L Q Quarries Pty Ltd v Barraport Investments Pty Ltd
[2015] VSC 191
•8 May 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S CI 2014 06423
| L Q QUARRIES PTY LTD | Plaintiff |
| v | |
| BARRAPORT INVESTMENTS PTY LTD | Defendant |
–and –
S CI 2014 06424
| LAGUNA AUSTRALIA PTY LTD | Plaintiff |
| v | |
| ADVANCE PUBLICITY PTY LRD | Defendant |
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JUDGE: | Efthim AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 2 March 2015 |
DATE OF JUDGMENT: | 8 May 2015 |
CASE MAY BE CITED AS: | L Q Quarries Pty Ltd v Barraport Investments Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2015] VSC 191 |
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J Korman | Marshalls & Dent Lawyers |
| For the Defendant | Mr P Caillard | Madgwicks Lawyers |
HIS HONOUR:
The plaintiff, L Q Quarries Pty Ltd, applies to set aside a statutory demand served on it by the defendant, Barraport Investments Pty Ltd. The demand claims that the plaintiff is indebted to the defendant in the sum of $2,678,870.
The debt is described as follows:
Description of debt
Date
Advance
Interest on advance
Total amount of debt
Monies owing for repayment of principal and interest on advance made by the Creditor to the Company. 26/6/2007 $836,729 $849,143 $1,685,872 Monies owing for repayment of principal and interest on advance made by the Creditor to the Company. 29/6/2007 $451,567 $457,555 $909,122 Monies owing for repayment of principal and interest on advanced made by the Creditor to the Company. 5/7/2007 $41,727 $42,149 $83,876 Total Amount $2,678,870
The Legal Principles
It is not for me to enter into the merits of the dispute between the parties, but only to ascertain if there is a genuine dispute. In TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd,[1] Dodds‑Streeton J said:
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. No in-depth examination or determination of the merits of the alleged dispute is necessary, or indeed appropriate, as the application is akin to one for an interlocutory injunction. Moreover, the determination of the ‘ultimate question’ of the existence of the debt should not be compromised …
… As the terms of section 459H of the Corporations Act and the authorities make clear, the company is required, in this context, only to establish a genuine dispute or off-setting claim. It is required to evidence the assertions relevant to the alleged dispute or off-setting claim only to the extent necessary for that primary task. The dispute or off-setting 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 a court of law’ may suffice.
[1](2008) 66 ACSR 67 [56]-[57], [71].
The standard to demonstrate a genuine dispute is not onerous. In Powerhouse Australasia Pty Ltd v Viar (‘Powerhouse’),[2] Dodds‑Streeton J in reference to McLelland J in Eyota v Hanav[3] repeated:
“A genuine dispute connotes a plausible contention requiring investigation and raises much the same sort of considerations as a serious question to be tried prior to and arising on an application for the interlocutory injunction or extension, 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 decision inconsistent with the undisputed contemporary documents or other statements by the same deponent or inherently and probable in itself” it may not be - “it may be not having sufficient prima facie plausibility to merit further investigation as to its truth or a patently feeble legal argument or assertion of the facts unsupported by evidence.”
[2][2006] VSC 508, [41]-[42].
[3](1994) 12 ACSR 785.
The grounds for alleging a dispute or an off-setting claim must not be spurious, hypothetical, illusory or misconceived. In Powerhouse,[4] Dodds‑Streeton J stated:
While it is not a very exacting standard, on the one hand mere, assertion of a dispute or off-setting claim, mere bluster or advancing grounds which are illusory or spurious or insufficiently particularized will not suffice. The court must not enter into the merits of the dispute, but it is not crossing the line in regards 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 …
[4][2006] VSC 508, [48].
The Dispute
The plaintiff denies that any of the advanced funds are due and owing to the defendant. In his first affidavit sworn within the 21 period of the demand being served, Mr David Marriner, director of the plaintiff, deposes that he entered into a series of transactions and contracts on behalf of the Marriner entities with the Herzog Group, which include the defendant. He alleges that in or about June and early July 2013 he had discussions with Mr Reuven Shlomo Herzog whereby they agreed that they would have an ‘all-in settlement’ to finalise all their investments and moneys due. This was a commercially sensible progression as he was planning to sell most of the Marriner entity’s interests at the Laguna Whitsundays Resort and he knew that it would be equally advantageous for the Herzog family, who already held various interests in the resort.
