In the matter of Urban Purveyor Group Pty Ltd

[2015] NSWSC 1705

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Urban Purveyor Group Pty Ltd [2015] NSWSC 1705
Hearing dates:	6 November 2015 [Written submissions 12 November 2015]
Decision date:	17 November 2015
Jurisdiction:	Equity - Corporations List
Before:	Bergin CJ in Eq
Decision:	Statutory demand varied by amounts in respect of which there is a genuine dispute
Catchwords:	STATUTORY DEMANDS – application under s 459H of the Corporations Act 2001 (Cth) to vary statutory demand – where no complaint of the kind made in application made prior to service of statutory demand – whether genuine dispute in respect of amount in demand.
Legislation Cited:	Corporations Act 2001 (Cth)
Cases Cited:	Edge Technology Pty Ltd v Lite-On Technology Corp (2000) 34 ACSR 301 Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 Goldspar Australia Pty Ltd v KWA Design Group Pty Ltd (1999) 17 ACLC 456 Jarena Pty Ltd v Sholl Nicholson Pty (1996) 136 ALR 427 Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290 Spacorp Australia Pty Ltd v Myer Stores Ltd (2001) 19 ACLC 1270 TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd [2008] VSCA 70
Category:	Principal judgment
Parties:	Urban Purveyor Group Pty Ltd (Plaintiff) Challenger Cleaning Pty Ltd (Defendant)
Representation:	Counsel: MP Cleary (Plaintiff) F Assaf (Defendant)   Solicitors: W Lawyers (Plaintiff) Bird & Bird (Defendant)
File Number(s):	2015/181545
Publication restriction:	Nil

Judgment

1. This is an application by the plaintiff, Urban Purveyor Group Pty Ltd, for an order pursuant to s 459H(4) of the Corporations Act 2001 (Cth) (the Act) that the statutory demand issued by the defendant, Challenger Cleaning Pty Ltd, dated 1 June 2015 be varied by reducing the amount claimed from $466,223.04 to $388,866.02. The plaintiff also seeks a declaration pursuant to ss 459F(2) and 459H(4) of the Act that the statutory demand has effect, as varied, from the date it was served on the plaintiff.

2. The plaintiff contends that there is a genuine dispute about the amount of the debt to which the demand relates. It does not assert any offsetting claim. The alleged genuine dispute relates to two aspects of the claims made in invoices served by the defendant on the plaintiff in relation to the provision of cleaning services. The first is that the amounts claimed are outside the rates agreed between the parties. The second is that some of the services listed in the invoices had to be approved by the plaintiff and were not so approved.

3. The plaintiff and the defendant entered into an Agreement on 20 March 2013 pursuant to which the defendant agreed to provide cleaning, food hygiene and sanitation services (the Services) to the plaintiff commencing on 8 April 2013 for an initial term of 12 months until 8 April 2014. The parties agreed to extend the initial term on such terms and conditions as they saw fit (cl 1). The defendant agreed to provide the Services (in accordance with the Specification Schedule annexed to the Agreement) at the plaintiff’s premises, being restaurants and bars, the plaintiff’s offices and the HFF Production Facility (the Facility). The Specification Schedule recorded the task, description and frequency of the Services to be provided in each of the premises.

4. The parties agreed that the plaintiff would pay the defendant for the Services on the basis set out in the Schedule of Rates annexed to the Agreement. They also agreed that the defendant would submit invoices to the plaintiff on a monthly basis and that the plaintiff would make payment within 30 days after the end of the month in which the invoices were rendered (cl 3). The Schedule of Rates identified the venue, the area, the number of days per week and the value of the Services to be provided per week. The defendant was required to clean the various venues, excluding the offices and the Facility every day of the week. There were some parts of the venues that were to be cleaned less than every day and some only “As Required”. In the “As Required” instances, the Schedule of Rates provided for a value “Per Clean” as opposed to a value per week. The parties also agreed to implement any increase or decrease in the wage rates and allowances due to statutory and related variations beyond the defendant’s control (cl 15). It is agreed between the parties that the amounts in the Schedule of Rates should be increased by 0.5% by reason of the matters in cl 15 of the Agreement.

