Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (in liq)
[2015] VSC 530
•6 October 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
COMMERCIAL COURT
CORPORATIONS LIST
AT MELBOURNE
S CI 2015 1815
| MALEC HOLDINGS PTY LTD (ACN 077 896 201) | Plaintiff |
| v | |
| SCOTTS AGENCIES PTY LTD (In liquidation) (ACN 007 592 261) | Defendant |
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JUDGE: | GARDINER AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 30 June 2015 |
DATE OF JUDGMENT: | 6 October 2015 |
CASE MAY BE CITED AS: | Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (in liq) |
MEDIUM NEUTRAL CITATION: | [2015] VSC 530 |
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CORPORATIONS – Application to set aside statutory demand pursuant to s 459G of the Corporations Act 2001 (Cth) by reason of alleged genuine disputes and offsetting claim – Affidavit served outside the 21 day period prescribed by s 459G sought to raise different claim to that outlined in first affidavit – Plaintiff not permitted to raise new claim – Representative of plaintiff who conducted dealings with Defendant and who expressly and implicitly admitted the debt did not swear affidavit in support of application – Subject to deduction made in respect of offsetting claim which is established, Defendant’s material otherwise considered to rebut Plaintiff’s alleged genuine disputes and offsetting claim - Plaintiff failed to discharge onus of establishing genuine disputes – Demand varied by deducting offsetting claim established and declared to be an effective demand for the balance.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M A Black | Marshalls & Dent |
| For the Defendant | Mr N P De Young | Maddocks (as agents for Finlaysons, solicitors Adelaide South, Australia) |
HIS HONOUR:
On 1 April 2015, the defendant, Scotts Agencies Pty Ltd (in liquidation) (‘Scotts’), served a statutory demand dated 31 March 2015 on the plaintiff, Malec Holdings Pty Ltd (‘Malec’), together with an affidavit of Martin Lewis, sworn 31 March 2015. The demand claims that Malec owes Scotts $603,367.94. The schedule to the demand describes the debt as follows:
| Moneys due and owing to the creditor by the company for fuel and other fluids sold and delivered to the company by the creditor, particulars of which are set out in Part A of the annexure to this demand | $518,772.44 |
| Overdue account fees payable to the creditor by the company under the terms of a written credit application dated 18 March 2009 executed on behalf of the company, particulars of which are set out in Part B of the annexure to this demand | $84,894.50 |
TOTAL: | $603,367.94 |
An annexure to the demand lists 28 invoices dated from 19 March 2014 to 2 June 2014 for diesel fuel, diesel exhaust fluid, hydraulic fluid and transmission fluid. The annexure also lists monthly amounts for what are described as overdue account fees from 31 March 2014 to 31 January 2015.
On 21 April 2015, Malec made application pursuant to ss 459G, 459H and 459J of the Corporations Act 2001 (Cth) (‘the Act’) for orders setting aside the demand. Paragraph 1 of the originating process makes the following claims:
The statutory demand addressed to the plaintiff, dated 31 March 2015 be set aside on the following grounds:
(a)there is a genuine dispute between the plaintiff and the defendant serving the statutory demand about the existence and the amount of the debt to which the demand relates;
(b)there is a genuine claim that the plaintiff has against the defendant by way of set off and cross demand;
(c)there is a defect in the demand and substantial injustice will be caused unless the demand is set aside; and
(d)there is some other reason why the demand should be set aside.
Grounds (c) and (d) were not pressed at the hearing of the proceeding.
Malec relies on affidavits of Matthew Malec sworn 21 April 2015, 19 May 2015 and 10 June 2015. Scotts relies on affidavits of Hamish Mould sworn 2 June 2015, Peter Mitchell sworn 2 June 2015 and Martin Lewis sworn 3 June 2015. The volume and complexity of the evidence filed by the parties was unusually high for an application of this type and required close analysis.
Scotts objects to reception in evidence of certain paragraphs of Mr Malec’s 10 June 2015 affidavit by reason that they attempt to make new claims that were not ‘raised’ in Mr Malec’s affidavit of 21 April 2015, the only affidavit filed and served within the 21 day period after service of the demand. It is said by Scotts that Malec is not entitled to raise what it says is a new offsetting claim mentioned in the 21 June 2015 affidavit relating to an allegation that 2,559,573.53 litres of fuel was charged for but not provided by Scotts by reason that it offends the Graywinter principle. Scotts also submits that the evidence in respect of that claim is inadmissible as it fails to meet the description of business records under the provisions of s 69 of the Evidence Act2008 (Vic) so as to allow for its admission as an exception to the hearsay rule.