As this ‘all-in settlement’ was acceptable to all, Mr Marriner agreed to arrange for payment and security to be made to the Herzog family entities in the amount of $3 million, made up of a cash payment of $2 million and a deferred payment of $1 million that was secured over a property in Tasmania. The sum of $2 million was actually paid to a nominated Herzog entity in or about July 2013. The payments, including the deferred payment, were in excess of all moneys due to all Herzog family entities, including any moneys owing to the defendant. Mr Marriner states that at all times it was acknowledged that after the ‘all‑in settlement,’ any and all debts and claims of any nature whatsoever between the Marriner group and Herzog group would be finally compromised and settled in full with these payments. To date, the deferred payment has been partly satisfied as he has provided $750,000 to the Herzog entities. The balance owing of $250,000, plus interest and agreed costs, was due to be paid at the end of January 2015 by another Marriner entity, being Goldworthy Pty Ltd.
Mr Marriner has produced to the Court a copy of the Laguna Quays Resort Marriner and Herzog settlement agreement. The settlement agreement is between Laguna Marinas Pty Ltd, Goldworthy Pty Ltd, David Wellesley Marriner and the defendant, Elanora Nominees Pty Ltd, Laguna Harbour Land Development Pty Ltd and Third Pleshette Pty Ltd.
The background information to the agreement states:
The Marriner Group of companies including Goldworthy and LHLD have agreed to sell all of their assets at the Laguna Quays Resort (‘Resort’) to a Chinese third party purchaser. LM is a jointly owned company between Marriner and the Herzog Group of companies including Barraport, TP and LM owns assets at the Resort that are subject to the sale. Barraport holds security over certain assets at the Resort. Marriner has requested Barraport to release and discharge its security and has requested LM to participate in the sale process. The Herzog Group of companies have prepared a two page memorandum (‘Memo’) entitled ‘Laguna Project’ which is annexed hereto. The Memo sets out the agreement between the parties and is incorporated into this Agreement.
The plaintiff is not a party to the settlement agreement and the transactions to which the settlement agreement relates does not refer to the debt that is referred to in the statutory demand.
The plaintiff submits that the disputes do not arise from the settlement agreement. Rather, they relate to the June and July 2013 discussions, in which it alleges that it was agreed that the Marriner entities would pay $3 million and transfer a Laguna Quay property in return for ‘all-in settlement’, finalising all investments and moneys due. The plaintiff further submits that if the alleged debts existed, the settlement agreement did not properly reflect the earlier oral agreement and the settlement agreement ought to have included them.
Based on the June and July discussions, it is submitted that the plaintiff has three causes of action:
Contract
The settlement agreement is not expressed to be a complete contract. It does not replace, and is not inconsistent, with the oral agreement which the plaintiff alleges was reached in June and July 2013 by the Herzogs and Mr Marriner. It is submitted that the oral contract remains effective, and by its terms the debts were forgiven.
Misleading or deceptive conduct in breach of s 18 of the Australian Consumer Law
It is submitted that it was reasonable to expect that the Herzogs would disclose that the contract they had drafted did not achieve the object that the parties had agreed upon and instead provided a windfall for the Herzogs.
Estoppel
It is submitted that Reuven Herzog represented to David Marriner that on the payment of $3 million and the transfer of a property to the Herzog group, all debts owing by the Marriner Group to the Herzog Group in relation to the Laguna Quays Resort project would be settled and in reliance upon that representation, Mr Marriner paid or agreed to pay $3 million and transferred a property to the Herzog group. The Herzogs are now estopped from demanding repayment of any debt owed by the Marriner Group relating to the Laguna Quays Resort even if they are legally entitled to such repayment.
In his third affidavit (which has been objected to), Mr Marriner endeavours to explain why the signed agreement did not refer to the debt. He deposes that he did not concern himself with details such as names and entities involved in transactions between him and the Herzog family. They had worked together for many years on the basis of mutual trust and goodwill. There were many entities, many contracts and many transactions. He could not and cannot remember them all. He relied upon the Herzog group to draw up the paperwork to document the actual arrangements for an ‘all‑in settlement’. Kim Meng Wong, financial controller of the Herzog group, drew up the Settlement Agreement and he relied upon Mr Wong to include all necessary entities, contacts and transactions in the settlement agreement. If the Herzog group had disclosed to Mr Marriner that the settlement agreement failed to include all Herzog group claims against Marriner’s entities in relation to the resort and failed to include as parties, all Herzog entities which made those claims and all Marriner entities made liable by such claims, he would have refused to enter into this settlement agreement.
