Ligon 158 Pty Ltd v Huber

Case •

[2016] NSWCA 330

•

28 November 2016

No judgment structure available for this case.

Court of Appeal


Supreme Court


New South Wales

Medium Neutral Citation: Ligon 158 Pty Ltd v Huber [2016] NSWCA 330
Hearing dates:4 November 2016
Date of orders: 28 November 2016
Decision date: 28 November 2016
Before: McColl JA at [1]
Meagher JA at [2]
Barrett AJA at [3]
Decision:

1. Appeal allowed.

 

2. Set aside orders (1) and (2) made in Equity Division proceedings 2015/254776 on 6 May 2016 and in lieu thereof order as follows:

 

(a) Order that the statutory demand dated 7 August 2015 served on the plaintiff by the defendant on 10 August 2015 be set aside.

 

(b) Order that the defendant pay the plaintiff’s costs of the proceedings.

 

3. Order that the sum of $410,000 paid into court by the appellant be paid out to the appellant.

 4. Order that the respondent pay the appellant’s costs of the proceedings in this Court.
Catchwords: CORPORATIONS – winding up – statutory demand – application for order setting aside – primary judge dismissed such application based on finding of lack of genuine dispute about the existence of the debt the subject of the demand – creditor alleged indebtedness arising from payment by way of loan – company alleged a different characterisation of the payment – where the primary judge regarded company’s contention as to characterisation as inherently implausible – several considerations identified in support of that conclusion – whether all such matters so devoid of plausibility as to require no further investigation
Legislation Cited: Supreme Court Act 1970 (NSW), s 75A
Corporations Act 2001 (Cth), ss 459G, 459H
Cases Cited: Asian Century Holdings Inc v Fleuris Pty Ltd [2000] WASCA 59
Britten-Norman Pty Ltd v Analysis and Technology Australia Pty Ltd (2013) 85 NSWLR 601; [2013] NSWCA 344
Browne v Dunn (1893) 6 R 67
Central City Pty Ltd v Montevento Holdings Pty Ltd [2011] WASCA 5; (2011) 29 ACLR 11-011
CGI Information Systems & Management Consultants Pty Ltd v APRA Consulting Pty Ltd [2003] NSWSC 728; (2003) 47 ACSR 100
Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers (Aust) Pty Ltd (1994) 13 ACSR 34
Createc Pty Ltd v Design Signs Pty Ltd [2009] WASCA 85
Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785
Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452; [1996] FCA 822
House v The King (1936) 55 CLR 499; [1936] HCA 40
Infratel Networks Pty Ltd v Gundry’s Telco & Rigging Pty Ltd [2012] NSWCA 368; (2012) 297 ALR 372
Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (in liq) [2015] VSCA 330
Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290; (1993) 11 ACSR 362
MNWA Pty Ltd v Deputy Commissioner of Taxation [2016] FCAFC 1540
Panel Tech Industries (Australia) Pty Ltd v Australian Skyreach Equipment Pty Ltd (No 2) [2003] NSWSC 896
Powerhouse Australasia Pty Ltd v Viarc Pty Ltd [2006] VSC 508
Re UGL Process Solutions Pty Ltd [2012] NSWSC 1256
Re Wollongong Coal Ltd [2015] NSWSC 1680; (2015) 110 ACSR 134
Spacorp Australia Pty Ltd v Myer Stores Ltd [2001] VSCA 89; (2001) 19 ACLC 1270
Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452; [1997] FCA 681
TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd [2008] VSCA 70; (2008) 66 ACSR 67
Warren v Coombes (1979) 142 CLR 531; [1979] HCA 9
Young v Queensland Trustees Ltd (1956) 99 CLR 560; [1956] HCA 51
Category:Principal judgment
Parties: Ligon 158 Pty Limited (Appellant)
Deborah Huber (Respondent)
Representation:

Counsel:
Mr DL Cook SC (Appellant)
Mr J E Marshall SC/Mr G P O’Neil (Respondent)

  Solicitors:
Polczynski Lawyers (Appellant)
Peterson Haines Lawyers (Respondent)
File Number(s):2016/158137
Publication restriction:Nil
 Decision under appeal 
Court or tribunal:
Supreme Court of New South Wales
Jurisdiction:
Equity
Citation:
[2016] NSWSC 652
Date of Decision:
06 May 2016
Before:
Brereton J
File Number(s):
2015/254776

Judgment

  1. McCOLL JA: I agree with Barrett AJA’s reasons and the orders his Honour proposes.

  2. MEAGHER JA: I agree with Barrett AJA.

  3. BARRETT AJA: The appellant, Ligon 158 Pty Ltd (“Ligon 158”), appeals by leave [1] against the dismissal by Brereton J on 6 May 2016 of its application under s 459G of the Corporations Act2001 (Cth) for an order setting aside a statutory demand dated 7 August 2015 served on it by the respondent, Ms Huber, on 10 August 2015. [2]

    1. Leave to appeal was granted on 1 August 2016.

    2. In the matter of Ligon 158 Pty Limited [2016] NSWSC 652 (“Primary judgment”).

  4. The primary judge held that Ligon 158, as plaintiff, had not established to the satisfaction of the court that there was, in terms of s 459H(1)(a), a “genuine dispute” between itself and Ms Huber “about the existence or amount of a debt to which the demand relates”. The debt was described in the statutory demand in this way:

“On demand loan from the Creditor to the Company pursuant to a cheque drawn by the Creditor in favour of the Company on 1 July 2010 and presented by the Company on 2 July 2010.

Total: $410,000.00.”

  1. It was not disputed that Ms Huber paid the sum of $410,000 to Ligon 158 by cheque dated 1 July 2010 which was presented on 2 July 2010. Ligon 158 maintains, however, that Ms Huber, by making that payment to it, did not make a loan. Rather, it is said, she played her part in a series of steps to create a temporary increase in her bank balance as at 30 June 2010. Ligon 158 contends that, in February 2010, Ms Huber used certain funds in her bank account to make a non-refundable contribution of $410,000 towards certain legal expenses incurred by Ligon 158 and subsequently participated in a plan executed in late June/July 2010 to cause her bank balance to be increased temporarily by $410,000.

