Konig Constructions Pty Ltd v Moracom Furniture and Fit Out Pty Ltd
[2010] VSC 659
•16 December 2010
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL LIST
No. S CI 2010 02810
| KONIG CONSTRUCTIONS PTY LTD (ACN 122 386 190) | Plaintiff |
| v | |
| MORACOM FURNITURE AND FIT OUT PTY LTD (ACN 135 620 745) | Defendant |
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JUDGE: | GARDINER AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 24 November 2010 | |
DATE OF JUDGMENT: | 16 December 2010 | |
CASE MAY BE CITED AS: | Konig Constructions Pty Ltd v Moracom Furniture and Fit Out Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2010] VSC 659 | |
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INSOLVENCY – Applications to set aside statutory demand pursuant to s 459G of the Corporations Act2001 (Cth) – Whether a genuine dispute and offsetting claim in respect of the debt the subject of the demand – Whether demand defective – Whether pursuant to s 450J there is some other reason why demand ought to be set aside – Consideration of contemporaneous documentation generated at or about the time that dispute and offsetting claim was said to arise – Application dismissed – Evidence of plaintiff inherently improbable and implausible to the degree that it ought not to be accepted as requiring further investigation.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R.W. Short | WMB Lawyers |
| For the Defendant | Mr E. Moon | Alliance Legal |
HIS HONOUR:
Konig Constructions Pty Ltd (“Konig”) makes application pursuant to s 459G of the Corporations Act2001 (“the Act”) by an originating process filed 24 May 2010 to set aside a statutory demand dated 3 May 2010 and served on it by Moracom Furniture and Fit Out Pty Ltd (“Moracom”).
In its written submissions, Konig contends that it has four bases to set aside the demand:
(a)there is a genuine dispute as to the debt claimed by Moracom in demand;
(b)Konig has an offsetting claim in respect of the alleged debt;
(c)because of a defect in the demand substantial injustice will be caused to Konig unless the demand is set aside;
(d)pursuant to s459J there is some other reason why the demand ought be set aside.
At the trial of this proceeding on 24 November 2010, Mr Short of counsel who appeared on behalf of Konig, sought to amend the originating process by adding grounds that Konig had an offsetting claim and that there was “some other reason why the demand should be set aside” under s 459J (1)(b) of the Act.
I refused Konig’s application to amend the originating process. It is well settled that, in applications of this type, the plaintiff is not able to raise additional grounds to set aside a statutory demand after the period of 21 days after the service of the statutory demand has expired.[1] The affidavit material filed within those 21 days sets the boundaries upon which the application is to be ultimately determined, although the authorities indicate that the grounds raised in that original affidavit material can be augmented by additional evidence. The affidavit material filed by Konig either contained the evidentiary bases for the grounds upon which it relies or it did not. As such, there was no point in allowing the proposed amendment. If those amendments sought to agitate grounds not raised in the original “21 day” affidavit they could not be now raised.
[1]Graywinter Properties v Gas & Fuel Superannuation Fund(1996) 21 ACSR 581.
Konig relies on seven affidavits in the application:
(a)Frank Koenigsmann sworn 24 May 2010 (the first Koenigsmann affidavit);
(b)Nicholas Agetzis sworn 24 May 2010 (the first Agetzis affidavit);
(c)Nicholas Agetzis sworn 14 July 2010 (the second Agetzis affidavit);
(d)Frank Koenigsmann sworn 11 August 2010 (the second Koenigsmann affidavit);
(e)Frank Koenigsmann sworn 20 October 2010 (the third Koenigsmann affidavit);
(f)Nicholas Agetzis sworn 17 November 2010 (the third Agetzis affidavit);
(g)Frank Koenigsmann sworn 23 November 2010 (the fourth Koenigsmann affidavit).
Moracom relies on five affidavits in opposition to the application:
(a)Robert Pititto sworn 28 July 2010 (the first Pititto affidavit);
(b)Robert Pititto sworn 17 September 2010 (the second Pititto affidavit);
(c)Mario Anthony Merlo sworn 22 September 2010;
(d)Robert Morabito sworn 17 November 2010;
(e)Michael Schiavello sworn 23 November 2010.
On 22 September 2010, I made orders that any further affidavit on which Konig desired to rely in reply be filed and served by 20 October 2010. I also made orders for the parties to file and serve outlines of submissions by 17 November 2010. Both parties filed affidavits outside the time fixed by those orders. Konig filed and served the third Agetzis affidavit and the fourth Koenigsmann affidavit several weeks later than ordered, but ultimately no objection was taken to their reception. At the hearing on 24 November 2010, Moracom filed an affidavit of Michael Schiavello sworn 23 November 2010. I gave leave for Moracom to rely on the affidavit of Mr Schiavello on the basis that if Konig wished to reply to that affidavit and required a short adjournment for that purpose, I would order such an adjournment. Mr Short, after seeking instructions, indicated that he was prepared to press on with the application. It is most unsatisfactory that court orders in regard to the filing of affidavit material are ignored, particularly when there is no cogent reason.