I note that paragraph 3(b) of the operative provisions of the settlement agreement refers to Marshalls and Dent as representing the Marriner group of companies in relation to the agreement. Mr Marriner was represented by competent lawyers and the fact that he was represented by Marshalls and Dent does not indicate that the parties were doing business on a handshake. I also note that no particulars have been given about the conversations; there is not detail at all. The onus is on the company to demonstrate that there was a genuine dispute and to do so there needs to be more than a mere assertion.
Mr Marriner also deposes that in 2011 he was negotiating the sale of his interests in the Laguna Whitsundays Resort and surrounding land. He reached an in principle agreement with a Chinese entity which had agreed to invest $24 million in a joint venture arrangement. The Herzog entities also owned interests in the resort with various Marriner entities and entered into a series of transactions and contracts with various Herzog entities in relation to the investments in the resort in order to finalise all the transactions and contracts. In about April 2011, he had discussions with members of the Herzog family whereby they agreed that they would have an all‑in settlement to finalise their investments and moneys due which would take effect if the sale that he was negotiating was completed. That all‑in settlement was recorded in a document titled ‘Position Paper – Heads of Agreement’.
He further deposes that the effect of that agreement was to require the Marriner group to pay the Herzog group an amount of $3.18 million in full and final settlement of claims between the parties arising from their transactions and contracts in relation to the resort. The 2011 sale did not eventuate, so that Heads of Agreement was never implemented. In both the 2011 and 2013 negotiations, it was acknowledged by all parties that the Marriner group would need to pay approximately $3.18 million to the Herzog group in order to settle claims between the parties arising from their transactions and contracts in relation to the resort.
The Heads of Agreement dated 4 April 2011 was provided to the Court as an exhibit to an affidavit of Reuven Herzog, director of the applicant. It provides:
The Laguna Group of companies (‘LG’) as controlled by MG has a loan arrangement with HG in respect of certain plant and equipment. HG has calculated the correct amount owing for this loan (‘P&EL’) to be $2,182,073.80 as at 31 March 2011 accruing interest at a rate of 10% p.a. compounding annually as at 31st December which debt is acknowledged by LG and MG and David Marriner personally and that debt is hereby personally guaranteed by David Marriner (DM). DM agrees to enter into a formal form of Deed of personal guarantee if required by HG.
Paragraph 13 of the Heads of Agreement provides:
13.In relation to the application of any monies available to the MG and HG unit holders from UTJV, the following rules shall apply between them:
13.1HG shall be entitled to the 1st $2,000,000 of money available to HG and MG in priority to MG with the effect that MG shall have paid $1,000,000 to HG as agreed compensation to HG for loss of profit.
13.2HG shall be entitled from the next amount/s of money available to MG in priority to MG such further amount of money that is sufficient to full repay the P&EL plus interest and reasonable costs.
13.3Upon receipt by HG of the money referred to in clause 13.2, this payment shall fully satisfy the debt that LG has to HG for the P&EL.
13.4All remaining monies available are to be split equally in accordance with the Unit trust deed of UTJV.
There are similarities between the ‘All-in Agreement’ and the Heads of Agreement. They both refer to the loans and the payments are similar. However, that and the evidence of Mr Marriner are not enough to demonstrate a genuine dispute. I need to be satisfied that the contention requiring investigation is plausible. The Heads of Agreement in 2011 referred to the parties who made the loan and the loan itself. Here the ‘All-in Agreement’ has no such references and the plaintiff, in entering the All-in Agreement, was represented by a firm of solicitors.
I also note that after the ‘All-in Agreement’ was signed, an email was forwarded in July 2013 by Kim Meng Wong, Financial Controller of the Herzog Group, to Mark Wallon, solicitor for the plaintiffs, which set out payments to be made under the agreement and the consideration for the payment. It does not include the loans. There is no response to this email before the Court.
The plaintiff has not provided any particulars of the oral agreement and the evidence before the Court regarding this agreement is nothing more than a bare assertion. There is no genuine dispute here.
