K & G Webb Pty Ltd v F & N Nominees Pty Ltd - [2004] WASC 133

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: K & G WEBB PTY LTD -v- F & N NOMINEES PTY LTD & ANOR [2004] WASC 133

CORAM: MASTER SANDERSON

HEARD: 9 JUNE 2004

DELIVERED : 18 JUNE 2004

FILE NO/S: COR 91 of 2004

BETWEEN: K & G WEBB PTY LTD (ACN 084 557 568)
Plaintiff
AND
F & N NOMINEES PTY LTD (ACN 008 954 934)
PLANT CONTROL SYSTEMS PTY LTD (ACN 009 172 794)
Defendants

Catchwords:

Corporations Act - Application to set aside a statutory demand - Turns on own facts

Legislation:

Corporations Act, s 459G, s 459H

Result:

Demand set aside

Category: B

Representation:

Counsel:

Plaintiff: Mr J C Giles
Defendants: Mr R J Price

Solicitors:

Plaintiff: Solomon Brothers
Defendants: Eley Palmer

Case(s) referred to in judgment(s):

Financial Solutions Australasia Pty Ltd v Predella Pty Ltd (2002) 26 WAR 306

Case(s) also cited:

Breeze v Cambridge Gulf Holdings NL & Anor, unreported; SCt of WA; Library No 970643; 27 November 1997
Brockway v Pando (2000) 22 WAR 405
CGI Information Systems v APRA Consulting Pty Ltd [2003] NSWSC 728
Commercial Bank of Tasmania v Jones [1893] AC 313
Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785
Financial Solutions Australasia Pty Ltd v Predella Pty Ltd (2002) 26 WAR 306
Life Savers (Australasia) Ltd v Frigmobile Pty Ltd [1983] 1 NSWLR 431
Re Portugese Consolidated Copper Mines Ltd (1890) 45 Ch D 16
Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) FCR 452
Williams & Anor v Frayne & Anor (1937) 58 CLR 710