  2. A cumulation of factors led the primary judge to the conclusion that characterisation of the payment by Ms Huber as a non-refundable contribution to legal expenses was a recent invention that deprived the dispute asserted by Ligon 158 of the “genuine” quality contemplated by s 459H(1)(a). [3] It was for that reason his Honour dismissed the proceedings.

    3. Primary judgment at [34].

  3. Ligon 158 challenges the primary judge’s decision in a number of ways. It is necessary to examine various aspects of the facts in order to assess the case of genuine dispute Ligon 158 seeks to sustain. First, however, it useful to record the criteria by which it is to be judged whether a dispute asserted by a company served with a statutory demand is, for the purposes of the particular statutory provision, a “genuine dispute”.

“Genuine dispute” – the task of the court

  1. The primary judge summarised a statement of relevant principles found in the judgment of Black J in Re Wollongong Coal Ltd [2015] NSWSC 1680; (2015) 110 ACSR 134 (at [9]-[22]). [4] Black J identified the following matters by reference to decided cases:

    4. Primary judgment at [4].

  1. A dispute is “genuine” if it is not “plainly vexatious or frivolous” or “may have some substance” or “involves a plausible contention requiring investigation”. [5] A genuine dispute requires that it be bona fide and, to that effect, be premised on sufficiently particularised grounds that are “real and not spurious, hypothetical, illusory or misconceived” and which demonstrate the dispute’s “objective existence” and “prima facie plausibility”. [6]

  2. The test is governed by principles analogous to those which underpin an application for an interlocutory injunction or summary judgment. [7] The court must, however, guard against setting the threshold too low for that is liable to defeat the legislative purpose of the section. [8]

  3. The task faced by a company challenging a statutory demand on the genuine dispute ground is by no means at all a difficult or demanding one. Once the company shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow and the demand will be set aside. [9] A finding to the contrary could only be arrived at if the contentions advanced are so devoid of substance that no further investigation is warranted. [10]

  4. The function of the court is merely to determine the existence of a genuine dispute. [11] While this neither requires nor invites it to weigh or assess the merits of the dispute,[12] the court will not exceed its legitimate function by having regard to evidence which bears upon whether the asserted dispute is genuine. [13]

    5. Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 787; Re UGL Process Solutions Pty Ltd [2012] NSWSC 1256 at [6]; Central City Pty Ltd v Montevento Holdings Pty Ltd [2011] WASCA 5; (2011) 29 ACLC 11-011 at [9].

    6. Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452; [1997] FCA 681 at 464; TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd [2008] VSCA 70; (2008) 66 ACSR 67 at [71].

    7. Eyota Pty Ltd v Hanave Pty Ltd at 787; Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers (Aust) Pty Ltd (1994) 13 ACSR 37 at 39; Re UGL Process Solutions Pty Ltd at [6].

    8. Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers (Aust) Pty Ltd at 39.

    9. CGI Information Systems & Management Consultants Pty Ltd v APRA Consulting Pty Ltd [2003] NSWSC 728; (2003) 47 ACSR 100 at [16]; Panel Tech Industries (Australia) Pty Ltd v Australian Skyreach Equipment Pty Ltd (No 2) [2003] NSWSC 896 at [17].

    10. CGI Information Systems & Management Consultants Pty Ltd v APRA Consulting Pty Ltd at [16].

    11. Powerhouse Australasia Pty Ltd v Viarc Pty Ltd [2006] VSC 508 at [47].

    12. Eyota Pty Ltd v Hanave Pty Ltd at 787; Powerhouse Australasia Pty Ltd v Viarc Pty Ltd at [47]-[48]; Asian Century Holdings Inc v Fleuris Pty Ltd [2000] WASCA 59 at [35]; CGI Information Systems & Management Consultants Pty Ltd v APRA Consulting Pty Ltd at [16]; Panel Tech Industries (Australia) Pty Ltd v Australian Skyreach Equipment Pty Ltd (No 2) at [17]; Createc Pty Ltd v Design Signs Pty Ltd [2009] WASCA 85 at [44]; Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290; (1993) 11 ACSR 362 at 295.

    13. Powerhouse Australasia Pty Ltd v Viarc Pty Ltd at [48].

  1. Black J referred in particular to the decision of this Court (Beazley P, Meagher and Gleeson JJA) in Britten-Norman Pty Ltd v Analysis and Technology Australia Pty Ltd (2013) 85 NSWLR 601; [2013] NSWCA 344 at [30]–[31] and [39]-[55], a case concerning the allied ground of offsetting claim under s 459H(1)(b). After considering the tests emerging from the decided cases, the Court made several important points about the forensic approach to be adopted in s 459G proceedings:

  1. While there must be evidence showing a serious question to be tried or an issue deserving of a hearing, that evidence cannot and need not conclusively prove the claim or otherwise be incontrovertible or substantially non-contestable.

  2. The short time allowed by s 459G(2) for the preparation of the affidavit supporting the claim for an order setting aside the demand militates against the presentation of the fullest and best evidence in some cases.

  3. In determining whether there is evidence of a genuine dispute regarding the debt, the court is generally not concerned to engage in an enquiry as to the credit of the deponent of the supporting affidavit. At the same time, it is not required to accept uncritically every statement in the affidavit that is inconsistent with undisputed contemporary documents, is inherently improbable, does not have sufficient prima facie plausibility to merit further investigation or is an assertion of facts unsupported by evidence.

  4. Inconsistent contemporaneous documents are not necessarily sufficient to defeat the company’s challenge even though they might pose difficulties for the ultimate proof of the case that it would advance if the dispute were litigated.