Limitations of Actions
Limitations defence
According to the schedules to the statutory demand, the date that the funds were advanced has been given, but there is no date payable. It has not been specified.
In Ogilvie v Adams,[5] Fullagar J said:
The common law has always regarded the fact of indebtedness as a continuing detention by the debtor of the creditor’s money, and this whether the creditor brought an action of debt or an action indebitatus assumpsit. Therefore if A lends money to B, then instantly B is detaining A’s money. In order to prevent a cause of action for recovery arising in A instantaneously on paying the money, the parties must expressly contract out of the situation by words clearly inconsistent with that situation …
[5][1981] VR 1041 at 1043.
In V L Finance v Legudi,[6] Nettle J applied Ogilvie v Adams. His Honour said:
Having regard to all the circumstances, I see nothing sufficient to warrant departure from the normal rule that, in the case of a loan for which no time for repayment is set, the debt is immediate due without any prior notice.
[6][2003] VSC 57 at [58].
The plaintiff submits that the normal rule applies here and the debts were immediately due at the time the funds were lent and are now statute barred, being over six years old, because no time for repayment is set. It contends that the defendants have provided no material in their statutory demands or accompanying affidavits to suggest that the parties had expressly contracted out of the situation and that the plaintiff immediately owed money on the dates that they were lent.
Section 24(3) of the Limitation of Actions Act 1958 (Vic) provides:
s 24
(3) Where –
(a)any right of action has accrued to recover any debt or other liquidated pecuniary claim or any claim to the personal estate of a deceased person or to any share or interest therein; and
(b)the person liable or accountable therefore acknowledges the claim or makes any payment in respect thereof –
the right shall be deemed to have accrued on and not before the date of the acknowledgment or the last payment:
Provided that a payment of a part of the rent or interest due at any time shall not extend the period for claiming the remainder then due, but any payment of interest shall be treated as a payment in respect of the principal debt.
The defendant submits that the claim is not statute barred because the plaintiff has acknowledged the debt and indemnity in the Heads of Agreement dated 4 April 2011, which is signed by Mr Marriner and witnessed by Greg Diamond, and has attached to it a document titled ‘Loan to David Marriner and companies’. It refers to the three loans which are the subject of the statutory demand. Paragraph 4 of that agreement demonstrates that the Marriner Group has therefore acknowledged the debt. The defendant is therefore not statute barred from bringing an action for recovery of those loans.
The Graywinter principle
In Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (‘Graywinter’),[7] Sundberg J set down the minimum requirements necessary in an affidavit in support of an application to set aside a statutory demand. His Honour said:
In order to be a ‘supporting affidavit’, an affidavit must say something that promotes the company’s case. An affidavit which merely says ‘I am a director of the company but am too busy at present to make a full affidavit, and I will do so later’ would not support the application. It would in no way advance, further or assist the company’s cause, which is to have the notice set aside. At the other extreme, the affidavit need not detail, in admissible form, all the evidence that supports the contention of a genuine dispute: John Holland. That evidence must be available at the hearing of the application to set aside, because that application is for final and not interlocutory relief: 71 Paisley Street.
In a s 459H(1)(a) case, the affidavit must in my view disclose facts showing there is a genuine dispute between the parties. A mere assertion that there is a genuine dispute is not enough. Nor is a bare claim that the debt is disputed sufficient. It follows from the fact that the affidavit need not go into evidence, which is the customary function of an affidavit, that it may read like a pleading.
An affidavit which exhibits an exchange of correspondence between the parties or between their solicitors from which it appears that a claim is made and rejected for reasons given can qualify as a supporting affidavit. And an affidavit verifying the pleadings in an action may qualify.
[7](1996) 21 ACSR 581 at 587.
His Honour also considered whether a plaintiff may supplement the first affidavit. His Honour said:[8]
In several cases it has been held that an applicant is not restricted on the hearing to the affidavit that is served with the application. See Scanhill at 467 and Mibor Investments Pty Ltd v Commonwealth Bank of Australia (1993) 11 ACSR 362 at 368. An applicant whose initial affidavit has satisfied the threshold test must be able to supplement the material, because while the ‘supporting’ affidavit does not have to deploy the evidence, on the hearing only admissible evidence can be relied on. In Louisbridge, Ryan J said that ‘provided that an affidavit is filed and served within the 21 day period which supports the application by providing grounds for concluding that there is a genuine dispute … or that the company has an offsetting claim’, supporting affidavits may be filed after the period has expired. Apart from Hire Works, the cases do not support the proposition for which the applicant contended, namely that an affidavit that does not satisfy the threshold test can be supplemented later on. That issue did not arise in Scanhill or Mibor. It did arise in Hire Works, but for the reasons I have given, I am respectfully unable to agree that the court can entertain as an application under s 459G a case in which an affidavit containing the minimum requirements has not been served within time.