Legal principles
In this application Malec bears the onus of establishing that it has a genuine dispute or offsetting claim within the meaning of s 459G of the Act which provides:
Company may apply
(1)[Order setting aside demand] A company may apply to the Court for an order setting aside a statutory demand served on the company.
(2)[Time limit] An application may only be made within 21 days after the demand is so served.
(3)[Affidavit and copy of application] An application is made in accordance with this section only if, within those 21 days:
(a) an affidavit supporting the application is filed with the Court; and
(b)a copy of the application, and a copy of the supporting affidavit, are served on the person who served the demand on the company.
Section 459H of the Act provides:
Determination of application where there is a dispute or offsetting claim
(1)[Court satisfied of dispute or offsetting claim] This section applies where, on an application under section 459G, the Court is satisfied of either or both of the following:
(a)that there is a genuine dispute between the company and the respondent about the existence or amount of a debt to which the demand relates;
(b) that the company has an offsetting claim.
(2)The Court must calculate the substantiated amount of the demand in accordance with the formula:
Admitted total – Offsetting total
where:
“admitted total” means:
(a)the admitted amount of the debt; or
(b)the total of the respective admitted amounts of the debts;
as the case requires, to which the demand relates.
“offsetting total” means:(a)if the Court is satisfied that the company has only one offsetting claim—the amount of that claim; or
(b)if the Court is satisfied that the company has 2 or more offsetting claims—the total of the amounts of those claims; or
(c)otherwise—a nil amount.
(3)If the substantiated amount is less than the statutory minimum, the Court must, by order, set aside the demand.
(4)If the substantiated amount is at least as great as the statutory minimum, the Court may make an order:
(a)varying the demand as specified in the order; and
(b)declaring the demand to have had effect, as so varied, as from when the demand was served on the company.
(5)In this section:
“admitted amount”, in relation to a debt, means:
(a)if the Court is satisfied that there is a genuine dispute between the company and the respondent about the existence of the debt—a nil amount; or
(b)if the Court is satisfied that there is a genuine dispute between the company and the respondent about the amount of the debt—so much of that amount as the Court is satisfied is not the subject of such a dispute; or
(c)otherwise—the amount of the debt.
“offsetting claim” means a genuine claim that the company has against the respondent by way of counterclaim, set-off or cross-demand (even if it does not arise out of the same transaction or circumstances as a debt to which the demand relates).
“respondent” means the person who served the demand on the company.(6)This section has effect subject to section 459J.
The principles to be applied in applications of this type were collected and discussed by Robson J in Rhagodia Pty Ltd v National Australia Bank and following. Robson J stated:
[91]In TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd Dodds-Streeton JA (with whom Neave and Kellam JJA concurred) said:
[56]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.
[57]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.
[92]Dodds-Streeton JA further said:
[71]As the terms of s 459H (sic) of the Corporations Act 2001 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. A selective focus on a part of the formulation in South Australia v Wall, divorced from its overall context, may obscure the flexibility of judicial approach appropriate in the present context if it suggests that the company must formally or comprehensively evidence the basis of its dispute or off-setting claim. The legislation requires something less.
[93]In Eyota, McClelland CJ of the Supreme Court of New South Wales said:
It is, however, necessary to consider the meaning of the expression “genuine dispute” where it occurs in s 450H. In my opinion that expression connotes a plausible contention requiring investigation, and raises much the same sort of considerations as the “serious question to be tried” criterion which arises 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 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” (cf Eng Mee Yong v Letchumanan), or “a patently feeble legal argument or an assertion of facts unsupported by evidence”: cf South Australia v Wall.
But if it does mean that, except in such an extreme case, a court required to determine whether there is a genuine dispute should not embark upon an inquiry as to the credit of a witness or a deponent whose evidence is relied on as giving rise to the dispute. There is a clear difference between, on the one hand, determining whether there is a genuine dispute and, on the other hand, determining the merits of, or resolving, such a dispute. In Mibor Investments Hayne J said, after referring to the state of the law prior to the enactment of Div 3 of Pt 5.4 of the Corporations Law, and to the terms of Div 3:
“These matters, taken in combination, suggest that at least in most cases, it is not expected that the court will embark upon any extended inquiry in order to determine whether there is a genuine dispute between the parties and certainly will not attempt to weigh the merits of that dispute. All that the legislation requires is that the court conclude that there is a dispute and that it is a genuine dispute.”
In Re Morris Catering (Aust) Pty Ltd Thomas J said:
“There is little doubt that Div 3 … prescribes a formula that requires the court to assess the position between the parties, and preserve demands where it can be seen that there is no genuine dispute and no sufficient genuine offsetting claim. That is not to say that the court will examine the merits or settle the dispute. The specified limits of the court’s examination are the ascertainment of whether there is a “genuine dispute” and whether there is a “genuine claim”.