  1. The grounds on which the company disputes the alleged debt must appear from the affidavit filed by it within the relatively short period allowed by s 459G(2). [14] The issue for the court is not whether the company would succeed on those grounds in defending a debt recovery action brought against it by the person who served the statutory demand. Rather, the court must decide whether the grounds of dispute delineated by the affidavit are grounds which, when viewed in the whole of the circumstances emerging from the evidence, indicate a plausible defence propounded in good faith and not one merely constructed in response to the pressure represented by the statutory demand. Issues of credibility will generally be confined to the question whether the asserted grounds are of that quality, as distinct from questions going to the ultimate merits of the postulated defence itself. It is for this reason that cross-examination of deponents is rare in such proceedings. [15]

    14. The so-called “Graywinter principle”, derived from Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452; [1996] FCA 822 (and, in light of subsequent refinements, said by Young AJA, with whom Hoeben JA and Ward J agreed, in Infratel Networks Pty Ltd v Gundry’s Telco & Rigging Pty Ltd [2012] NSWCA 365; (2012) 297 ALR 372 at [28] to be misnamed), was the subject of recent discussion and explanation by Kyrou, Ferguson and Kaye JJA in Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (in liq) [2015] VSCA 330 and by Rares, Farrell and Davies JJ in MNWA Pty Ltd v Deputy Commissioner of Taxation [2016] FCAFC 154 at [93]-[97].

    15. This Court held in Britten-Norman Pty Ltd v Analysis and Technology Australia Pty Ltd at [67]: “Whilst cross-examination is not (and ought not be) the norm in an application brought under s 459G, there are occasions where cross-examination may be permitted, if directed to whether there is a genuine dispute as to the existence of a debt or whether there is a plausible basis for an off-setting claim, as distinct from the merits of any such dispute or claim”. The Court referred, in that respect, to Mibor Investments Pty Ltd v Commonwealth Bank of Australia at 294.

  2. The restraint that a court should exercise in considering the ultimate question of the indebtedness of a company served with a statutory demand was emphasised by Brooking and Charles JJA in Spacorp Australia Pty Ltd v Myer Stores Ltd [2001] VSCA 89; (2001) 19 ACLC 1270. They said (at [3]-[4]):

“The only question for us is whether the judge erred in determining that there was no genuine dispute. One can of course differ from the judge without deciding that the debt did not exist. A great range of states of mind on what we might call the ultimate question - the existence of the debt - may accompany the view that there is a genuine dispute, ranging from a clear conviction that the debt does not exist to the opinion that the genuine dispute hurdle has only just been cleared.

We think, if we may say so, that, except in a case in which it is as plain as a pikestaff that there is no debt (where bluntness may be in the interests of both sides), judges should, in general at all events, in dealing, whether at first instance or on appeal, with the question of genuine dispute, be at pains to perform the admittedly delicate task of disposing of that question without expressing a view on what we have called the ultimate question. For otherwise, on an application which resembles if it is not in law an interlocutory one, things may be said which embarrass the judge before whom the ultimate question comes.”

  1. Finally, it should be recorded that an appeal such as the present is by way of rehearing[16] and that the question to be determined, on the basis of the material that was before the primary judge, is whether the circumstances are such as to cause the court to be, in terms of s 459H(1), “satisfied” that there is a dispute about the existence of the asserted debt and that the dispute is a genuine dispute. The task is one of non-discretionary judgment by a process of evaluation against a statutory criterion. Appellate review must therefore proceed in accordance with Warren v Coombes (1979) 142 CLR 531; [1979] HCA 9 at 551 rather than House v The King (1936) 55 CLR 499; [1936] HCA 40.

    16. Supreme Court Act 1970 (NSW), s 75A(4).

  2. The issues raised in the particular case concern the process of distinguishing a genuine dispute from one that is merely a constructed response to the claim advanced through the statutory demand.

The decision of the primary judge

  1. The primary judge delivered a concise and closely reasoned ex tempore judgment at the conclusion of the hearing. [17] He rejected as implausible and not warranting further investigation Ligon 158’s contention that the payment of $410,000 to it by Ms Huber was not a loan but a non-refundable contribution towards legal expenses. His Honour reached that conclusion for reasons he summarised as follows:[18]

“The incredible implausibility of Ms Huber donating her savings of $410,000 for legal expenses incurred by her husband's brother's company on a basis that it would never be repayable, would still not suffice of itself to deny this dispute the epithet of ‘genuine’. However, when one superimposes on it the facts that it was originally documented in [Ligon] 158’s books as a loan; that that was ‘corrected’ only after the present dispute had arisen; that when the first demand in respect of the February advance was rebutted, there was no suggestion then that it was not a loan but a non-repayable contribution, and no reference to the idea that the 30 June repayment was merely a transitory device to create an appearance in Ms Huber's account; and that the text messages of 29 June falsify Mr Binetter’s version of the repayment, I am satisfied that the dispute as to this debt is not a genuine one, but one created after the demand for repayment was made: as appears from, first, the failure to raise it in respect of the first creditor's statutory demand and, secondly, the so-called ‘correction’ of the ledger some time in July, August or September 2015.”

17. The judgment dealt with two s 459G applications that had been heard together. The other concerned a statutory demand served by Ronald Binetter on 12 Years Juice Foods Australia Pty Ltd (formerly Nudie Juice Foods Australia Pty Ltd).

18. Primary judgment at [34].

Grounds of appeal

  1. There are, in substance, two grounds of appeal. The first is that the primary judge erred in finding that Ligon 158 had failed to show that the asserted dispute was, in terms of the tests to which reference has been made, not vexatious or frivolous and that his Honour should have found that, on the evidence, Ligon 158 had advanced, at the least, a plausible contention, requiring investigation, that it was not indebted as alleged.

  2. The second ground of appeal concerns cross-examination of Andrew Binetter, a director of Ligon 158 and the principal witness in its case, and a question regarding the rule in Browne v Dunn (1893) 6 R 67. It arises from the fact that the primary judge disbelieved evidence of Andrew Binetter in relation to matters that, it is said, were not put to him in cross-examination.

Undisputed facts

  1. Much of the background is uncontroversial. Andrew Binetter and Ronald Binetter are brothers. The wider Binetter family, of which they are members, owned a number of companies, including Ligon 158 which is the trustee of the Caringbah Investment Trust. Andrew Binetter is one of the directors of Ligon 158.

  2. Ronald Binetter is an ophthalmic surgeon. He conducted his practice through a company called Ligon 268 Pty Ltd, the trustee of the Bankstown Family Eye Trust.

  3. Ms Huber is Ronald Binetter’s wife. Huber is her maiden name. She has been married three times and divorced twice. She married, in succession, Ronald Binetter, Steven Ezzes and (in 2006) Ronald Binetter again. She is referred to in certain contemporary documents as Deborah Ezzes but is now known as Deborah Huber.

