Kallawar Holdings Pty Ltd v Commonwealth Bank of Australia
[2010] VSCA 237
•10 September 2010
Revised
SUPREME COURT OF VICTORIA
COURT OF APPEAL
No 95 of 2010
| KALLAWAR HOLDINGS PTY LTD | |
| Applicant | |
| v | |
| COMMONWEALTH BANK OF AUSTRALIA | Respondent |
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JUDGES: | MANDIE JA and BEACH AJA | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 10 September 2010 | |
DATE OF JUDGMENT: | 10 September 2010 | |
MEDIUM NEUTRAL CITATION: | [2010] VSCA 237 | |
JUDGMENT APPEALED FROM: | [2010] VSC 288 (Davies J) | |
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APPLICATION FOR LEAVE TO APPEAL – Corporations – Statutory demand – Application to set aside – Claim of genuine dispute about existence of debt – Corporations Act 2001 (Cth), ss 459G and 459H – Decision below not shown to be wrong or attended with sufficient doubt.
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr P G Cawthorn SC with Dr E J Boros | B2B Lawyers |
| For the Respondent | Dr A P Trichardt with Dr O Bigos | Commonwealth Bank of Australia Legal Services Victoria |
MANDIE JA:
I will ask Beach AJA to deliver the first judgment.
BEACH AJA:
Introduction
On 18 May 2010, Efthim AsJ dismissed an application by Kallawar Holdings Pty Ltd (‘the company’) under s 459G of the Corporations Act2001 (Cth) (‘the Act’) to set aside a statutory demand served upon it by the respondent (‘the CBA’). The company appealed. The appeal was a hearing de novo of the application.
The appeal was heard by Davies J. On the appeal, the company contended that the statutory demand should be set aside because:
(a)there is a genuine dispute between the company and the CBA about the existence of the debt to which the demand related;[1] and
(b)there are ‘other reasons’ why the demand should be set aside.[2]
[1]See s 459H(1)(a) of the Act.
[2]See s 459J(1)(b) of the Act.
On 24 June 2010, her Honour dismissed the appeal and ordered that the application to set aside the statutory demand be dismissed. The company now seeks leave to appeal against the orders made by Davies J. Leave to appeal is required as the order sought to be appealed was an order in an interlocutory application within the meaning of s 17A(4)(b) of the Supreme Court Act 1986.[3] If leave is granted, consequential orders are sought seeking an extension of time for compliance with the statutory demand pending the determination of the appeal; alternatively, a stay on proceedings to wind up the company or an injunction from initiating proceedings to wind up the company pending the outcome of the appeal.
[3]See Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Ltd (2007) 212 FLR 56, [5].
The proceeding below
The statutory demand was for an amount of $18,904,122.29. The demand was alleged to be owed pursuant to a Deed of Guarantee between the company and the CBA.
The company supported its application by two affidavits, both sworn by Mark Henry Skinner, a director of the company. In essence, Mr Skinner deposed that the CBA had approved the entry into, between the company and another company, of a Purchase Price Adjustment Deed (‘PPAD’) and represented that should the company enter into the PPAD, the company would be released from the guarantee and the CBA would not seek to rely on the guarantee.
In support of these propositions, Mr Skinner deposed to conversations he had with a Mr Chen and a Mr Allen of Sinoed wherein he was told that the CBA had agreed to release the guarantee. The substance of these conversations is set out in the judgment below.
The only relevant conversation between Mr Skinner and an employee of the CBA was described by Mr Skinner in his affidavit evidence in the following terms:
In or around February 2009 Glen Olley of the [CBA] told me that the [CBA] would consider a request to release the [company’s] guarantees after the Second Closing.
Her Honour then referred to affidavit material filed on behalf of the CBA by the bank officers with whom Mr Chen and Mr Allen appear to have dealt. In substance, this evidence was to the effect that the CBA did not release, nor agree to release, the company from its obligations under the guarantee. At its highest, what was said on behalf of the CBA was that the bank would consider a request for the release of the company from the guarantee, but that further material would be needed before consideration could be given to any restructuring of the facilities and arrangements then in place.