5. The parties’ relationship continued until May 2015.

6. It is clear that the defendant met with and/or communicated with the plaintiff and/or its venue managers in respect of the services to be provided that were additional to those contained in the Specification Schedule. From time to time the defendant would send emails to the plaintiff providing detail of additional costs incurred per site, for instance for waste removal and copper polishing. In addition there were notifications regarding duty cleaners and their shift times for various venues.

Meeting – 6 January 2015

7. In 2014 the plaintiff became concerned about the standard of the cleaning services being provided by the defendant. A meeting was convened on 6 January 2015 to discuss the plaintiff’s concerns. The plaintiff’s representatives at this meeting included Neville Sender (the plaintiff’s Chief Financial Officer) and Frank Tucker (the plaintiff’s Group Director, Food & Beverage). The defendant’s representatives included Terry Kallis (the defendant’s General Manager of Commercial Operations). The minutes of the meeting make reference to the management logbooks kept by the plaintiff for the previous 45 days which “consistently noted poor/inconsistent cleans” at eight of the venues. Some of the complaints identified in the minutes include “railings unclean, large section of floor that required re-buffing, toilets, floors consistently un-mopped/un-vacuumed, remnants of food as well as spills of jus, dusty fixtures, dead rodents, poor standard over entirety of venue, mirrors consistently to a poor standard”. The minutes record the defendant’s claims that there had been an increase in foot traffic and inconsistency in staff attendance. There was reference to the unreliability of one particular staff member and the need to reprimand specific staff thought to have contributed to poor standards. The minutes also recorded the following:

Challenger to move to revise month of billing for Urban Purveyor Group venues

Challenger to provide Action Plan for Frank’s perusal by afternoon

Challenger to schedule more regular meetings with chefs and venue managers, meetings with Director’s to remain at the same frequency, monthly solely to talk strategy.

UPG to potentially rebid or possibly to go out to tender as a result of deficiencies in Challenger cleaning

8. All of the defendant’s invoices to 30 December 2014 including for work additional to that in the Specification Schedule were paid, apparently without demur as to rates and/or approval. The defendant continued providing services from January 2015 to the end of April 2015 and rendered invoices accordingly.

Meeting – 6 March 2015

9. A further meeting took place on 6 March 2015 at which were present Mr Tucker, Darren Campbell (from the defendant) and Mr Kallis. It was noted that the defendant was requested to scrub the new treads at the Argyle fire stairs on a weekly basis. All parties agreed that an additional half hour was required every Thursday. It was noted that Mr Tucker requested the entire Argyle fire stairs to have an additional weekly deep clean to be completed every Saturday morning for which one hour was approved. Mr Tucker instructed that the additional costings were to be invoiced to the Argyle costs centre with the service starting on 9 March 2015. Similar instructions were given in respect of the Sake venue courtyard stair treads starting on 9 March 2015. The minutes also record agreement for a duty cleaner be introduced at the Sake venue similar to the duty cleaner at the Argyle. The minutes also record the following:

DC mentioned that Challenger previously supplied duty cleaners in past periodically to Sake. FT approved the attendant’s shift would be Monday to Saturday commencing Monday 9th March. FT approved 6pm-10pm shift hours. FT agreed with new service and instructed invoicing to be split between the three venues as follows: 1. Sake 50% 2. Ananas 25% 3. The Cut 25%.

Statutory Demand – 1 June 2015

10. By 1 June 2015 the plaintiff had failed to pay invoices for January to April 2015 amounting to $466,223.04. The defendant served a creditor’s statutory demand for that amount on the plaintiff together with the affidavit of Vadim Gurevich, a director of the defendant, in which he expressed the belief that there was no genuine dispute about the existence or amount of the debt.

Proceedings Commenced – 19 June 2015

11. On 19 June 2015 the plaintiff filed an Originating Process seeking to set aside the statutory demand. The plaintiff also filed the affidavit in support of Neville Sender sworn on 19 June 2015. Mr Sender referred in that affidavit to the Agreement between the parties and claimed that the plaintiff “disputes that the defendant provided services in accordance with the Agreement” (par [8]). In this regard Mr Sender claimed that it was in about June 2014 that the plaintiff noticed a decline in “performance and quality of the cleaning services” provided by the defendant. Mr Sender claimed that the performance and quality of the cleaning services had “significantly deteriorated” in the previous six months. In support of this claim Mr Sender exhibited logbooks which the plaintiff had kept over the period 21 November 2014 to 24 March 2015. These logbooks refer to the various complaints about the standard of the cleaning services, some of which were discussed at the meeting on 6 January 2015.