The schedule to the statutory demand contains the following description of the debt:
The balance of the following invoices the benefit of which were assigned to the Creditor by Lineas Australia Pty Ltd (ACN 076 741 494) on 1 July 2009.
Invoice No. 3546 dated 15 September 2008 36,602.69 Invoice No. 3560 dated 29 September 2008 107,434.49 Invoice No. 3567 dated 29 September 2008 130,265.75 274,302.93 Less: Adjustment Note No. 3431 dated 28 April 2009 94,302.93 Payments received by the creditor from the company since 1 July 2009 60,000 Balance of debt payable: $120,000 Konig’s affidavits in support
In the first Koenigsmann affidavit, Mr Koenigsmann, without reference to a time period, states that “he” was working on two building sites at 8 Porter Street, Prahran and 50 Cooper Street, Essendon. He requested Robert Morabito of “Michael Schiavello” to carry out plastering works at those two sites. The agreement was never reduced to formal terms and Mr Schiavello started charging daily labour rates for the works.
Mr Koenigsmann says that Konig was served with the statutory demand from Moracom, a company with which he and Konig had had no prior dealings. He had been involved in transactions with Mr Schiavello previously and some invoices from him were made out by Lineas Australia Pty Ltd (“Lineas”). Mr Koenigsmann states that all invoices that Konig received from Lineas have been paid. He states that the invoices claimed in the demand were not issued by Lineas as Moracom claims but by “Michael Schiavello”.
Mr Koenigsmann then goes on to detail disputes that he contends that he has had with the invoices issued by Lineas. He states that he had disputes with all of Lineas’ invoices since the start of March 2006 and has requested credits. He asserts that he considered Konig had been overcharged $350,000 by Lineas.
I would understand that where Mr Koenigsmann speaks in his affidavits of “he” having had the relevant dealings, that at all times he was doing so as the disclosed agent of Konig. It is not at all clear whether his references to “Michael Schiavello” are to an individual by that name or a corporate entity.
Mr Koenigsmann asserts that Konig has suffered losses by reason of the works carried out by Lineas, totalling $74,480. This assertion is never developed in the later affidavits filed on behalf of Konig and there is no cogent evidence to establish an arguable offsetting claim.[2]
[2]See Sewmail (Australia) Pty Ltd v Booby Traps Pty Ltd (1997) 23 ACSR 339 at 343.
Mr Koenigsmann contends that the statutory demand is defective. He states that he has not seen any deed of assignment of the type referred to in the demand and repeats his belief that the invoices relied upon were issued by “Michael Schiavello”, not Lineas as claimed. He also asserts that Konig has not seen “any proof of the debt as requested on numerous occasions”.
I observe at this point that exhibited to the second Pititto affidavit, a deed of assignment dated 23 June 2009 by which Lineas Australia Pty Ltd (t/a Michael Schiavello Furniture) assigns a debt of $180,000 owed to it by Konig to Intrafit Pty Ltd. Mr Short, counsel for Konig, contended that mere exhibition of this document by Mr Pititto was not sufficient to prove the assignment. It was in reaction to that submission that the affidavit of Mr Schiavello of 23 November 2010 was sworn and for which I gave Moracom leave to rely upon at the hearing. Mr Schiavello is the sole director of Lineas. He deposes that the deed of assignment was executed on behalf of Lineas by Mr Morabito, who was the general manager of Lineas at the time and responsible for the day to day running of the business. On the basis of that affidavit, I consider that Moracom has established that there was an assignment of Lineas’ debts to Konig.
In the first Agetzis affidavit, he exhibits an ASIC extract for Moracom. That extract reveals that, from 12 May 2009 to 21 October 2009, Moracom was called Intrafit Pty Ltd. On the latter date, it changed its name to Moracom.
Moracom’s affidavits in opposition
In the first Pititto affidavit, Mr Pittito states that, as at 20 October 2008, Konig was indebted to Lineas for $274,302.93 in respect of three identified invoices which are the invoices mentioned in the schedule to the statutory demand. He states that on 28 April 2009, Konig and Lineas reached an agreement by which Lineas agreed to reduce the debt owing under the invoices by the sum of $94,302.93, in return for Konig’s agreement to pay the sum of $180,000 by three instalments. He states that that agreement was recorded in writing and was signed by Mr Koenigsmann on behalf of Konig. That document states:
Re Porter Street Prahran payment
End May 20K
End June 40K
Settlement 120K
Total: 180K
28.4.09
Agreed with F. Koenigsmann, Konig Construction or personal
SGD F. Koenigsmann
Mr Pititto says that in compliance with the agreement, Lineas issued an adjustment note on 28 April 2009 reducing the debt owing under the three invoices by the sum agreed to. However, he says Konig failed to make the payments to Lineas in May or June 2009 when instalments of $20,000 and $40,000 were respectively due to be paid.