[8]Ibid 588.
The defendant submits that the application to set aside the statutory demand was not validly initiated, as the original affidavit was insufficient to establish the existence of a genuine dispute, which is a minimum requirement. It is said that it is inadequate to simply file an affidavit with a hopeless case alleging that a genuine dispute exists, with a purpose of subsequently shoring up the argument outside the 21 day period. I have considered the plaintiff’s application on the basis that Graywinter does not apply and now give my reasons as to why it is of no consequence here.
The grounds of the dispute are contained in paragraph 5 of the first affidavit of Mr Marriner. I repeat, he stated that in or about June and early July 2013 he had discussions with Mr Reuven Shlomo Herzog, whereby they agreed that they would have an all‑in settlement to finalise all their investments and moneys due. He states that it was at all times acknowledged that in the all-in settlement any and all debts and claims of any nature whatsoever between the respective parties would be finally compromised and settled in full with these payments. That, in my view, does not detail in admissible form all the evidence that supports the contention of a genuine dispute, but it does not need to do so on the Graywinter test.
The plaintiff has supplemented that affidavit with two further affidavits. In his second affidavit, the plaintiff denies ever borrowing any funds from the defendant other than the $920,402.11 loan. In relation to that loan, he has no recollection of any repayment date or whether any interest charges were discussed or ever agreed. That assertion does not accord with the documentary evidence. That affidavit also refers to the oral agreement and book entries made in the accounts of the plaintiff dated 12 July 2013, which records the advance of $920,402.11 which was to be the forgiven debt. The book entries and the reference to the agreement do supplement, and are able to supplement, the first affidavit as to the debt not being due. However, they are entries of the plaintiff and do not relate to the total debt.
The affidavit also refers to the repayment date not being discussed or agreed, or any interest charges ever being discussed or agreed. They are new matters which have not been raised previously. However, it is not said that any repayment date or interest charges were part of the 2013 agreement. Any evidence in relation to those matters is irrelevant.
The third affidavit refers to the Heads of Agreement signed in 2011 which relates to the same debt and also refers to negotiations regarding the 2011 Heads of Agreement and the 2013 settlement agreement. Mr Marriner in that affidavit also seeks to explain how the 2013 agreement came about. These issues relate to the ‘All‑in Settlement Agreement’ with the first affidavit and are relevant.
None of the affidavits relate to the legal argument involving whether the debt is statute barred. I do not have to decide whether this breaches the principle in Graywinter because there was an acknowledgement of the debt. I do note that in Callite Pty Ltd v Adams (‘Callite’),[9] Santow J held that an affidavit filed within time need not in fact depose to any of the facts relevant to the grounds raised in later affidavits. It was sufficient that it arise from exhibited material. Here, the description of the debt in the statutory demand does not specify a date as to when the debt should be paid. The statutory demand was exhibited to the first affidavit. Callite is also authority for the proposition that there is no requirement to depose to legal consequences arising from the facts revealed by the affidavit. Here, the legal consequences relate to whether the action for the debt was statute barred. In my view there was no need for that submission to be raised in the first affidavit.
[9][2001] NSWSC 52.
The statutory demand will not be set aside as there is no genuine dispute.
Laguna Australia Pty Ltd v Advance Publicity Pty Ltd
The plaintiff, Laguna Australia Pty Ltd, applies to set aside a statutory demand served on it by the defendant, Advance Publicity Pty Ltd. The demand claims that the plaintiff is indebted to the defendant in the sum of $202,638.
The debt is described as follows:
Description of debt
Date
Advance
Interest on advance
Total amount of debt
Monies owing for repayment of principal and interest on advance made by the Creditor to the Company. 4/06/2007 $100,000 $102,638 $202,638 Total Amount $202,638
At the commencement of the hearing, Counsel agreed that the decision in L.Q. Quarries Pty Ltd would be binding in this proceeding, as the facts are essentially the same.