  4. In 2006, the Australian Taxation Office commenced an audit of the Binetter companies. That audit included Ligon 268 and resulted in substantial assessments which, as to some 40 per cent, affected Ligon 268, according to an estimate given by Andrew Binetter to Ronald Binetter.

  1. Ligon 158 expended significant sums of money defending proceedings instituted by the Australian Taxation Office, including those brought against Ligon 268.

  2. A sum of $410,000 was paid on 25 February 2010 from Ms Huber’s account to Ligon 158 by cheque and banked into Ligon 158’s account.

  3. On 28 June 2010, Andrew Binetter handed Ms Huber a Ligon 158 cheque in her favour for $410,000 dated on or before 29 June 2010 and Ms Huber handed Andrew Binetter a cheque for $410,000 drawn by her in favour of Ligon 158 and dated 1 July 2010.

  4. On 22 June 2015, Kemp Strang, acting for Ms Huber, wrote to Ligon 158 alleging that Ligon 158 was indebted to Ms Huber in the sum of $410,000 being “loan funds advanced in about February 2010 on an on demand basis”. The solicitors demanded payment within seven days.

  5. Polczynski Lawyers, acting for Ligon 158, responded on 1 July 2015. They requested further time to consider the matter, observing that no particulars had been provided. They asked for further detail about the alleged debt, including any relevant documents.

  6. On 2 July 2015, Kemp Strang wrote to Polczynski Lawyers repeating that the loan was advanced in about February 2010 on an “on demand basis” and enclosing a copy of cheque 600002 of 25 February 2010.

  7. On 15 July 2015, in the absence of further response, Kemp Strang served on Ligon 158 a statutory demand in respect of a debt of $410,000, described as "On demand loan from the Creditor to the Company pursuant to a cheque drawn by the Creditor in favour of the Company on 25 February 2010”. The demand was accompanied by an affidavit deposing that the debt was due and payable and remained owing and that there was no genuine dispute.

  8. By letter dated 29 July 2015, Polczynski Lawyers responded to the statutory demand, relevantly, as follows:

“1. Dispute and Repayment of Alleged Debt1.1 We are instructed that:1.1.1 Our client denies and disputes that there is a debt owing by Ligon [158] to your client, Deborah Huber.1.1.2 The amount of $410,000 was repaid to Deborah Ezzes (as she was then named) on 29 June 2010 by cheque number 500282.”

  1. On 30 July 2015, Kemp Strang requested a copy of cheque 500282 or particulars of it but then, in a second letter of the same date, withdrew the 15 July 2015 statutory demand.

  2. In a third letter of the same date (30 July 2015), Kemp Strang said that they were instructed that Ligon 158 was indebted to Ms Huber for $410,000, in respect of a loan advanced on 1 July 2010 on an on demand basis pursuant to a cheque dated 1 July 2010 which had been presented on 2 July 2010. A copy of cheque 600005 accompanied the letter.

  3. On 10 August 2015, Kemp Strang served a creditor's statutory demand dated 7 August 2015 in respect of a debt as described in the third letter of 30 July 2015. That demand later became the subject of the s 459G application determined by the primary judge.

  4. On 12 August, Polczynski Lawyers responded, disputing that there was a debt owing by Ligon 158 to Ms Huber on the basis set out in the letter of 30 July 2015 and the statutory demand served on 10 August 2015. Polczynski Lawyers said, regarding the sum of $410,000 paid to Ligon 158 by cheque on 1 July 2010, that it was “gifted to Ligon as set out in text messages between our client and [Ms Huber] in July 2010” and that it was therefore “not a loan or repayable”.

Ligon 158’s contentions

  1. In the key passage of his judgment set out at [14] above, the primary judge identified four factors that, in his Honour’s assessment, reinforced the “incredible implausibility” of Ligon 158’s contention regarding the nature of Mr Huber’s 1 July 2010 payment such as to render a defence to a hypothetical debt recovery action based on that contention so devoid of substance as to require no further investigation. Those factors were:

  1. the original recording of the sum of $410,000 in Ligon 158’s books of account as a loan;

  2. the “correction” of that recording only after “the present dispute” had arisen;

  3. the circumstance that, when Ligon 158’s initial request for payment was refused, there was no suggestion:

  1. that the payment by Ms Huber had been a non-repayable contribution rather than a loan; or

  2. that the repayment of $410,000 on 30 June 2010 was merely to cause a particular appearance to be assumed by Ms Huber’s bank account;

  1. the falsification of Andrew Binetter’s version of the repayment by text messages exchanged between him and Ms Huber in late June 2010.

  1. Those factors, viewed together with the “incredible implausibility” to which his Honour referred, led the primary judge to the conclusion that the apparent dispute premised on Ligon 158’s proposition that the payment constituted a non-repayable contribution and not a loan was a manufactured or “created” dispute as distinct from a genuine dispute.

  2. Against this, Ligon 158 contends that the evidence before the primary judge warranted a number of inferences sufficient to create, in relation to all of the enumerated factors (as well as the matter the subject of the “incredible implausibility” assessment), a degree of prima facie cogency sufficient to satisfy the test of “genuine dispute” referred to at [8] above.

  3. It is convenient to examine relevant matters under several headings.

The parties’ relationship

  1. There was evidence that Andrew Binetter and Ronald Binetter had enjoyed a close relationship as brothers until mid-2012. Two circumstances apparently led to estrangement between them. First, in 2012 both Ronald Binetter and Ms Huber gave evidence adverse to Andrew Binetter’s interests in certain Federal Court proceedings.

  2. Secondly, Ronald Binetter’s affidavit evidence before the primary judge referred to his having provided financial support to his father’s businesses from the substantial earnings of his own medical practice [19] against the father’s assurance that he (Ronald) would be a major beneficiary under the father’s will. In 2014, however, Ronald Binetter discovered that he was not among the beneficiaries under his father’s will, the father having by then died.

    19. Or, perhaps more accurately, the father having helped himself to the practice’s funds.

The payments - evidence of Ms Huber and Ronald Binetter

  1. Ms Huber and Ronald Binetter gave consistent evidence on affidavit about the events of February and June/July 2010. They were not cross-examined.