Mr Pititto says that in June 2009, Lineas decided to cease trading and to transfer its business to Moracom. Lineas assigned the debt owed by Konig to Moracom by the deed of assignment of debt referred to above.
Mr Pititto says that on 23 June 2009, Lineas wrote to Konig advising Konig that the debt outstanding to Lineas had been assigned to Moracom and that all future payments should be made to Moracom. The letter advised Konig of the assignment of the debt and directed Konig to pay the debt to Intrafit Pty Ltd, the name at that time of Moracom. Mr Koenigsmann says however that the letter was never received by Konig, despite being sent to its registered office. Moracom is not able to establish by other means that Konig received the letter of 23 June 2009 giving notice of the assignment.
Mr Pititto exhibits a chain of email correspondence passing between him on behalf of Moracom and Mr Koenigsmann on behalf of Konig between 25 July 2009 and 26 October 2009. Those emails contain numerous promises by Mr Koenigsmann on behalf of Konig to pay, without reservation as to Konig’s liability to do so.
I regard the exchanges which took place in those emails to be most significant. They are a contemporaneous written record and are relevant to my task of assessing the genuineness of Konig’s application.
Amongst the emails, Mr Koenigsmann states the following:- :
· 27 July 2009, 12.00pm: ‘I will try to place extra funds as they come available. I sent $25,000 to the new office’;
· 30 July 2009; 3.13pm: ‘Its around 2 weeks off for the next payment of around $15,000 to $25,000’;
· 13 August 2009; 3.45pm: ‘Due this Frid or Mon so cheque will go 1 day later or when funds are cleared’;
· 13 August 2009; 3.50pm: ‘I am expecting 25k to come in either tomorrow or next Monday at the latest’;
· 27 August 2009; 12.53pm: ‘15k will be sent Mon and I hope 10K wed or Frid’;
· 2 September 2009; 1.50pm: ‘I hope within the next fortnight’ [in relation to the payment of $10,000];
· 9 September 2009; 7.52am: ‘I have resent another cheque to you and stopped again the one I sent last week (It was sent to City Rd) Please only cash cheque #1540. (This was sent to NTH Melb) #1538 has been stopped so when it arrives DON’T present it.
Regarding the remainder between now and the 16 Dec we will be all cleared up as that is the date that we get the remainder of the retention money back from Porter st (As the 12 months will then be due) and if other funds become available from my other projects, I will send those amounts to you as to reduce the outstanding amount prior to Dec. (see what I can do). We are currently waiting for an offer on my home in writing to which settlement will be 90 days. This is also around the mid Dec as per our agreement’.
· 21 October 2009; 9.58pm: ‘I will let you know and I might have an offer on my home this week fingers crossed’;
· 22 October 2009; 6.18pm: ‘I have taken this matter seriously as you sent me the signed agreement that I am to sell my house to which I am doing. I don’t know how much more that I can show that I am serious. I will let you know when settlement date is and you know that paying you bill has put my family on the street or into rental accommodation. …
but I did commit to repay you from selling my home. So you are lucky that you have the home agreement or can I change that to extend the payment over the next 12 months (Being $10,000 per month commencing 6 November 2009 and paid monthly on the 6th of the month) so that I may not have to sell my home as I do feel that this was an error on my behalf to place my family in such a position that I don’t believe anyone would do?’
(see exhibit RP-5 to the first Pititto).
The extracts recited above have the singular theme of Mr Koenigsmann seeking indulgences to extend time for payment in response to Mr Pititto’s requests for payment and with no mention being made by Mr Koenigsmann that the liability for payment of the debt was in issue.
In the email of 9 September 2009, Mr Koenigsmann states that the remainder of the debt would be paid by 16 December 2009, being the date that Konig was to be repaid the remainder of the retention monies on the Porter Street project. Mr Koenigsmann states that if other funds became available from other projects, he would apply those sums to reduce the amount outstanding. Significantly, there is no mention by Mr Koenigsmann that the payment of the balance is subject to any other proviso or condition, in particular as he contends in his later affidavits, that such amount will only be payable if the amount realised on the sale of his home exceeded a certain figure. Indeed, that alleged condition is only raised by Mr Koenigsmann in vague terms in the second Koenigsmann affidavit (filed two and a half months after the commencement of the application) and deposed to in more detail in the third Koenigsmann affidavit[3] (sworn some five months after this proceeding commenced).
[3]Third Koenigsmann’s affidavit, para 10.