MASTER SANDERSON: This is the plaintiff's application to set aside a statutory demand. The application is brought under the provisions of s 459G of the Corporations Act and falls to be determined under s 459H. It is the primary contention of the plaintiff that there is a genuine dispute as to the debt the subject of the demand. At the conclusion of the hearing I indicated to the parties that I would set aside the demand and that I would publish my reasons at a later date. These are those reasons.
The demand itself is to be found as annexure "KGLW1" to the affidavit of Kenneth Graham Laurie Webb ("Mr Webb"), sworn 14 April 2004. In the schedule to the demand the amount of the debt is said to be $62,471.54. The debt is described in the following terms:
"Arrears of instalments due to be paid to the Creditor pursuant to an agreement for the sale of business dated 29 November 1998".
A copy of this agreement for the sale of a business appears as annexure "KGLW6" to Mr Webb's affidavit. The agreement is between the defendant, who is described as trustee for the Burke Family Trust, and Plant Control Systems Pty Ltd, both parties being described in the agreement as "the seller" and the defendants described as trustee for the K G Webb Family Trust and T & J Burke Pty Ltd as trustee for the T & J Burke Family Trust, as buyers. Without going into detail the agreement provided for the sale and purchase of a refrigeration, airconditioning and mechanical service business. The agreement detailed the purchase price and allowed the buyer to make payment to the seller by monthly instalments (see cl 5.1.2). The agreement also provided that the buyer would be liable to discharge all of the liabilities of the business (cl 2.3). This clause is of significance in the context of this dispute.
Mention should be made of two other provisions in the agreement. Clause 15.3 provides that any variation or cancellation of the agreement would be of no force and effect unless it was in writing and signed by or on behalf of the parties. Clause 15.5 provides that the agreement constituted the sole record of the agreement between the parties.
It is the plaintiff's case that subsequent to the signing of this agreement, further negotiations took place between the parties as to the way in which payment should be made of the purchase price. Rather than paraphrase what Mr Webb has to say about these negotiations, I will quote his evidence in full. By way of background, I should mention that a company styled Burkeair Pty Ltd was incorporated on 23 June 2000. Against that background, par 13 to 15 of Mr Webb's affidavit is in the following terms:
"13.Burkeair purchased from the plaintiff and T & J Burke Pty Ltd the business sold to the plaintiff and T & J Burke by the defendants pursuant to the Sale Agreement (the 'Business'). Before Burkeair purchased the Business, I along with Mr Tim Burke met with Mr Francis Burke and Ms Norma Burke, each a director of each of the defendants. That meeting was on or about April 2000 at Mr and Mrs Burke's residence at 37 Reeve Street, Swanbourne (the 'Meeting'). Mr and Ms Burke are the parents of Mr Tim Burke (director of T & J Burke Pty Ltd and director of Burkeair). They are also the parents of my wife, who I am in the process of divorcing and am engaged in Family Court litigation with.
14.I informed Mr and Ms Burke that it was proposed by the plaintiff and T & J Burke Pty Ltd that a company to be incorporated (ie Burkeair) which would purchase the Business, be solely liable for the repayments pursuant to the Sale Agreement and that the plaintiff and T & J Burke Pty Ltd would be released and discharged from their obligation to make repayments under the Sale Agreement. That proposal arose as T & J Burke Pty Ltd and the plaintiff had carried on the Business in partnership and the sale to Burkeair was to incorporate the partnership (which created a structure to allow further equity investment). The purpose of the meeting with Mr and Ms Burke was to obtain the defendants' consent to that proposal. Ms Burke, at the Meeting agreed to the company to be incorporated (ie Burkeair) purchasing the Business and that the company to be incorporated (ie Burkeair) would be solely liable for the repayments pursuant to the Sale Agreement. She agreed to release and discharge the plaintiff and T & J Burke Pty Ltd from their obligation to make repayments under the Sale Agreement: that is, the liabilities were novated.
15.The agreement reached and the release and discharge provided at the Meeting was not documented. At that time the relationship between the various entities and their directors was good. Since separating from my wife that relationship has seriously deteriorated. I had no reason at that time to expect what occurred at the Meeting would be ignored or denied. Since the Meeting and the transfer of the Business to Burkeair, Burkeair has been the only entity making repayments pursuant to the Sale Agreement. I am unable to annex documents to this affidavit evidencing those payments as I no longer have access to the documents of Burkeair, the circumstances of which is set out in annexure KGLW-12 hereof."
At the commencement of the hearing in this matter, counsel for the defendant objected to par 14 and part of par 15. As I understand the objection, it was said that Mr Webb was not giving evidence in the proper form. Rather, he was stating conclusions as to the legal effect of what took place at the meeting between him and Mr and Ms Burke. I am satisfied that the evidence is admissible. Any witness who gives evidence in an action between parties is obliged to tell the Court what took place. It is then for the Court to draw conclusions as to the legal effect of the transaction between the parties. But it must be remembered that this is an application to set aside a statutory demand. Essentially, what a plaintiff is required to do is set out matters which, it is said, give rise to a genuine dispute between the parties. It is not the function of the Court on such an application to determine the rights and liabilities of each of the parties; that is a matter for trial if proceedings are issued elsewhere. That alters the nature of the evidence that is required. This issue was explored by the Full Court in Financial Solutions Australasia Pty Ltd v Predella Pty Ltd (2002) 26 WAR 306. Doubtless the evidence to be found in par 14 and the early part of par 15 of Mr Webb's affidavit would, if given at trial, be inadmissible. It does contain statements of opinion and conclusions. But in my view, for the purposes of an application to set aside a statutory demand, it is both satisfactory and consequently admissible.
In opposition to the application, the defendants filed an affidavit of Norma Josephine Burke, sworn 23 April 2004. Ms Burke denies that the meeting referred to by Mr Webb in his affidavit ever took place: see par 6. During the course of his submissions, counsel for the defendants conceded that for the purposes of this application, it must be assumed both that the meeting took place and that the discussion as set out by Mr Webb occurred. With respect, that concession was entirely proper. There is clearly a genuine dispute as to whether or not the meeting took place. If it did, there is still a dispute about what was said. It was the defendant's position that even assuming everything Mr Webb says occurred at the meeting did occur, there was still no genuine dispute as to the liability of the plaintiff to the defendants.
It was the plaintiff's case that there was a genuine dispute as to whether, consequent upon the facts outlined in par 14 of Mr Webb's affidavit, there was a novation of the sale agreement. The plaintiff says that this novation was ratified by Burkeair Pty Ltd entering into an agreement with T & J Burke Pty Ltd and the plaintiff on 24 January 2001. A copy of this agreement (referred to in the evidence as the "Burkeair agreement") appears as annexure "BRG1" to the affidavit of Bradley Ryan Gannon, sworn 26 May 2004 and filed in support of the application. It was said that pursuant to this agreement, the loan repayments were made by Burkeair to the defendants. While Burkeair Pty Ltd had not been incorporated as at the date of the alleged novation, it was said that the company, subsequent to its formation, had ratified the novation and had done so within a reasonable time. In all the circumstances then, it was said that there was a genuine dispute as to the liability of the plaintiff to the defendants.
Against these submissions, the defendants pointed to the fact that any variation to the sale agreement was to be in writing. Given that there was no such writing, it was submitted there was no novation. Further, it was said that the terms of the Burkeair agreement was such that they were inconsistent with any alleged novation. A number of other submissions were made on behalf of the defendants but these were the two principle submissions put by counsel.
It is clear even from this brief outline that there is a genuine dispute between the parties. Based upon the affidavit material, I am not in a position to resolve the question of whether or not there was a novation transferring liability from the plaintiff to Burkeair Pty Ltd. To reach a conclusion on that question would amount to a de facto trial of a dispute between the parties. That is not the function of the statutory demand procedure. I am satisfied on balance that there is a genuine dispute between the parties and that the statutory demand ought accordingly be set aside.
I will hear the parties as to costs.