12. Mr Sender’s affidavit also referred to the meeting of 6 January 2015 with the claim that whenever these issues were raised with the defendant it would assure the plaintiff that the problems would be rectified. Mr Sender claimed that despite assurances, the issues with the cleaning services persisted (par [9]). Mr Sender’s affidavit also included the following:

11   Further to the above, the plaintiff disputes that the amount described in the Demand and the supporting affidavit is owed. Several invoices in the Demand detail alleged provision of cleaning services which are outside the terms of the Agreement.

13. Mr Sender then exhibited an invoice (#3655) as an example of services that were said to be outside the terms of the Agreement. He claimed that the Schedule of Rates for the particular venue in that invoice was $1,406.13 but that the invoice amount was $2,024.98 and the plaintiff had been unable to reconcile the additional charges. The invoice claimed $1,413.16 as opposed to the scheduled rate of $1,406.13. There were additional charges of $211.45 for a duty cleaner on 13 March 2015 and $216.28 for a duty cleaner on 14 March 2015.

14. Mr Sender also exhibited a letter from the plaintiff’s solicitors, W Lawyers, to the defendant’s solicitors, Bird & Bird, dated 17 June 2015. That letter detailed a number of grounds in support of the plaintiff’s claim that there was a genuine dispute in respect of the debt. However as all but one of them have been abandoned it is appropriate only to refer to the remaining claim which was as follows:

The amounts claimed in the invoices do not correspond with amount specified in the Agreement. We refer to Annexure B of the Agreement [the Schedule of Rates]. There is no evidence of any additional charges being properly approved by our client.

15. When the Originating Process was listed on the first return date, 22 July 2015, Consent Orders were made for the service of evidence and the matter was listed on 24 August 2015. On 24 August 2015 it was noted that the evidence was complete and the proceedings were fixed for hearing before me on 6 November 2015.

Hearing – 6 November 2015

16. The matter was heard on 6 November 2015 when Mr MP Cleary, of counsel, appeared for the plaintiff and Mr F Assaf, of counsel, appeared for the defendant. At the conclusion of the hearing the parties were granted leave to file further submissions by 12 November 2015.

17. At the hearing the plaintiff was, by consent, granted leave to file the Amended Originating Process in Court seeking an order pursuant to s 459H(4) of the Act for variation in the amount claimed in the statutory demand and a declaration that the statutory demand, as varied has effect from the date it was served on the plaintiff.

18. The plaintiff relied upon the affidavit of Mr Sender referred to above and those of Frank Tucker sworn on 12 August 2015 and 24 August 2015. The defendant relied upon the affidavits of Thomas Beissert (the defendant’s General Manager of Food & Beverage) affirmed on 14 August 2015, Sally Louise Barber (the defendant’s solicitor) affirmed on 14 August 2015, Marlon Maurice Aronowitz (the defendant’s financial controller) affirmed on 14 August 2015 and Terry Kallis sworn on 14 August 2015.

19. Mr Tucker is responsible for the day to day operations of the plaintiff’s restaurant businesses. His duties include revenue and costs tracking and analysis and general monitoring of the operations of the business. He claimed that the plaintiff and the defendant held meetings at least once a month to discuss performance and standards of the services provided pursuant to the Agreement. He gave evidence of a meeting on 8 April 2014 with Mr Kallis, Mr Campbell and Mr Beissert at which “it was discussed between the attendees that any work pursuant to the Cleaning Agreement by the defendant at the plaintiff’s venues not included in the fixed price was to be approved by the plaintiff prior to work being undertaken by the defendant” (par [15]).

20. Mr Beissert’s affidavit evidence was that the conversation at this meeting was in the following terms:

Tucker:    Any additional work by Challenger not included in the fixed fee must be approved before the work is done.