The email of 9 September in my view dispels any plausible contention that Konig and Mr Koenigsmann were in any doubt as to the identity of the creditor that they were now dealing with by reason of the assignment, or that they had any genuine issue concerning Konig’s liability for the amount claimed. Further, Konig made payments which in my view could only be referrable to the agreement of 28 April 2009 and it made promises through its director Mr Koenigsmann for payment of the balance which were not honoured. Only $60,000 of the debt of $180,000 was paid in July and September 2009.
I note that on 22 October 2009 he sought to vary the “Home Agreement”to pay the $120,000 by instalments of $10,000 per month so as to avoid selling the family home. In my view, this is clear evidence that Mr Koenigsmann has no genuine issue in respect of the debt. He was seeking a variation of the 28 April 2009 agreement which was not agreed to by Moracom.
Mr Pititto states that he was advised by Mr Koenigsmann that he had sold his family home but, after payment of the secured creditors, there were no surplus funds to make any payment to Moracom.
I consider that although the schedule to the demand describes the debt as being in respect of the three invoices described and it would have been more appropriate to have described it as being the amount outstanding under the agreement made on 29 April, it seems clear that that agreement was reached to resolve disputes concerning those three invoices. Mr Koenigsmann, however, contends that such mis-description of the deed in the schedule to the demand amounts to a defect which is the cause of substantial injustice and is therefore a reason why the demand should be set aside under s 459J. For reasons which I shall develop below, I do not consider that that submission can be maintained.
The remainder of Mr Pititto’s first affidavit is given over to taking issue with matters raised in the first Koenigsmann’s affidavit. In regard to the allegation that Konig has had no dealings with Moracom, Mr Pititto refers to the letter of 23 June 2009 from Lineas to Konig, advising of the of assignment of the debt, but as I have said, Konig denies receiving such a letter and Moracom cannot prove actual receipt of it by Konig. Mr Pititto also refers to the chain of emails some of which I have extracted above, passing between Mr Pititto and Mr Koenigsmann after 1 July 2009, which Mr Pititto contends demonstrates that Konig and Mr Koenigsmann were aware that after that date it was dealing with Moracom.
The affidavit of Mario Anthony Merlo, sworn 22 September 2010, exhibits colour printed versions of the emails which are Exhibit RP5. The copy emails exhibited as RP5, which were printed in black and white, did not show the name of Moracom’s former name, Intrafit Pty Ltd. The originals were coloured pale green and when the original coloured version was photocopied, the pale green segment of the email did not copy. Mr Merlo exhibits copies of the emails printed off a colour printer with Intrafit Pty Ltd appearing on them, pointing to Mr Koenigsmann being put on notice that the source of the emails was Intrafit. I consider that the receipt of the emails demonstrates that Mr Koenigsmann was informed on a number of occasions and was aware that the creditor he was communicating with was Intrafit.
Konig’s affidavits in reply
In the second Koenigsmann affidavit, he states that the handwritten note which set out the payments to be made did not accurately reflect the whole of the agreement reached. He asserts that what was agreed was that “I would make some payments to satisfy the alleged debt. Part of the agreement was that I would sell my family home and if the sale price left me enough money, I would use this to pay the alleged debt”. He uses the personal pronoun and refers to “my family home”. He speaks of the home being used as a source to pay “the alleged debt” but does not appear to take issue with Konig’s liability to pay it.
The issue which Mr Koenigsmann seems to be agitating is the source of how the debt was to be paid rather than the liability to pay it. The agreement which Mr Koenigsmann contends for has the effect that Moracom agreed to accept the risk of whether or not it would be paid the $120,000 on the outcome of an auction of Mr Koenigsmann’s home, an event and process over which it had no control.
In my view, Mr Koenigsmann’s evidence is, to adopt the expressions used in some of the authorities, “inherently improbable” and spurious. Mr Koenigsmann does not take issue with the contention that he had signed a document, albeit informal, that provides for payment of three instalments totalling $180,000. Moracom, on its version of events, stated that in consideration of that agreement being reached, a significant discount of $94,302.93 was given to Konig as a credit note.
Mr Koenigsmann then refers to the evidence in the first Pititto first affidavit, stating that the invoices are “inconsistent” with the invoices that Konig actually received as the invoices exhibited to Mr Pititto’s affidavit are headed “Lineas Australia Pty Ltd trading as Michael Schiavello” at the top of the page. The invoices are exhibited to Mr Koenigsmann’s second affidavit and are issued by Michael Schiavello, without apparent reference to Lineas Australia Pty Ltd. They are, on examination, identical in all respects to the invoices exhibited to Mr Pittito’s affidavit (including the ABN) save for the absence of Lineas’ name and I would infer that what has occurred is that when they were copied, the name of Lineas failed to copy, in the same way that occurred with the emails which are exhibit RP-5. Mr Koenigsmann states that the business name search of the name “Michael Schiavello” shows that the owner of the business name is a company Michael Schiavello Pty Ltd ACN 007 403 750, not Lineas. It will be seen Mr Pititto states in the second Pittito affidavit that Lineas Australia Pty Ltd is the holder of the ABN stated on the tax invoices. He repeats the observation made in his earlier affidavit that Konig through Mr Koenigsmann agreed to pay the debt, made partial payments and made promises to pay the balance.
