112

- Re Savemore Wholesale Pty Ltd [2021] NSWSC 307

- Re UGL Process Solutions [2012] NSWSC 1256

- Re Wollongong Coal Limited (2017) 122 ACSR 30; [2017] NSWSC 201

- Spacorn Australia Pty Ltd v Myer Stores Limited (2001) 19 ACLC 1270; [2001] VSCA 89

- Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452; [1997] FCA 681

- UGL Rail Services Pty Ltd v Janik [2014] NSWCA 436

Category:

Principal judgment

Parties:

Austpac Resources N.L. (Plaintiff)
Michael John Turbott (Defendant)

Representation:

Counsel:
R L Gall (Plaintiff)
J Dooley (Defendant)

Solicitors:
HWL Ebsworth (Plaintiff)
Christopher C Freeman & Co (Defendant)

File Number(s):

2022/236036

Judgment – ex tempore (Revised 2 November 2022)

1. By Originating Process filed on 10 October 2022, Austpac Resources NL (“Austpac”) seek to set aside a creditor’s statutory demand (“Demand”) issued by Mr Michael Turbott, a former executive of Austpac. The application to set aside the demand is brought alternatively under ss 459G, 459H, or 459J of the Corporations Act 2001 (Cth) (“Act”). Ms Gall, who appeared for Austpac, primarily relies on the contention that a genuine dispute existed in respect of the amount claimed in the Demand for the purposes of s 459G of the Act. It will only be necessary to determine the alternative claims, if reason to set aside the Demand is not established on that basis.

Affidavit evidence

2. Turning to the affidavit evidence, Austpac relies on the affidavit of its current chief executive officer, and a director, Mr Colin Iles, who refers to the service of the Demand. The Demand is in turn exhibited to that affidavit and records a claim in the amount of $270,000 described as follows:

“Redundancy payment of four weeks' total remuneration per year of service, capped at 52 weeks pursuant to clause 2.1(a) of the Redundancy Agreement between the company and the creditor dated 15 October 2001 $180,000.

Six months payment in lieu of notice calculated by reference to the creditor's total remuneration pursuant to clause 2.1(b) of the Redundancy Agreement between the company and the creditor dated 15 October 2001 $90,000.”

3. Those two amounts are then totalled to arrive at the figure of $270,000.

4. The Demand is in turn verified by Mr Turbott’s affidavit dated 20 July 2022, who verifies that the amount claimed is due and payable by Austpac and indicates his belief that there is no genuine dispute about the existence or amount of the debts.

5. The Demand refers, as I have noted, to a “Redundancy Agreement” dated 15 October 2021, which is in evidence. Recital A refers to the employment of Mr Turbott as Austpac’s managing director, and Recital B records that:

“In recognition of the commitment that [Mr Turbott] has made to Austpac, and his continuing commitment to Austpac, Austpac seeks to implement redundancy provisions regulating the terms and conditions of [Mr Turbott's] employment."

6. Clause 2.19, which is an operative provision, as to which there is a question of construction between the parties, in turn records that:

“In the event of redundancy, which includes without limitation a materially adverse change in the authority or status of [Mr Turbott], [Mr Turbott] will be entitled to receive:

(a)    redundancy payment of four weeks' Total Remuneration per year or [sic] service, capped at 52 weeks;

(b)    six months' notice or payment in lieu of notice calculated by reference to [Mr Turbott] Total Remuneration..."

7. Those two paragraphs are in turn reflected in the calculation of the amount claimed in the Demand, the premise of which is that the circumstances in which Mr Turbott ceased employment with Austpac amounted to a redundancy for the purposes of the Redundancy Agreement.

8. Returning now to Mr Iles' first affidavit, he refers to Mr Turbott's employment with Austpac and to an issue which arose in respect of certain transactions which Austpac contended were unauthorised or inappropriate. Mr Iles also refers to the circumstances in which Mr Turbott was given an opportunity to make submissions, and the subsequent termination of his employment. Mr Iles there contends that Mr Turbott’s position was not terminated by reason of redundancy, or because Austpac no longer required the position to be performed, and, implicitly, was terminated by reason of the issues to which I have referred above.