Her Honour concluded there was no genuine dispute between the company and the CBA about the existence of the debt to which the statutory demand related. She also rejected the contention that there were ‘other reasons’ why the demand should be set aside.
Proposed grounds of appeal
The company’s proposed grounds of appeal are as follows:
1.The learned trial judge erred in failing to find that there was a genuine dispute as to the existence of the debt.
2.The learned trial judge erred in failing to find that there was sufficient evidence before the Court to enable the Court to conclude that there was a dispute and that it was a genuine dispute.
3.The learned trial judge erred in failing to find that there was put before the Court sufficient probative evidence from which the Court could be satisfied that there was a real dispute about the debt.
4.The learned trial judge should have found that having found Mr Skinner relied on assurances from Mr Chen and Mr Allen a basis to set aside the guarantee founded, at least, on s 87 of the Trade Practices Act1974 existed and that, accordingly, there was a genuine dispute.
5.The learned trial judge erred in apparently requiring evidence to be adduced directly of conversations between the Plaintiff/Appellant and Defendant/Respondent.
6.The learned trial judge erred in finding that it was necessary that there be affidavits from Mr Chen, Mr Allen and Mr Solly answering evidence adduced by the Defendant/Respondent.
7.The learned trial judge erred in finding that the evidence of the Defendant/Respondent as to the content of discussions was uncontested. It was not appropriate to deal with the matter on that footing in relation to an application to set aside a statutory demand.
The proposed grounds of appeal all relate to her Honour’s conclusion that there was no genuine dispute between the company and the CBA about the existence of the debt to which the statutory demand related.
The reasoning below
In dismissing the application, Davies J referred to the authorities in the following terms:
16The authorities make it clear that the company must put sufficient evidence before the Court to enable the Court to conclude that there is a dispute and that it is a genuine dispute. In Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd the Full Federal Court stated that a ‘genuine’ dispute requires that:
(a) the dispute be bona fide and truly exist in fact; and
(b)that the grounds for alleging the existence of a dispute are real and not spurious, hypothetical, illusory or misconceived.
17In TR Administration Pty Ltd v Marchetti and Sons Pty Ltd, Dodds- Streeton JA (with whom Neave JA and Kellam JA agreed) said:
[The company] is required to evidence the assertions relevant to the alleged dispute … only to the extent necessary for that primary task. The dispute … should have a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion, and sufficient factual particularity to exclude the merely fanciful or futile. … it is not necessary for the company to advance, at this stage, a fully evidenced claim. Something ‘between mere assertion and the proof that would be necessary in a court of law’ may suffice.
The Court must be satisfied that the claim may have some substance.
18Although the standard of satisfaction is ‘not a particularly high one’, as Dodds-Streeton JA went on to say:
A rigorous curial approach is nevertheless essential to the effective operation of the statutory scheme.
Thus the material before the Court must contain the basis for establishing that a genuine dispute exists and be of sufficient probative value that the Court is satisfied that it is a real dispute.[4]
[4]Footnotes omitted.
In determining that there was no genuine dispute, her Honour said:
19It is clear on the evidence that the company does not assert that there were direct communications between it and the CBA about the release of the guarantee, apart from a conversation that Mr Skinner had with Mr Olley of the CBA in February 2009. Mr Skinner deposed that Mr Olley told him that the CBA ‘would consider a request to release the [company’s] guarantees after the Second Closing’.[5]
[5]Footnote omitted.
After setting out the CBA’s evidence,[6] her Honour said:
29Although it is not the function of the Court on an application to set aside a statutory demand to resolve contested questions of fact or determine where the merits lie in any contest, the Court must have regard to the bank evidence in considering whether a genuine dispute has been shown. Critically there was no affidavit from Mr Chen, Mr Allen or Mr Solly answering the banks’ evidence. The state of the evidence is left at the bank’s evidence about what CBA told Mr Chen and Mr Allen and Mr Skinner’s evidence about what Mr Chen and Mr Allen told him.