The second Pititto affidavit takes issue with Mr Koenigsmann’s version of events in regard to the agreement of 28 April 2009. He states that the debt which was originally $274,302.93 was reduced to $180,000, to take into account amounts disputed by Konig and the fact that Mr Koenigsmann had advised him that Konig was struggling financially and was not in a position to pay the debt in full. He says that the invoices the subject of the dispute were issued by Lineas, trading as Michael Schiavello Furniture. Lineas was the registered proprietor of and traded under the name Michael Schiavello Furniture. It was the registered proprietor of that name from 8 September 2006 to 17 June 2010, at which date the business name was deregistered. He says that the business name extract exhibited to Mr Koenigsmann’s affidavit as FK1 is a new business name registered by Michael Schiavello Pty Ltd on 17 June 2010, well after the events involving the present dispute. Lineas Australia Pty Ltd he says is the owner of the ABN stated on the tax invoices.
As to the issue of the assignment of debt and Mr Koenigsmann’s knowledge of it, Mr Pititto states that Konig from July 2009 communicated with Mr Pititto and Mr Morabito “in our capacity as officers of Moracom which traded from a different address to that which Lineas traded.”
Because Moracom is not able to establish receipt by Konig of the letter of 23 June giving notice of the assignment, consideration is then required as to whether the service of the statutory demand itself can constitute provision of notice of the assignment in order to be effective for the purposes of the Property Law Act 1958 (Vic). Section 134 of the Property Law Act 1958 (Vic) provides relevantly:
Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal thing and action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to claim such debt or thing in action, shall be and shall be deemed to have been effectual in law (subject to equities having priorities over the right of the assignee) to pass and transfer from the date of such notice –
(a)the legal right to such debt or thing in action;
(b)all legal and other remedies for the same; and
(c)the power to give a good discharge for the same without the concurrence of the assignor; …
Moracom, in order to demonstrate an effective assignment must establish, first that there has been an assignment of the debt and that the debtor, in this case Konig, has been given express notice of it. The schedule to the statutory demand which is extracted at paragraph 8 above describes the elements of the assignment.
In Bennell v Netlink Australia Pty Ltd,[4] Austin J had to consider whether the statutory demand the subject of that application was valid when it also served as notice to the debtor of the assignment of the debt, i.e. whether the requirement of express written notice to the debtor prescribed by s 12 of the Conveyancing Act 1999 (NSW) was satisfied by the statutory demand itself. Austin J held that it did not matter that the very instrument that constituted written notice was also a statutory demand for payment of the debt that became due at law to the assignee only when that notice was given. He considered that the instrument simultaneously completed the assignment at law and constituted a demand for payment of the creditor, the assignee. At paragraph [41] and following his Honour observed:
[41] … Section 12 requires, for a valid assignment at law, that express notice in writing be given to the debtor. It is not necessary for the notice to be given by the assignor. In the present case, express notice in writing was given by the plaintiff to the defendant when the statutory demand was served. Paragraph 2 of the statutory demands said that the amount claimed was due and payable by the company due to a judgment in favour of Mrs Vlaski which was assigned to the plaintiff on 22 April 2002. It is clear, in my opinion, that the statutory demand satisfied the express notice requirement of s 12.
[42] The only point open to doubt, in my opinion, is whether an instrument would constitute express notice completing an assignment under s 12 can be, at the same time, a statutory demand for payment of the debt which becomes due at law to the assignee only when that express notice is given. Master Bredmeyer appears to have given an affirmative answer in Clearance Nominees Pty Ltd v Discount Acceptance Corp Pty Ltd (1997) 25 ACSR 531 at 533. I respectfully agree. Section 459E(4) says that a person may make a demand relating to a debt even if the debt it owed to the person as assignee. That sub-section begs the question were all of the steps necessary to produce the consequence that the debt is owed to the assignee must be taken before the statutory demand is made.