Kallis:    What about ad hoc requests such as duty cleaners and functions?

Tucker:    That is fine as long as the venue manager requests the work.

21. Mr Kallis’ affidavit evidence in respect of the conversation at the meeting on 8 April 2014 was in the same terms as claimed by Mr Beissert.

22. In his affidavit in reply of 24 August 2015 Mr Tucker responded to the evidence given by Mr Kallis and Mr Beissert. He denied that he said words to the effect “that is fine as long as the venue manager requests the work”. He claimed that he “distinctly” recalled that he said words to the effect of “additional work may be requested but the expense must still be approved prior to the work commencing” (pars [5] and [14]).

23. Mr Tucker also gave evidence that at a meeting with Mr Kallis and Mr Campbell on 8 September 2014 the following conversation took place:

Tucker:   As has been discussed and agreed previously, any additional work by Challenger not included in the fixed fee must be approved by me. I do not expect any work to be provided for free. However, no additional work is authorised without my consent and any work provided prior to my approval will not be paid.

Kallis       

/Campbell:    Ok.

24. Mr Kallis gave affidavit evidence in respect of the meeting on 8 September 2014 in which he claimed that the following conversation took place:

Kallis:    To be clear, this only includes any work that will be a recurring fixed item to be added to the existing scope of work will be approved by you before we do the work. We assume that you will not need to approve ad hoc requests and venue managers will still have authority to make such requests such as duty cleaners and functions. Is this correct?

Tucker:   Yes, that is correct.

25. Mr Tucker denied this conversation (although his affidavit in reply refers to the wrong paragraph in Mr Kallis’ affidavit).

26. In his affidavit sworn on 12 August 2015 Mr Tucker referred to each of the invoices the subject of the statutory demand and made claims including that they contain items for which the plaintiff has been overcharged and items in respect of which there was no approval.

Real Issue

27. The real issue is whether there is a genuine dispute about the amount of the debt. It is contended by the plaintiff that: (a) the amounts charged in the invoices totalling $24,273.34 are not the amounts agreed between the parties for those Services as listed in the Schedule of Rates (overcharging claim); and (b) work and/or charges for work additional to that in the Specification Schedule totalling $58,647.34 were not approved by the plaintiff (unauthorised work claim).

Consideration

28. Section 459H of the Act applies relevantly where the Court is satisfied that there is a genuine dispute between the parties about the existence or amount of the debt to which the statutory demand relates (s 459H(1)). The Court is required to calculate the substantiated amount of the demand in accordance with the statutory formula and if it is at least as great as the statutory minimum ($2,000) the Court may make an order varying the demand as specified in the order: s 459H(4). There is no issue in the proceeding that if there is a genuine dispute on either of the bases claimed, an order may be made varying the demand.

29. The process of determining whether a genuine dispute exists is not dissimilar to the process of determining whether there is a serious issue to be tried in an application for an interlocutory injunction. The question is whether there is a “plausible contention requiring investigation”: Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 787.

30. The Court is not confined to an uncritical assessment of the affidavit containing the contention that there is a genuine dispute. The Court is to determine whether there is a genuine dispute at the time of the hearing. In considering the surrounding circumstances and applying commercial common sense as to whether there is a genuine dispute, it is permissible to take into account the fact that prior to the service of the statutory demand or some subsequent time, there were no complaints of the kind raised at the hearing. Such circumstances may carry weight but may not, on their own, be conclusive against the existence of a genuine dispute: Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290; Edge Technology Pty Ltd v Lite-On Technology Corp (2000) 34 ACSR 301 at 307 [33]; Jarena Pty Ltd v Sholl Nicholson Pty (1996) 136 ALR 427 at 429; Goldspar Australia Pty Ltd v KWA Design Group Pty Ltd (1999) ACLC 456.

Overcharging claim

31. It is not in issue that the amount claimed in the statutory demand overstates the total amount of the invoices by $63.00.