30In my view, there is insufficient objective evidence to provide a factual foundation for the company’s assertion that the CBA had represented to Mr Chen or Mr Allen that the company’s liability under the guarantee had been released. First, the CBA’s evidence as to the content of those discussions was uncontested. Secondly, the actual release was not a condition precedent of the transaction and Mr Skinner knew when he signed the PPAD that the CBA required but had not received the necessary documentation to consider the request for a release. Thirdly, the evidence of the bank, which was not refuted, was that it never received that documentation. Fourthly, no actual release was given by the CBA.
31Although the evidentiary onus is a low hurdle, nonetheless the evidence must be enough to enable the Court to form a view that a sufficient factual basis for the claim that there is a genuine dispute has been shown. That onus was not discharged.
32In the circumstances, the evidence did not sufficiently disclose a ‘genuine dispute’.
[6]Her Honour having already set out the company’s evidence.
The resolution of this application
The company submitted that although her Honour referred to authority which stated that a genuine dispute required that the dispute be bona fide and truly exist in fact and that the grounds for alleging the existence of the dispute must be real and not spurious, hypothetical, illusory or misconceived, her Honour applied a more stringent test by:
(a)assessing and weighing evidence;
(b)pre-empting possible evidence at the trial from other persons that may be procured by subpoenas;
(c)having regard to the fact that there was no affidavit evidence from Mr Chen, Mr Allen or Mr Solly answering the CBA’s evidence when, in fact, the company had joined issue; and
(d)having regard to (and accepting) evidence of CBA employees that was untested.
In my view, there is nothing in these submissions, nor the proposed grounds of appeal. To the contrary, her Honour’s reasons show a careful application of authority to the facts as disclosed by the evidence. There was simply no sufficient evidence to provide a factual foundation for the company’s assertion that the CBA had represented to Mr Chen or Mr Allen that the company’s liability under the guarantee had been, or would be, released. The conclusions reached by her Honour in paragraph [30] of her judgment are compelling and, in my view, undoubtedly correct. Those conclusions mandated the dismissal of the company’s application.
It follows that the company has not persuaded me that the decision below was wrong or attended with sufficient doubt to justify the granting of leave. In the circumstances, the application must be dismissed.
MANDIE JA:
In my opinion one of the key questions raised by this application was whether there was any basis to show a genuine dispute based on evidence that Mr Chen was acting as agent for the CBA. In my view it is not reasonably open on the material that was before the judge below to have made that inference and in the absence of that inference, the main basis of the applicant's contentions would fail. But even if one applied an arguably less stringent test, such as that adumbrated by Dodds-Streeton JA in TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd,[7] it seems to me that the suggestion that it should be inferred on this material that Mr Chen was acting as agent for the CBA, is implausible - and it does not have sufficient prima facie plausibility to merit further investigation as to its truth.
[7](2008) 66 ACSR 67, [64].
I would further accept the submission made by counsel on behalf of the CBA this morning that the material, in particular in paragraph 3(k) of the second affidavit of Mr Skinner, does not go far enough. It is not shown that the representation went as far as would be necessary for the applicant to arguably show or justify the existence of a belief that the bank had released, or intended to release, the applicant.
As has been said in a number of the cases, a rigorous approach is required else any assertion made on affidavit would be sufficient and applying that approach here, I think that the judge below was right and, in any event, the decision below is not attended with sufficient doubt as to justify a grant of leave to appeal. I am also of the view that no sufficient argument is advanced under s 52 of the Trade Practices Act. I would otherwise endorse Beach AJA's reasons for judgment.
The order of the Court will be that leave to appeal is refused with costs. (An order extending time for compliance with the statutory demand was also made).
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