[43] In my opinion, however, the correct analysis is that the same instrument may constitute express notice of the assignment for the purposes of s 12 and also a valid statutory demand for the purposes of s 459E. The assignment from Ms Vlaski to the plaintiff was effective in equity, being for valuable consideration, on 22 April 2002 when it was made. Thereafter Ms Vlaski was under an equitable obligation to account to the plaintiff for any payment of the debt that she might have received. The plaintiff was the creditor in equity. The statutory demand made the position clear to the defendant both in its capacity as the debtor whose debt had been assigned, and in its capacity as a debtor subject to a statutory demand for payment. It informed the defendant that its creditor had become the plaintiff. It required payment to the plaintiff. The instrument simultaneously completed the assignment at law and constituted a demand for payment by the true creditor, the assignee. Nothing in the Conveyancing Act or the Corporations Act requires that the notice of assignment and the statutory demand be separate documents, and there is no reason or public policy for insisting that this be so.
[4](2002) 42 ACSR 680.
In Condor Asset Management Limited v Excelsior Eastern Limited,[5] Barrett J considered the situation where the assignee creditor had issued a statutory demand in which it described itself as “assignee of the GDK Financial Solutions Trust”. One of the issues the Court had to consider was whether such a description sufficed to constitute a valid demand. At [25[ Barrett J stated:
[25] That question must, of course, be addressed in context: and it is clear that a defect will not be productive of ‘substantial injustice’ if the demand, viewed in the light of what the company already knows or ought reasonably to be expected to know, contains sufficient information to assess its liability for the amounts demanded: ….
And at [35] and following:-
[35] In the context of a statutory demand issued by the assignee of a debt, it is reasonable to think that the requirements under s 459E(2), including the requirement arising from the ‘description of debt’ instruction in form 509H, will not be satisfied unless it can be seen, when the demand is served, that the circumstances warranting such an order of a court of equity exist in relation to a debt upon which the person serving the demand relies as a creditor by assignment. In other words, a self‑professing assignee cannot be regarded as having satisfied the content requirements of s 459E(2) unless the statutory demand is framed in terms enabling the company to see the matters that would cause a court to order that the assignor’s name be used in a debt recovery action brought by the equitable assignee. If, as has been suggested, the statutory demand can operate as notice which causes a merely equitable assignment to become a legal assignment under s 12 of the Conveyancing Act, it does not follow as some form of corollary that the demand need not contain, in the way I have stated, information sufficient to show the status of the issuer as an assignee. Where the statutory demand represents the first information to the debtor regarding the assignment, the content I have described must, I think, be included.
[36] The position will, of course be different where the company on which the statutory demand is served already knows of the assignment. The cases make it clear that the content of a statutory demand will be measured against the ‘substantial injustice’ criterion in s 459J(1)(a) by reference to the company’s pre‑existing knowledge of relevant matters. I have already referred, in that connection, to the Topfelt case. A company is, for example presumed to have knowledge of dealings in which it has engaged, with the result that there is no need for the creditor formulating a statutory demand to provide notice of such dealings. But where the existence of the debt on which the creditor bases the statutory demand depends, so far as the status of the debt as a debt owing to that creditor is concerned, on matters of which the company has no knowledge and cannot reasonably be expected to receive knowledge in the ordinary course of events, it becomes incumbent upon the creditor to show the missing particulars on which the claim depends.
[37] The statutory demand in the present case contained no more than a bald assertion that the unnamed ‘trustee of the GDK Financial Solutions Trust’ had assigned the debts to the defendant. The plaintiff was provided with no means whatsoever of satisfying itself of the validity of that assertion. It was left in a position where, if it complied with the demand, it might, for all it knew, have remained liable to the supposed assignor (assuming that it was indebted to that supposed assignor).
[38] The failure to include in the description of the debt in the statutory demand material from which the plaintiff could satisfy itself that there had been an assignment as alleged was, in my opinion, another ‘effect’ in the demand in terms of the s 9 definition of ‘defect’. Because that defect left the plaintiff in a position where it could not see whether it could, with safety, comply with the demand, it was a defect productive of ‘substantial injustice’ as referred to in s 459J(1)(a) (emphasis added).
[5](2005) 56 ACSR 223.
The above authorities reveal that one does not look at the demand in isolation on the question of whether it constitutes sufficient notice of the assignment; one must also have regard to the objective evidence of what the company knew or ought reasonably be expected to have known about the assignment. In my view, when one considers the email communications in respect of the debt extracted above after the date of the assignment in July 2009, it could not be credibly contended by Konig that it was ignorant of the assignment or that it did not have sufficient information to assess its liability for the amounts demanded. The emails, in the form exhibited by Mr Merlo, reveal that Konig knowingly dealt with Moracom under its previous name, Intrafit Pty Ltd, in respect of the debt after July 2009. Mr Pititto, in the signature to his emails, identified his email address as [email protected] and that was the address to which Mr Koenigsmann responded. Mr Pititto identified the web address for whom he was corresponding on behalf of as and cited its ABN.