9. Mr Iles also there refers to correspondence after the termination of Mr Turbott’s employment which, as Ms Gall points out in submissions, plainly involved a recognition that there was a "dispute" between the parties as to that matter. In particular, by letter dated 13 August 2020, Austpac indicated the reasons for the termination of Mr Turbott's employment. By email dated 1 October 2020, referring to a letter dated 29 September 2020, Mr Turbott took issue with the circumstances of the termination of his employment, contending that the "allegations of misconduct are misconceived and very wrong" and referred to an "ongoing dispute" in relation to his role being made "redundant". By a letter dated 30 October 2020, the solicitors for Austpac in turn wrote to Mr Turbott, reasserting Austpac's position that there had been no redundancy of any position that he held and that no redundancy amounts were payable to Mr Turbott, and also asserting a claim which it is now accepted would amount to an offsetting claim, if the amount claimed in the Demand were otherwise due and payable.

10. By a further email dated 23 April 2021, Mr Turbott wrote to a director of Austpac raising the possibility that the parties may "amicably resolve [their] dispute" and, by letter dated 3 December 2021, Mr Turbott referred to certain regulatory inquiries which he had sought to prompt, and held out the possibility that, following a "fair and reasonable settlement for our dispute", any investigations of those matters might not continue.

11. Mr Turbott, in turn, relies on his affidavit dated 30 August 2022, which refers to the Redundancy Agreement and puts a proposition, also put by Mr Dooley, who appears for him, that in January 2019, his position was changed from managing director to an executive employee, and he was stood down from his employment on 3 July 2020, and that the allegations against him were denied. He contends in these circumstances, a "redundancy" arose for the purposes of the Redundancy Agreement.

12. Austpac in turn relies on the affidavit dated 14 September 2022 of Mr Iles in response, which reiterates the proposition that Mr Turbott's employment was terminated, not by reason of redundancy or because the position was no longer required, but because of "serious misconduct on his part".

Whether a genuine dispute is established

13. I should now refer to the applicable principles as to whether a genuine dispute can be established in respect of the Demand, before turning to the relatively narrow dispute between the parties. The Court has power to set aside a creditor's statutory demand under s 459H(1)(a) of the Act where there is a genuine dispute between the company and the issuer of the demand about the existence or amount of the debt to which the demand relates. The test for establishing a genuine dispute has been formulated, in cases since Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452; [1997] FCA 681 at 464 as requiring that the dispute be "bona fide and truly existing fact" and that the grounds for it be "real and not spurious, hypothetical, illusory or misconceived”. The case law also establishes that the threshold to establish a genuine dispute is not high, and I referred to the relevant authorities in my decision in Re Savemore Wholesale Pty Ltd [2021] NSWSC 307 at [23]ff, which I need not now repeat.

14. The position between the parties here raised a somewhat narrower issue. Ms Gall submits on behalf of Austpac that there is a genuine dispute between the parties because there is a question as to the application of the Redundancy Agreement in the relevant circumstances. Ms Gall points out that, in particular, the Redundancy Agreement does not define the term "redundancy", although Recital B to it contemplates that the agreement is directed to implementing "redundancy provisions". She also points out that the operative provision cl 2.1 commences with the language "In the event of redundancy", although it includes, without limitation, a "materially adverse change in the authority or status of the executive". Ms Gall contends, by reference to authority, that the concept of "redundancy" here will reflect the general law understanding of a redundancy, and that the Court may have regard to the recital in the Redundancy Agreement in the construction of that agreement, referring to Lachlan v HP Mercantile Pty Ltd (2015) (2015) 89 NSWLR 198; [2015] NSWCA 130. She also refers to the consideration of the concept of a redundancy provision, where a clause in a redundancy policy referring to "redundancy" was not defined, in Bampton v Viterra Limited (2015) 123 SASR 80; [2015] SASCFC 87; the consideration of that issue by Vickery J in Hodgson v Amcor Limited (2012) 264 FLR 1; [2012] VSC 94 and the consideration of that decision by the Court of Appeal in UGL Rail Services Pty Ltd v Janik [2014] NSWCA 436.

15. Mr Dooley addresses the same case law, but places primary reliance on the proposition that, here, the reference to "redundancy" at general law would not confine the specific provision in the Redundancy Agreement to a "materially adverse change in the authority or status" of Mr Turbott. Mr Dooley does not hesitate to embrace the radical consequences of that submission, which appeared to extend so far as that a "redundancy" would be established following a "materially adverse change" in Mr Turbott's authority, not only if he was terminated for misconduct, the position for which Austpac contends here, but also if he ceased employment for any reason not amounting to a redundancy at general law.