  2. In relation to February 2010, both Ms Huber and Ronald Binetter deposed to a conversation between them and Andrew Binetter during which Andrew Binetter referred to a need for funds to cover legal expenses and asked Ms Huber if she was willing to make a short term loan. This was, allegedly, followed by discussion of precisely how much was required and Ms Huber’s confirmation that she had around $400,000 in her “home loan offset account” that she had saved to pay off her mortgage. Ms Huber and Ronald Binetter deposed that Andrew Binetter asked Ms Huber to lend that money on the basis of a “temporary loan” to overcome a cash flow problem, saying that interest of $3,000 would be forthcoming on repayment. She was reluctant to lend but agreed to do so because her husband wished it.

  3. In respect of the events of late June/July 2010, Ronald Binetter and Ms Huber gave evidence that a cheque for $410,000 drawn by Ligon 158 was handed by Andrew Binetter to Ms Huber on an occasion in which all three were present. Ronald Binetter deposed that, at that time, Andrew Binetter asked for what was effectively a replacement or extension of the short term loan made in February 2010 and that Ms Huber agreed to this. There was also reference to a bundle of cash being handed over by Andrew Binetter.

  4. Ms Huber deposed that she made a new loan of $410,000 with great reluctance and impressed on Andrew Binetter the need for it to be repaid, adding that she would “chase you till the day you die”.

The payments - evidence of Andrew Binetter

  1. Andrew Binetter swore three affidavits and was cross-examined.

  2. In his first affidavit (sworn on 31 August 2015) he referred to the incurring of substantial legal expenses by Ligon 268 and other Binetter family interests and the need to pay Signet Lawyers. He deposed at par 21:

“In my capacity as a director of Ligon 158, I recall having a conversation in or about July 2010 with Ronald, to the effect that funds for legal fees on behalf of the Binetter Entities was required to be paid to Signet [Lawyers]. As best I can recall now, that conversation was relevantly as follows (or words to the effect of):

Me:   Ronald, we need further funds to pay Signet. Can you contribute an additional amount of money for that purpose? As before, payment will need to go through Ligon 158.

Ronald:   Yes sure I will contribute as much as I can.”

  1. Paragraph 23 of the affidavit reads:

“There was no discussion with either Ronald or Deborah at that time (or subsequently) in which repayment, interest or documentation of a $410,000 loan with Ligon 158 was discussed or that the funds were required to be repaid.”

  1. In his second affidavit (sworn on 11 November 2015), Andrew Binetter made a correction to par 21 of the first affidavit, saying that the conversation with Ronald Binetter “was prior to July 2010 and was during the same conversation as the conversation mentioned above at par 10(h), which was in June 2010”. Paragraph 10(h) was as follows:

“Later and in approximately June 2010, I had a further conversation with Ronald, in words to the following effect:

Ronald:   Deb’s got a problem with Steve. She needs to show him [Steve] that there is money in the offset account. Can I have the $410,000 back.

Me:      That’s fine but when can Ligon 158 have the money back.

Ronald said:   Deb will give you a new cheque after 1 July 2010.”

  1. Also in his second affidavit, Andrew Binetter deposed at pars 10(a), (b) and (c) as follows:

“(a)   In approximately February 2010 I had a conversation with Ronald, in words to the following effect:

Me:   Ron, we need money to fund the accounting and legal costs for Ligon 158.

Ronald said:   Deb has a [sic] least $400,000 in her off set account. I’ll get Deb to give you a cheque from there.

(b)   By cheque dated 25 February 2010, Deborah paid Ligon 158 the amount of $410,000…

(c)   Ligon 158 appropriated the $410,000 from Deborah toward reimbursement of persons who had paid legal and accounting costs on its behalf including me.”

  1. Andrew Binetter’s affidavit evidence was that he never discussed business matters with Ms Huber, only with his brother, Ronald Binetter. He referred to a meeting in about February 2010 among Ms Huber, Ronald Binetter and himself at which Ms Huber handed him a cheque and said, “Here is the cheque”; to which he replied, “Thanks”.

  2. In his third affidavit (sworn on 19 April 2016), Andrew Binetter denied having had a conversation with Ms Huber in February 2010 in which he said, “Don’t worry, Deb – it’s only temporary! You will be repaid in 3 months with interest”. He accepted that he handed a cheque for $410,000 to Ms Huber in June 2010 on an occasion in which both Ronald Binetter and Ms Huber were present. However, he denied having handed Ms Huber $3,000 cash as well. He also denied requesting a further “loan” on “the same terms” and promising that it would be repaid in three months.

  3. Andrew Binetter deposed that when he gave Ms Huber a cheque for $410,000 in June 2010, a conversation took place as follows:

“Me:      Here is the cheque. When can I have a new one back?      

Deborah:   I will give you a new cheque in a few days.

Me:      Great I’ll text you to come and pick it up.

Deborah:   Ok.”

  1. It was put to Andrew Binetter in cross-examination that, in putting forward par 21 of his first affidavit as justification for the July 2010 cheque, he had forgotten that any context necessary to justify his defence had to date back to February 2010. He denied this. He accepted that his first affidavit contained no reference to any relevant conversation in February 2010, however added that there were many conversations to which he did not refer.

The “problem” with Steven Ezzes

  1. Andrew Binetter deposed that the provision of a cheque by Ligon 158 to Ms Huber in late June 2010 had its genesis in a “problem” that, according to what he was told by Ronald Binetter, Ms Huber had with her former husband, Steven Ezzes. [20] Andrew Binetter deposed to having been told by Ronald Binetter that Ms Huber needed to show Mr Ezzes that there was money in the bank account from which Ms Huber had drawn the $410,000 (that account played a part in arrangements under which Mr Ezzes deposited funds regularly to finance Ms Huber’s home mortgage payments pursuant to their divorce settlement). On Andrew Binetter’s affidavit account, he agreed that Ligon 158 would make $410,000 available for deposit into Ms Huber’s account but on the basis that Ms Huber would draw a new cheque for the same amount in favour of Ligon 158 after 30 June 2010.