In addition, the address given on the emails was 105‑109 Munster Terrace, North Melbourne. Lineas had operated from premises at 256 City Road, South Melbourne. Mr Moon, counsel for Moracom, says that the evidence indicates that Mr Koenigsmann was aware of the respective addresses of the assignor and the assignee. He quoted the email of 9 September 2009 at 7.52am where Mr Koenigsmann states:
I have resent another cheque to you and stopped again the one I sent last week (it was sent to City Road). Please only cash cheque #1540. (This was sent to Nth Melb. #1538 has been stopped so when it arrives don’t present it.)
As I have said, the tone in the communications from Mr Koenigsmann implicitly accepted a liability for the debt and sought indulgences as to time to pay it. In addition, Mr Moon submitted that the evidence is that Konig paid the monies to Moracom and not to Lineas. In this regard, he referred to the exhibit to Mr Merlo’s affidavit which are copies of the emails (printed off a colour printer) passing between Mr Pititto, who signed himself off as the Finance and Commercial Manager of Intrafit, to Mr Koenigsmann. On 14 July 2009, Mr Pititto emailed Mr Koenigsmann the bank account details of Intrafit. Subsequently, on 22 July 2009, Mr Pititto, again signing off as Finance and Commercial Manager of Intrafit, enquires of Mr Koenigsmann as to when $40,000 will be deposited. On 15 October 2009, Mr Pititto requests of Mr Koenigsmann “When can we expect your next payment regarding the outstanding debt?” There was no response to this email and this was followed up with a request for a response on 21 October 2009. All emails were signed off by Mr Pititto in his capacity as Finance and Commercial Manager of Intrafit. I am satisfied that the payments that were made of the $60,000 were advertently made to Intrafit subsequent to the provision of its banking details to Mr Koenigsmann in July 2009. Again, this points to an awareness and an acceptance, in my view, by Mr Koenigsmann and Konig that the debt has been assigned to Intrafit. Express notice of the assignment as required by the Property Law Act was effected by the service of the statutory demand.
As such, I consider that the evidence is that the statutory demand did not come “out of the blue”.When one has regard to the documented exchange of communications prior to service of the demand, I consider it is clear that Konig was aware of the assignment and indeed had made payments to Moracom (under its former name of Intrafit) under the agreement which Moracom says it had with Konig. The service of the statutory demand on Konig perfected it into a complete legal assignment.
Legal principles
The principles to be applied when considering applications under s 459G of the Act have been the subject of a considerable number of authorities. These have been collected and considered in the decision of TR Administration v Frank Marchetti & Sons Pty Ltd,[6] where Dodds-Streeton AJ referred to the well known formulation by McLelland CJ in Eyota v Hanave Pty Ltd[7] where his Honour stated:
It is however, necessary to consider the meaning of the expression ‘genuine dispute’ where it occurs in s 450H (sic). In my opinion that expression connotes a plausible contention requiring investigation, and raises much the same sorts of considerations as the ‘serious question to be tried’ criterion which arise 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 …’.[8]
[6](2008) 66 ACSR 67 (“Marchetti”).
[7](1994) 12 ACSR 785.
[8]Ibid, 787.
Dodds-Streeton AJ goes on to say at paragraph 71 of Marchetti:
As the terms of s 459H of the Corporations Act and the authorities make clear, the company is required, in this context, only to establish a genuine dispute or offsetting claim. It is required to evidence the assertions relevant to the alleged dispute or offsetting claim only to the extent necessary for that primary task. The dispute or offsetting claim 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. As counsel for the appellant conceded however, 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 the court of law’ may suffice.
Her Honour made similar observations when she was a member of the Trial Division of this Court in Powerhouse Australasia Pty Ltd v Viarc Pty Ltd.[9] Her Honour observed at paragraph [48]:
While it is not a very exacting standard, on the other hand mere, assertion of a dispute or off-setting claim, mere bluster or advancing grounds which are illusory or spurious or insufficiently particularised will not suffice. The Court must not enter into the merits of the dispute, but it is not crossing the line in relation to its legitimate role in these applications to consider evidence which ‘bears on whether or not the asserted dispute or off-setting claim is genuine’. Indeed, that is its necessary function. (Emphasis added.)
[9][2006] VSC 508.
Her Honour went on to say at paragraph [49]:
The dispute or off-setting claim should, as has been recognised, have some objective existence, and the [plaintiff] bears the onus of establishing the genuineness of the dispute or off-setting claim.
In Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd,[10] the Full Court of the Federal Court observed that for a genuine dispute to exist, it must be “bona fide and truly exist in fact”, and the grounds for alleging its existence must “be real and not spurious, hypothetical or misconceived”. The dispute should have 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.
[10](1997) 76 FCR 452 at 464.