32. The plaintiff calculated the weekly charges above the fixed rates set out in the Schedule of Rates as $24,273.34. The bulk of this claim ($14,045.60) relates to two invoices. The two invoices for the cleaning of one of the commercial premises (the Facility) for the periods 2 March 2015 to 27 March 2015 (#182291) and 30 March 2015 to 24 April 2015 (#183191) make claims for payment at $5,797.32 per week (excluding GST) for four weeks totalling $23,189.28. The charge per week agreed in the Schedule of Rates was recorded as “HHF Production Facility – HACCP Clean – All Areas 5 days $2,153.05; Day Cleaner 1 – Monday to Friday – Pot Wash 5 days $972.80; Day Cleaner 2 – Monday to Saturday – All Areas 5 days $1,075.20”. Even if all those charges were applicable, the total amount would only be $4,201.05 per week rather than $5,797.32. The alleged overcharges of $7,021.92 and $7,023.68 respectively are inclusive of GST.

33. I should record also that as I understood the submissions the defendant conceded that there was a genuine dispute in relation to the amounts in the two invoices #182291 and #183191.

34. The balance of the claims includes nine invoices (#3347, #3577, #3665, #3702, #3798, #4013, #4110, #4252 and #4266) for the cleaning of premises in O’Connell Street in Sydney. The Schedule of Rates fixes the value at $500 per week for the Ground Floor; $675.48 per week for the Lower Ground; and “As Required” for Level One. Each of the invoices makes a claim for $916.17 for the Ground Floor and $1,123.82 per week for the Lower Ground. In additional written submissions filed on 12 November 2015 the defendant characterised the $1,123.82 in these invoices as being $675.48 for the Lower Ground plus $3.38 for the rate increase plus “additional service: general additional cleaning at $444.96”. In support of this contention the defendant relied upon an email between Mr Beissert (when he was working for the plaintiff) and Messrs Kallis and Campbell dated 7 February 2014. That email requested a meeting the following Monday for a “walk through the new restaurant” and to “amend the cleaning scope where needed”. There is nothing further to suggest that there were additional services agreed and/or that the rate of the additional cleaning would be at $444.96 as claimed. The defendant also characterised the Ground Floor claim at $916.17 as being $500.00 as in the Schedule of Rates plus $2.50 for the rate increase plus “additional service: general additional cleaning at $413.67”. Once again the defendant relied upon the email dated 7 February 2014.

31. I am not satisfied that the defendant’s reliance on these documents detracts from the plaintiff’s claims.

32. Also included in the overcharging claim are nine invoices (#3580, #3668, #3705, #3801, #4016, #4065, #4104, #4256 and #4270) relating to the cleaning of the plaintiff’s office premises. Each makes a claim of $406.97 inclusive of GST. The plaintiff alleges that there is an overcharge of $29.67 per invoice when compared to the Schedule of Rates in the Agreement. The defendant claims that this difference is for one hour extra cleaning services per week at the offices. In support of this contention the defendant relies upon an email dated 10 September 2013 from Mr Beissert (when he was working with the plaintiff) to Mr Kallis. That email is entitled “Meeting Notes – Extra Charges”. It is in response to an email from Mr Kallis to Mr Beissert in which Mr Kallis confirmed the “extra weekly hours” which included “1 hour extra per week to be added to the Urban Purveyors Head Offices weekly invoice for the dusting of Melissa’s private filing room”. The email in response is in the following terms:

Confirmed, as per below.

Stairways – need them vacuumed or swept everyday with Mob.

Scrubbing once a week enough on the yellow edges.

Thanks again and regards

37. There is no express mention in the responding email to the extra one hour per week at the offices. However a reasonable reading of the email would suggest that the additional hour had been approved. Accordingly it is appropriate to reduce the plaintiff’s claim by $29.67 per invoice amounting to $267.03 for nine invoices.

38. In all the circumstances I am satisfied that there is a genuine dispute in respect of the overcharge claim in the amount of $24,006.31 (being the amount claimed $24,273.34 less $267.03). I am satisfied that the statutory demand should be varied to reduce the amount claimed by this amount.

Unauthorised work claim

39. The amount in question on this aspect of the claim is agreed as $58,647.34. There is no issue that at the conclusion of the initial term of the Agreement the parties had discussions in which the plaintiff required that the cost of any work requested by venue managers additional to that in the Specification Schedule be approved or agreed with the venue before it was performed.