    20. See above at [46].

  2. Ms Huber denied that the payments of late June/July 2010 had anything to do with her relationship with Mr Ezzes.

  3. Mr Ezzes deposed that he had neither asked Ms Huber to show the balance in the bank account nor questioned whether she used any of the funds he deposited in the account. He also denied the existence of any “problem” with Ms Huber regarding the account.

  4. In evidence before the primary judge was a copy of a cheque dated 1 July 2010 for $410,000 signed by Ms Huber in favour of Ligon 158, together with a bank voucher showing a transaction date of 2 July 2010 for a debit entry of that amount.

The text messages

  1. Also in evidence were seven text or SMS messages from Andrew Binetter to Ms Huber and nine from Ms Huber to Andrew Binetter. Several referred to family matters and are, for present purposes, irrelevant, except to the extent that they show the two persons to have been on friendly terms. The messages of particular relevance were as follows:

Date and time

From

Content

28.06.10

8.29am

AB

I’m coming to get a cheque from you … Remember??

28.06.10

8.37am

DH

Already signed.

29.06.10

2.30pm

DH

Cheque in assumed you wanted it cleared b4 June 30 so paid to expedite. Neshikot … (kisses)

29.06.10

2.31pm

AB

Yes – thank you

29.06.10

2.32pm

DH

Have receipt

  1. These text messages were introduced into evidence by Andrew Binetter. His thesis was that they supported his contention that the payments of late June 2010 were for the convenience or benefit of Ms Huber regarding Mr Ezzes.

  2. Andrew Binetter was questioned briefly by the primary judge about the text messages. His Honour asked where Andrew Binetter had been when he sent the message of 8.29am on 28 June 2010. He replied that he did not know but thought it probable that he was in his office. The primary judge then asked a question regarding one of the messages concerning family matters. Andrew Binetter answered that question. Then followed this exchange:

“Q. If you go down three texts from the bottom of the page, ‘Cheque in. Assumed you wanted it cleared before 30 June’, can you offer any reason why she would have thought you would have wanted it cleared before 30 June?

A. I have no idea. It does not make sense to me, your Honour. It was the cheque going back to her into her account from what I understood to be so she could show her ex-husband that the funds were in the account at 30 June; but as to why I would want it cleared, I think she – I don’t know, your Honour. Certainly I wanted the cheque back on as close to 1 July as possible, that was certainly the case and maybe that was the reason why she chose to expedite it, she was trying to help.”

  1. There was no evidence from Ms Huber about the text messages.

The accounting entries

  1. The evidence shows that the accounting records of Ligon 158 originally reflected a loan of $410,000 from Ms Huber and that that characterisation was later changed. Evidence about that matter was given by Andrew Binetter and Ligon 158’s bookkeeper, Ms McCaw.

  2. Ms McCaw is an accountant. She deposed that she had been, since April 2005, the accountant of a number of Binetter family companies, including Ligon 158. She reported to Andrew Binetter in respect of her work. Ms McCaw originally reflected the $410,000 received by Ligon 158 from Ms Huber as a loan by her to the company. She merely assumed that that was its character and made no enquiry of Andrew Binetter. In or about June 2015, however, Andrew Binetter told her that she had, in that respect, “made a mistake” and the sum in question “was a contribution to the legal fees” and should never have been recorded in the loan account. She made a correction by general journal entry.

  3. Andrew Binetter deposed that, in the period January 2009 to December 2010, Ligon 158 incurred more than $1.8 million in legal and accounting fees in connection with proceedings brought by the Australian Taxation Office against the Binetter family entities. He also deposed that he had not been aware until June 2015 that funds paid to Ligon 158 by Ms Huber had been recorded as a loan, and that, at that time, he instructed Ms McCaw to make the correction to which she deposed. [21]

    21. It was submitted by counsel for Ms Huber in this Court that it should be found that the alteration was made in September 2015, not at the earlier time referred to by Ms McCaw and Andrew Binetter. The submission was based on a date appearing on the print-out introduced into evidence. In the absence of evidence of the workings of the system by which the print-out was created and, in particular, indicating whether that system is such that a date marking of the relevant kind indicates the date of an entry rather than the date of printing of the document, the date marking on the document cannot be said to falsify the evidence of the two witnesses.

  4. That evidence of Andrew Binetter was contained in his affidavit of 11 November 2015 and became the subject of cross-examination, including as to why it had not appeared in his affidavit of 31 August 2015 filed with the originating process.

  5. Andrew Binetter was also cross-examined about the content of the financial statements of Ligon 158 and whether those statements had been prepared in a timely way. His answers were generally to the effect that he could not answer without checking records. The general impression created by the evidence is that, while Ms McCaw kept the books in a regular fashion, the formalities were not observed in such a way that formal financial statements were prepared as and when they should have been. There was, for example, affidavit evidence from Ms McCaw that tax returns for another family entity for the years 2008 to 2012 were not completed and lodged until late 2013 or early 2014.

  6. Andrew Binetter gave evidence that he first saw draft accounts of Ligon 158 in June 2015.

The 29 July 2015 letter

  1. The primary judge considered it most significant that Ligon 158’s response to the first statutory demand, as conveyed by the Polczynski Lawyers letter of 29 July 2015,[22] was to deny and dispute that there was a debt owing to Ms Huber in respect of the cheque handed over by her in February 2010 and to say that “the amount of $410,000 was repaid to Deborah Ezzes as she was then named by cheque number 500282”. There was, at that point, no suggestion that the $410,000 payment by Ms Huber in February 2010 was a non-refundable contribution to legal expenses. This, in the view of the primary judge, coupled with the reference to such a sum having been “repaid” on 29 June 2010, contributed materially to his Honour’s assessment that the original payment had been by way of loan.

    22. See above at [28].

  2. It is significant, according to submissions made on behalf of Ligon 158, that Andrew Binetter was not cross-examined about the 29 July 2010 letter and the instructions, if any, that he gave for its preparation. The absence of cross-examination on that point contrasts with the close questioning to which he was subjected regarding instructions given to Polczynski Lawyers regarding the letter of 12 August 2010 which disputed Ligon 158’s liability for the indebtedness alleged in the statutory demand dated 10 August 2015.

