Joulia Apartments Pty Ltd v Melvest Property Ltd (Ruling)

[2014] VSC 182

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

S CI  2014  01042

JOULIA APARTMENTS PTY LTD (ACN 140 072 420)	Plaintiff
v
MELVEST PROPERTY LTD (ACN 162 243 263)	Defendant

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JUDGE:	RANDALL AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	19 March 2014
DATE OF JUDGMENT:	Ex tempore 19 March 2014 and revised 28 April 2014
CASE MAY BE CITED AS:	Joulia Apartments Pty Ltd v Melvest Property Ltd (Ruling)
MEDIUM NEUTRAL CITATION:	[2014] VSC 182

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CORPORATIONS — Setting aside of statutory demand — Company failed to pay the creditor the second month rent guarantee under the contract of sale of real estate — Amount was payable pursuant to a special condition entered into between signing the contract and settlement — Applicable law requires identification of a genuine dispute without resolving the same — Construction of the special condition not appropriate— Whether the Company waived compliance with special condition by earlier payment.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr A P Muller	Logie-Smith Lanyon
For the Defendant	Mr D J-H Kim	Stamford Lawyers Pty Ltd

HIS HONOUR:

1. In this matter the description of the debt and statutory demands is that the company failed to pay the creditor the rent guarantee under the contract of sale of real estate dated 8 August 2012 between the company and the creditor in relation to the land described in the certificate of title referred to therein, for the period 20 October 2013 to 19 November 2013.  That period was the second rental month pursuant to the contract, the first period having been paid without any complaint, conditions or resistance. 

1. The provision in the contract pursuant to which the amounts are payable is a special condition entered into between signing of the contract and settlement.  The special condition was in the following form:

Rent guarantee

(i)The Vendor will provide the Purchaser with a rental guarantee of 6% of the Price (gross) payable monthly in arrears for 12 months from the settlement date;

(ii)       To be entitled to the rental guarantee, the Purchaser must:

a.        Complete the contract on the due date for settlement;

b.Authorise in writing the Vendor or an estate agent nominated by the Vendor to act as the leasing agent of the property (“the Leasing Agent”);

c.Accept a tenant and the terms and conditions for the tenancy approved by the Vendor on the recommendations of the Leasing Agent;

d.Do all that is necessary and required by the Leasing Agent and/or Vendor, to facilitate the leasing of the Property, including making the Property available for inspection when requested; and

e.Sign within three days of being requested to do so, any engagement, contract, authority, tenancy agreement, lease or other document that the Vendor or Leasing Agent may require to enable it to attend to the leasing of the Property in accordance with this Special Condition.

(iii)If the Purchaser fails to comply with the above the Purchaser is deemed to have waived the benefit of the rental guarantee;

(iv)The Purchaser acknowledges and agrees that the rent pursuant to the rent guarantee shall be subject to reduction by the Leasing Agent’s letting fees, property outgoings; and any collection or management fees to which the Leasing Agent may be entitled pursuant to the terms of its appointment.

1. I was not taken to (iv), nor to the GST and interest provisions in the special conditions.  Accordingly, I will not deal with the same.

1. Mr Kim for the creditor has forcefully argued that the rental period up to 20 November or 19 November was due and payable prior to 26 November 2013.  26 November 2013 is a significant date in that it is the date on which the authority pursuant to sub-paragraph (ii)(e) was provided and returnable within three days.  It was returned after three days.

1. Mr Kim submitted that the construction point had to be determined in favour of the defendant as it did not make commercial sense otherwise.  The waiver that is purported to be relied upon in (iii) depends on matters which the plaintiff had to attend to first of all, and that was not done until 26 November, being after the date on which the second period was due and payable.

1. Mr Kim submitted that what occurred between the solicitors for the plaintiff and the defendant was irrelevant to this particular issue, that is, whether at the time of service of the statutory demand, the rental guarantee for the period ending November 2013 was due and payable.  The notice of default served by Mr Kim's instructors only related to periods post-November 2013.

1. Notwithstanding Mr Kim's able submissions I will decide against him on the basis that there is a construction point which I cannot determine in this proceeding. 

1. The task of the Court is to identify whether there is a ‘genuine dispute’.  ‘Genuine dispute’ connotes a plausible contention requiring investigation and raises much the same sort of consideration as the ‘serious question to be tried’ criterion.  The various tests require me to identify whether there is a genuine dispute without resolving the same.  I refer to the judgment of Dodds‑Streeton JA in TR Administration Pty Ltd v Marchetti and Sons Pty Ltd,[1] where her Honour said:

[56]The Court, in the context of an application to set aside a statutory demand, must determine whether there is a genuine dispute about the existence or amount of the debt or whether the company has a genuine off-setting claim.

[1][2008] VSCA 70.

1. Dodds‑Streeton AJ also referred to Spencer Constructions Pty Ltd v G & M AldridgePty Ltd[2] and quoted from the decision of McClelland CJ in eq in Eyota Pty Ltd v Hanave Pty Ltd.[3]  McClelland CJ said:

It is, however, necessary to consider the meaning of the expression “genuine dispute” where it occurs in s 450H. In my opinion that expression connotes a plausible contention requiring investigation, and raises much the same sort of considerations as the “serious question to be tried” criterion which arises on an application for an interlocutory injunction or for the extension or removal of a caveat. This does not mean that the court must accept uncritically as giving rise to a genuine dispute, 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” not having “sufficient prima facie plausibility to merit further investigation as to [its] truth”…or “a patently feeble legal argument or an assertion of facts unsupported by evidence”…

But it does mean that, except in such an extreme case, a court required to determine whether there is a genuine dispute should not embark upon an inquiry as to the credit of a witness or a deponent whose evidence is relied on as giving rise to the dispute. There is a clear difference between, on the one hand, determining whether there is a genuine dispute and, on the other hand, determining the merits of, or resolving, such a dispute.[4]

[2](1997) 76 FCR 452.

[3](1994) 12 ACSR 785.

[4]At 787.

1. Further, in Delnorth Pty Ltd v State Bank of New South Wales,[5] Cohen J, after commenting on the expression ‘genuine dispute’ said:

Where no further investigation is required, I consider that the court on an application under s 459G may decide as a matter of law if there is a genuine dispute. The occasions when this is possible may be few…[6]

[5](1995) 17 ACSR 379.

[6]At 385.

1. The construction points are:

(a)whether (i) stands alone and imposes an obligation to pay monthly in arrears irrespective of what is contained in (ii); alternatively

(b)does (ii) impose preconditions before there is any legal obligation to pay the rental guarantee; and

(c)does (ii)(b) operate separately to (ii)(e)?

1. Further, there is another issue which is whether in any event, by performance for the October month, the plaintiff waived compliance with the matters set out in (ii), or it waived strict compliance with the consequences set out in (iii).        

1. These are not simple matters of construction and also require full evidence with respect to the circumstances as to the prior payment.  Accordingly, this is not one of the matters identified by Cohen J where the dispute can be resolved by the construction of the special condition.

1. The question to be agitated is plausible and had been identified prior to the signing of the statutory demand and serving of it and was continually propounded after the service of the statutory demand.

1. The statutory demand dated 19 February 2014 is set aside.