16. The question here, however, is not merely which is the better construction of the Redundancy Agreement, because the Court is not here considering a construction dispute in respect of the contract, with the aid of full evidence as to the contractual circumstances, but it is instead dealing with a summary application to set aside a creditor's statutory demand. Both counsel recognise the general principle that the Court will not determine questions of construction in an application to set aside a creditor's statutory demand, a position which was emphasised by the Court of Appeal in Creata (Aust) Pty Ltd v Faull (2017) 125 ACSR 212; [2017] NSWCA 300 (“Creata”), which was subsequently quoted at length and applied by Williams J in Re Jana Pty Ltd [2022] NSWSC 112 at [15].

17. The Court of Appeal in Creata also referred to the observations of the Supreme Court of Victoria in Spacorn Australia Pty Ltd v Myer Stores Limited (2001) 19 ACLC 1270; [2001] VSCA 89 at [4], where Brooking and Charles JJA put that test as directed to the question whether it was "plain as a pikestaff" that a particular construction was not tenable. Mr Dooley fairly proceeded by reference to that test, and contended that it was "as plain as a pikestaff" here that the construction for which Austpac contended was not available.

18. It seems to me, there is a genuine dispute as to the relevant contractual provision. It seems to me that it is plainly arguable that the redundancy agreement was, by reference to the recital and the introductory word of cl 2.1 directed to "redundancy" in the general law sense, where the position in which a person was employed was displaced. The inclusive reference to a "materially adverse change" does not necessarily displace that reading of the provision or do so in a way that is "as plain as a pikestaff". The clause would read sensibly, and consistently with the recital, if it is limited to "redundancy" in the general law sense, although making clear that a material adverse change in authority or status, within that concept, amounts to a "redundancy". Of course, I emphasise that I am not reaching a finding as to the proper construction of the clause or indicating any view whether that approach for which Austpac contends is preferable to the approach for which Mr Turbott contends. I am, instead, concluding that it is not "plain as a pikestaff" that the approach for which Austpac contends could not be accepted by a Court determining that question on the merits.

19. It is then not to the point whether that this construction dispute could be determined simply, and by reference to the evidence before me, or in little more time than was required to determine whether there is a genuine dispute about it, because the appellate authority has made clear that that course is not generally open to a judge, in determining a case of this kind, and I am bound by that authority.

Offsetting claim

20. In these circumstances, the question of a genuine offsetting claim does not arise. Had I reached the contrary conclusion as to whether a genuine dispute was established, it was common ground between the parties that an offsetting claim would be established for a part of the amount claimed, as identified in correspondence between Austpac's solicitors and Mr Turbott's solicitors. It is not necessary to address that question further, where I have found that a genuine dispute exists in respect of the amount claimed in the capital demand as a whole.

Section 459J of the Act

21. Austpac also sought to set aside the Demand in relation to s 459J of the Act, on the basis that it was issued in respect of a debt that was known to be disputed or that, alternatively, an offsetting claim in respect of a significant part of the amount of $270,000 claimed in the Demand gave rise to some other reason to set aside the Demand, consistent with the approach which I adopted in Re UGL Process Solutions [2012] NSWSC 1256. It is not necessary to determine that question given the conclusions that I have reached above, although there is force in Mr Dooley's submission that, if an offsetting claim were established, then that would permit the reduction of the amount claimed in the Demand, pursuant to s 459H of the Act and in accordance with the approach I took in Re Wollongong Coal Limited (2017) 122 ACSR 30; [2017] NSWSC 201. As I have noted, it is not necessary to determine that question, where a genuine dispute is established in respect of the amount claimed in the Demand as a whole.

Orders

22. For these reasons, I am satisfied that the application to set aside the Demand must succeed. I make orders that:

1. The creditor’s statutory demand dated 19 July 2022 served by the Defendant, Mr Turbott, on the Plaintiff, Austpac Resources NL, be set aside.

2. The Defendant pay the Plaintiff's costs of and incidental to this Originating Process as agreed or as assessed.

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Decision last updated: 07 December 2022