  1. The absence of such cross-examination is said by counsel for Ligon 158 to be one of several factors making insecure the inference drawn by the primary judge from the 29 July 2015 letter. It is emphasised that the letter does not explicitly link its pars 1.1.1. and 1.1.2 in a cause and effect way and refers at a later point to matters of history and background. There was no reason, so counsel for Ligon 158 submitted, why Andrew Binetter should have referred back to the earlier statutory demand and the company’s response to it when preparing his evidence about the 10 August 2015 letter. Had he been on notice that that was an issue, he might have responded with evidence about discovery of what was said to have been the misclassification of the payment in Ligon 158’s books on the basis of Ms McCaw’s assumption.

“Gift” and “contribution”

  1. The statutory demand with which the proceedings are concerned alleged a debt of $410,000 based on the cheque of 1 July 2010. The response, in August 2015, was that that $410,000 had been “gifted” to Ligon 158 as shown by text messages between Andrew Binetter and Ms Huber in June 2010. The articulated defence to a notional debt claim was thus that the payment to the company had been a gift.

  2. Andrew Binetter was closely questioned in cross-examination whether the word “gift” had ever been used in contemporary conversations to describe Ms Huber’s payment to Ligon 158. He accepted that it had not, adding, however, that nothing was ever said about the money ever being repaid and that there was “an agreement between Ron and the family that they would contribute funds to the extent that he could for the Ligon 268 expenses”. Andrew Binetter also made it clear that Ronald Binetter was not under any legal obligation to make such contributions. Ronald Binetter denied on affidavit that he had ever agreed to make such contributions.

  3. It is, to my mind, difficult to see how the statement in the letter of August 2015 that the payment by Ms Huber in July 2010 was “gifted” is seriously undermined by the later classification of it as a “contribution to legal expenses”. The difference may well be one of labelling only. A non-refundable “contribution” of the kind alleged shares with a gift the characteristic that there is no legal obligation upon the paying party to pay in the first place and no legal obligation upon the receiving party to repay. A “contribution” may, however, carry overtones of moral obligation that are foreign to the concept of a gift. There is also the point that Ligon 158 was a trustee, so that notions of settlement of funds for the benefit of beneficiaries might conceivably come into play so as to distinguish the case from one of beneficial receipt of a gift by a corporate entity.

  4. Any notion that Ligon 158’s ground of defence shifted in some significant way between receipt of the letter of August 2015 (referring to “gift”) and the presentation of its case (referring to “contribution”) does not, to my mind, assist any case of recent invention.

Assessment

  1. The principal question raised by the grounds of appeal is whether, in the light of the evidence as I have described it, the primary judge correctly concluded that the contention of Ligon 158 as to the status of the payment to it by Ms Huber (that is, that it was related to steps to raise her bank balance temporarily, following her earlier non-refundable contribution to legal expenses) was so devoid of plausibility that no further investigation was required.

  2. Counsel for Ligon 158 submitted that several factors provide grounds for a finding of prima facie plausibility in respect of the proposition that it is not indebted as Ms Huber alleges. For reasons that follow, I consider those submissions to be well-founded.

  3. First, it is said that the activities involving cheques in late June/July 2010 are inconsistent with mere renewal or extension of a short-term loan made in February 2010. If the parties intended such renewal or extension, there was no need for cheques to be exchanged. They could simply have made a new oral agreement varying the date for repayment. There must have been some other reason for bringing the cheques into existence.

  4. Secondly, if, as she maintained, Ms Huber was a reluctant lender in February 2010 and only grudgingly renewed the loan in late June/July 2010, there emerges a clear inconsistency with her then making no attempt to recover her money for some five years. This inconsistency is all the more marked when it is recognised that Ms Huber only attempted to recover the money after the estrangement between Ronald Binetter and Andrew Binetter had occurred and Ronald Binetter had discovered he was not a beneficiary under his father’s will. [23]

    23. Counsel for Ms Huber submitted that delay by her in seeking repayment was explained by ill health. Ms Huber gave evidence of having been diagnosed with a significant illness some weeks after what she refers to as “the first loan”, so that the diagnosis must have occurred around March 2010. She says that she became preoccupied with treatment and recovery. She also deposed that she asked Andrew Binetter repeatedly throughout 2011 for repayment but did not have contact with him after the estrangement in 2012. That does little to answer the point made by Ligon 158. It was some three years after contact ceased that tangible steps towards recovery were commenced.

  5. Thirdly, if the cheque drawn in late June/July 2010 on Ms Huber’s account in favour of Ligon 158 in truth represented a loan, Ms Huber must, in logic, have expected that the loan should bear interest to replace the interest that she was earning on funds held in her bank account. Yet there is no reference to any agreement regarding interest on the supposed second loan (which sets it apart from the first loan which was said by Ronald Binetter and Ms Huber to have earned $3,000 interest which was paid in cash).

  6. Fourthly, the only objective evidence in support of Ms Huber’s contention that the payment by her in late June/July 2010 was a renewed loan is the entry in Ligon 158’s books of account. Ms McCaw recorded a liability of $410,000 on the footing that the company had received proceeds of a loan. Significantly, however, that treatment in the books reflected nothing more than an assumption by Ms McCaw as to the character of the transaction. Andrew Binetter gave her no instruction on the matter until about June 2015 and she, of her own volition, never made any earlier enquiry of him as to the entries that were appropriate or required. The accounting entries as they stood before the adjustment in about June 2015 therefore apparently did not reflect any conscious or informed decision of anyone in authority within Ligon 158 as to the nature of the receipt from Ms Huber and the transaction giving rise to it.

  7. Fifthly, while the natural tendency might be to think, as the primary judge did, that it was implausible that Ms Huber should make a substantial cash contribution to her husband’s brother’s company, there are three circumstances suggested by the evidence that might, on further investigation, cause any such implausibility to be resolved. First, the evidence indicated that Ligon 158 had paid substantial amounts of legal expenses for (or, at least, benefitting) Ligon 268 and therefore to the advantage of Ronald Binetter. Ms Huber might have been disposed to use her own financial resources to assist with the discharge of a moral obligation owed by her husband. Secondly, the moneys in the account may not have been wholly Ms Huber’s: there was evidence from Andrew Binetter that, while regular deposits were made into the account by Mr Ezzes, Ronald Binetter himself sometimes topped up the account as Ms Huber made withdrawals from it, so that the funds might be regarded, in some part, as Ronald Binetter’s funds. [24] Thirdly, Ligon 158 was a trustee and, while gifts to companies beneficially may be thought unusual, a settlement upon a trustee may not.