The case of Rhagodia Pty Ltd v National Australia Bank Ltd[11] provides an illustration of the application of the above principles. Robson J, in summarising his reasons for dismissing the plaintiff’s application to set aside a statutory demand, stated as follows:
[2] In summary, for the following reasons, I have found as follows. Rhagodia bears the onus of establishing that it has a genuine defence to the bank’s claim. I find that Rhagodia’s defence to the bank’s claim as deposed to by Mr Abdou is equivocal, lacks precision, is inconsistent with undisputed contemporaneous documents and is inherently improbable.
[3] In circumstances where Rhagodia’s defence is contradicted by the contemporaneous undisputed documents, including the letter signed by Mr Abdou, the establishment of the defence requires an explanation of the contemporaneous and undisputed documents that is consistent with the defence. The applicant has not provided such an explanation.
[4] In my opinion, the defence does not have sufficient prima facie plausibility to merit further investigation as to its truth. In my opinion, Rhagodia’s defence as deposed to is devoid of substance and warrants no further investigation.
[11](2008) 67 ACSR 367.
Consideration
I consider the evidence is clear that there was an assignment of the debt of the character referred to in the statutory demand. Konig contends that it never received notice of such assignment by the letter of 23 June 2009. That, however, is not the end of the matter as regards provision of notice of the assignment. Service of the statutory demand can itself amount to provision of notice of the assignment in some circumstances. In these circumstances, on an application of the principles referred to by Austin J in Bennell v Netlink Australia Pty Ltd and Barrett J in Condor Asset Management v Excelsior Eastern Limited, I consider that by reason of the pre-existing knowledge Konig had of the assignment prior to the service of the demand betrayed by the emails referred to, the demand satisfied the requirement of notice to Konig of the assignment .
Mr Short contended that the competing versions of the parties as to the exact terms of the agreement of 28 April 2009, in particular whether it was a condition of the agreement that the $120,000 would only be payable if Mr Koenigsmann’s house realised a certain sum at auction, gave rise to a genuine dispute in respect of the debt.
I reject that submission. No mention was made of this significant matter in Mr Koenigsmann’s first affidavit. The failure to raise it at the earliest opportunity leads me to believe that such evidence is inherently improbable and implausible to such a degree, that even on the comparatively low threshold which applies in these types of applications, it ought not to be accepted as requiring further investigation. Such a condition of the payment agreement was not raised in any of the contemporaneous communications as one would expect; it would be a complete answer to Mr Pittito’s demands for payment. Rather, in the email of 22 October 2009 referred to above, Mr Koenigsmann sought to vary the payment arrangements to pay the debt by 12 instalments of $10,000 each. To adopt the expressions employed by the Full Court of the Federal Court in Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd[12] I consider that the position which Mr Koenigsmann takes in respect of the agreement of 28 April 2009 is not bona fide and does not truly exist in fact and, in addition, the grounds for alleging a dispute on that basis are not real and rather are spurious. I regard the position being put by Mr Pititto in his affidavits as being plausible, credible and consistent with undisputed contemporary communications in the form of the emails passing between the parties.
[12]
Konig bears the onus of establishing that the alleged dispute is genuine and I do not consider it has discharged the burden.
The email communications and Konig’s payment of $60,000 results, in my view, in a conclusion that there is no substantial injustice arising from the description of the debt in the schedule to the demand. The agreement of April 2009 was in a sense a settlement of a dispute in respect of the subject invoices and in my view on the evidence Konig ,through Koenigsmann, was fully aware of the debt and how it was comprised.
Again, as to the issue of Konig’s knowledge of the assignment of the debt, I do not consider that the position being put by Mr Koenigsmann is credible. From July 2009, Konig dealt with Moracom under its previous name, Intrafit. It will be recalled that Intrafit changed its name to Moracom on 22 October 2009. As to the issue of whether the letter of 23 June 2009 was received or not, I do not consider that anything turns on this. As the authorities referred to above reveal, the service of the demand itself can be regarded as the notice to the debtor of the making of the assignment.[13] As to whether the schedule contains enough information to constitute compliance with the requirement referred to in Condor Asset Management Limited v Excelsior Eastern Limited,[14] the demand must be construed in the context of the pre‑existing knowledge of the situation revealed by the chain of emails. The existence of the debt is acknowledged implicitly and expressly on a number of occasions and Mr Koenigsmann was well aware of it.
[13]See Bennell v Metlink Australia Pty Ltd (2002) 42 ACSR 680.
[14](2005) 56 ACSR 223.
I agree with Mr Moon’s observation that the matters set out in paragraph 11 of Mr Koenigsmann’s affidavit of 20 October 2010,in particular, the material as to the terms of the sale of the house should not be accepted. I note that on 22 October 2009 he sought to vary the “Home Agreement” to pay the $120,000 by instalments of $10,000 per month so as to avoid selling the family home. No reference was made to this term in any contemporaneous documents, including the emails, and it is denied by Mr Morabito.
In my view, the plaintiff’s application should be dismissed with costs including reserved costs.
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