40. There is no issue on the evidence that the defendant was requested to perform some additional work from time to time. It is also not in issue that many of the invoices record work “as requested” with no contemporaneous suggestion that the work was not requested and/or approved by the plaintiff and/or the venue manager. The first time that it was ever suggested that some of the additional work had not been approved was two weeks after the statutory demand was served on the plaintiff, when the plaintiff’s solicitor wrote to the defendant’s solicitor on 17 June 2015 making the bold assertion that “there is no evidence of any additional charges being properly approved by our client”.

41. Mr Sender’s supporting affidavit of 19 June 2015 made no express claim that there was a lack of approval for additional work. Rather he claimed that “several invoices” particularised in the statutory demand “detail alleged provision of cleaning services which are outside the terms of the Agreement”. Mr Sender gave one example (#3655) and claimed that the plaintiff had been “unable to reconcile the additional charges”. There was no suggestion in the body of the affidavit of any lack of approval. Invoice #3655 related to the cleaning of premises in Brisbane. The claim for the weekly clean was $1,413.16. The value in the Schedule of Rates is $1,406.13. In addition there was a claim for a duty cleaner for Friday 13 March 2015 for eight hours at $211.45 and on Saturday 14 March 2015 for eight hours at $216.28.

42. The first time that any additional material was provided in respect of the unauthorised work claim was in Mr Tucker’s affidavit of 12 August 2015 when he referred to each of the invoices in the statutory demand. He claimed that he had “reviewed the plaintiff’s documents and records” including his emails and “confirmed” that “no request for additional services was made for the venue for the specified period”. He also claimed that there was “no record” of any additional cleaning services being provided for the venue for the specified period as claimed in the invoices.

43. Prior to the service of the statutory demand, the clear focus of the plaintiff’s complaints was about the defendant’s level of performance as clearly evidenced in the minutes of the meetings on 6 January 2015 and 6 March 2015. There was no mention in either of those meetings and more particularly the meeting of 6 March 2015 (after the plaintiff had received many of the defendant’s subject invoices) that there had been any additional work that had not been requested and/or not approved.

44. As Dodds-Streeton JA (with whom Neave and Kellam JJA agreed) said in TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd [2008] VSCA 70 at [57], there is no need for an “in-depth examination or determination of the merits of the alleged dispute”. Her Honour also referred at [59] to the observations of Brooking and Charles JJA in Spacorp Australia Pty Ltd v Myer Stores Ltd (2001) 19 ACLC 1270 at [3]-[4]. Those observations included that in deciding the issue of whether there is a genuine dispute 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”.

45. Notwithstanding the fact that there was no complaint about unauthorised work prior to the service of the statutory demand, there is evidence that it was the plaintiff’s intention that work additional to that in the Specification Schedule needed to be approved by the plaintiff and if requested by the venue manager its value needed to be agreed with the venue prior to it being carried out. On one view the defendant’s evidence supports such intention. There are entries in the various invoices that detail work additional to that found in the Specification Schedule which do not have the words “as requested” recorded next to them. In addition the entries that do record “as requested” do not identify whether it was requested by the venue or otherwise.

46. The defendant’s reliance upon the email communications referred to earlier (par [6]) go some distance to identifying some aspects of the additional work that was proposed and the rates that were suggested. However those emails also support the plaintiff’s claim that approval was necessary.

47. On balance I am satisfied that there is a plausible contention that the amounts claimed were not approved that warrants further investigation. I am satisfied that a genuine dispute exists in relation to the amount of $58,647.34. I am satisfied that the statutory demand should be varied to reflect a reduction in this amount.

Conclusion

48. The statutory demand is to be varied by reducing it from $466,223.04 to $384,459.55. This takes into account the arithmetical error of $63.00; the genuine dispute in respect of the overcharging claim of $24,006.31 (par [38]); the genuine dispute in respect of the unauthorised work claim of $58,647.34 (par [47]); and the agreed 0.5% increase of $953.16.

49. A declaration will be made that the statutory demand has effect, as varied, as from when the demand was served on the plaintiff.

50. If the parties are unable to agree on a costs order I will hear argument on 23 November 2015 when the matter is listed in the Corporations List for finalisation of the orders.

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Decision last updated: 17 November 2015