    24. Ronald Binetter denied this.

  8. Sixthly, the impression created by the Polczynski Lawyers letter of 29 July 2015 that Ligon 158 accepted that the February 2010 payment by Ms Huber was in truth a loan should be treated with caution for the reasons outlined at [67]-[68] above.

  9. Seventhly, there is fertile ground for investigation of the true import of the text messages. The primary judge saw these as supporting the view that Andrew Binetter handed Ms Huber a cheque in repayment of the first advance and asked for a replacement cheque which she had prepared and signed by 28 June, post-dated to 1 July. In particular, his Honour perceived the third and fourth of the text messages set out at [56] above to be “fundamentally inconsistent” with Andrew Binetter’s version that the money was returned by Ligon 158 in order to enable Ms Huber to show Mr Ezzes that the funds were in her account at 30 June. [25] The inference, according to the primary judge, was that payment by 30 June was in some way to serve Andrew Binetter’s requirements rather than those of Ms Huber.

    25. Primary judgment at [32].

  10. I am not persuaded that the evidence permits such a conclusion to be reached with any degree of confidence. The first and second text messages set out at [56] above suggest that Ms Huber had signed a cheque on or before 28 June 2010 and that Andrew Binetter came (or planned to come) on that day to collect it from her. The third, fourth and fifth messages suggest that, on 29 June 2010, Ms Huber deposited a cheque and arranged special clearance of it; and that this was a process that both suited Andrew Binetter and was approved by him. The cheque that Ms Huber prepared for collection by Andrew Binetter may be taken to have been the cheque dated 1 July 2010 that was debited to Ms Huber’s account on 2 July 2010 (see [23] above). But that cheque, being post-dated, cannot have been the cheque that Ms Huber deposited and had specially cleared on 29 June. It may be that the cheque she deposited and had specially cleared was indeed a cheque drawn in her favour by Ligon 158 and that there were two reasons why Ms Huber sought Andrew Binetter’s confirmation that she had acted appropriately in obtaining the special clearance. First, Andrew Binnetter would have wished to see the cheque paid before 30 June to be sure that cleared funds were available in Ms Huber’s account to cover the cheque she had drawn in favour of Ligon 158 post-dated to 1 July that he planned to deposit into the Ligon 158 bank account on that day. Secondly, it may be that it was Andrew Binetter who had devised the method of creating a temporary increase in Ms Huber’s bank balance and that she was simply checking with him that, in obtaining the special clearance, she was acting in accordance with his plan.

  11. If this is the true import of the text messages (and I readily accept that other explanations may be available), those messages cannot be discounted as inconsistent with the proposition that Ms Huber needed, for reasons associated with Mr Ezzes or otherwise, to be able to show a credit balance in her account at 30 June. The view of the primary judge that the text messages falsified Andrew Binetter’s version of the repayment was, in my respectful opinion, a view that should not have been formed. That matter could not be determined with any degree of confidence on the material available.

  12. Having regard to these seven factors, it cannot be said that the proposition that Ms Huber made a non-refundable contribution as distinct from a loan is so devoid of plausibility as to warrant no further investigation. On the material before the primary judge and this Court, an ultimate conclusion of non-refundable contribution might well be considered less likely than an ultimate conclusion of loan. But that is beside the point, given that it is not the function of the Court to weigh the merits of the competing contentions. The only question is whether Ligon 158’s case, based on non-refundable contribution, is so lacking in substance that it can be dismissed without further examination. The primary judge erred in giving a positive answer to that question.

  13. I would add that, while the primary judge allowed limited cross-examination of Andrew Binetter, there was no cross-examination of Ronald Binetter or Ms Huber (or, for that matter, Ms McCaw or Mr Ezzes). The content of the affidavits of Ronald Binetter and Ms Huber admits the possibility of meaningful testing of their evidence in a number of areas if and when debt recovery proceedings are brought by Ms Huber against Ligon 158. Upon the hearing of any such proceedings, a great deal will depend on the evidence of three persons about conversations that took place in the first half of 2010 (that is, at least six years before any such hearing); and it will be for Ms Huber, as plaintiff, to establish[26] her debt claim on the balance of probabilities by reference to that evidence.

    26. Young v Queensland Trustees Ltd (1956) 99 CLR 560; [1956] HCA 51.

The Browne v Dunn ground

  1. Given the conclusion I have reached on the principal issue, [27] there is no need to address this matter specifically, although I would observe that cross-examination of Andrew Binetter was closely confined and controlled by the primary judge and that his Honour himself asked a number of pertinent questions.

    27. And, in particular, what is said at [67]-[68] about cross-examination concerning the 29 July 2015 letter.

Conclusion

  1. It follows from what I have said about the principal issue that I am of the opinion that the appeal should be allowed. In that event, there will be a need for a consequential order dealing with money paid into court by Ligon 158 to abide the outcome of the proceedings in this Court. The orders I propose are:

  1. Appeal allowed.

  2. Set aside orders (1) and (2) made in Equity Division proceedings 2015/254776 on 6 May 2016 and in lieu thereof order as follows:

  1. Order that the statutory demand dated 7 August 2015 served on the plaintiff by the defendant on 10 August 2015 be set aside.

  2. Order that the defendant pay the plaintiff’s costs of the proceedings.

  1. Order that the sum of $410,000 paid into court by the appellant be paid out to the appellant.

  2. Order that the respondent pay the appellant’s costs of the proceedings in this Court.

*********

Endnotes


Decision last updated: 28 November 2016

Most Recent Citation
Cases Cited

23

Statutory Material Cited

2

In the matter of Ligon 158 Pty Limited; In the matter of 12 Years Juice Foods Australia Pty Limited [2016] NSWSC 652
Re Wollongong Coal Ltd [2015] NSWSC 1680
Re Wollongong Coal Ltd [2015] NSWSC 1680