It is often possible to discern the spurious, and to identify mere bluster or assertion. But beyond a perception of genuineness (or the lack of it), the court has no function. It is not helpful to perceive that one party is more likely than the other to succeed, or that the eventual state of the account between the parties is more likely to be one result than another.
The essential task is relatively simple — to identify the genuine level of a claim (not the likely result of it) and to identify the genuine level of an offsetting claim (not the likely result of it).”
I respectfully agree with those statements.
[94]In TR Administration, Dodds-Streeton JA (with whom Neave and Kellam JJA concurred) cited this passage with apparent approval and noted it was also cited by the Full Federal Court in Spencer Constructions Pty Ltd v GAM Aldridge Pty Ltd.
(Citations omitted)
In Powerhouse Australasia Pty Ltd v Viarc Pty Ltd,[1] Dodds-Streeton J (as she then was) 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.
[1] [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,[2] 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, illusory or misconceived’ (emphasis added).
[2] (1997) 76 FCR 452, 464.
Factual background
Malec operates a transport company and has a fleet of trucks. Prior to going into liquidation, Scotts supplied it with fuel and other products. Malec has an aboveground tank at its depot in Geelong which its drivers use to refuel their vehicles. The aboveground tank is described in the evidence as the tankard and had a nominal capacity of 31,400 litres although the designated safe fill level of the tankard is limited to 28,000 litres.
The trading relationship between Scotts and Malec commenced in 2009. The parties operated a running account for several years until June 2014. In a typical transaction, Malec would order fuel, Scotts would deliver it and Scotts would send an invoice to Malec. Malec would pay Scotts amounts from time to time when it could afford to do so.
Malec disputes the amount claimed by Scotts in the demand. It contends that inquiries and investigations carried out by it have uncovered significant anomalies in the amount of fuel allegedly delivered to Malec. In March 2015, Malec engaged an accountant to conduct what is described as an audit of its account with Scotts. Mr Malec contends that between 15 February 2010 and 2 August 2014, Scotts overcharged Malec an amount of $415,063 in relation to the quantity of fuel in excess of the safe fill capacity and asserts that the sum should be offset against the debt and an agreement reached that Malec will pay the amount of the difference.
In response, Scotts contends that on the basis of the evidence that it has filed the issue of these alleged anomalies is conclusively addressed and, other than peripherally, is not addressed in Malec’s affidavit in reply.
Malec also denies any liability for interest (called overdue account fees in the schedule to the demand) which is claimed in the demand for the unpaid account. In response, Scotts refers to the terms of the application for credit executed by Mr Malec which provides for an entitlement by Scotts to charge 1.5% per month on outstanding balances.
In Mr Malec’s affidavit of 10 June 2015, he deposes that Malec has been charged for but has not been provided with 2,559,573.53 litres of fuel. As I have said, Scotts submits that this is a new offsetting claim not raised in the first affidavit and ought not be considered by reason that it offends the Graywinter principle.
Malec’s evidence
In his affidavit of 21 April 2015, Mr Malec, the sole director and secretary of Malec, states that Malec engaged Scotts to deliver fuel to it on a weekly basis in early 2009. He states that there was no formal written document signed by the parties evidencing the arrangement, although Mr Malec admits signing a personal guarantee as part of a credit application submitted to Scotts.[3]
[3]Affidavit of Matthew Malec of 21 April 2015 at paragraph 23.
Mr Malec contends that the arrangement was that there would never be more than one delivery in any given day, and there would never be more than two deliveries in any given week. If there was, it would have been highly unusual and on request. The amount of fuel to be delivered was by way of reference to a dipstick in the tankard. Mr Malec states that the amount of fuel to be delivered would never exceed more than 30,000 litres in any given delivery. The person delivering the fuel was required to come on site and contact a representative of Malec’s to allow them to ascertain, by reference to the dipstick, how much fuel was already in the tankard. Upon completion, Scotts’ representative was to sign off on a delivery docket confirming that the correct amount of fuel had been delivered and that the above procedure had been complied with.[4] A copy of the delivery docket was retained by both Malec and Scotts. This was so Malec could identify and keep track of deliveries. Within 24 hours of the delivery of fuel, a tax invoice was to be provided which would then be referenced to the relevant delivery docket.
[4]It was stated in Mr Malec’s further affidavit that after a period of time, Scotts did not deliver fuel in the manner dictated above.
Mr Malec makes a generalistic assertion[5] that, on a number of occasions, Malec has been charged for fuel and that there is no evidence that the fuel was ever delivered. He says that a tax invoice would arrive with no reference to a delivery docket, often much later than when the fuel was alleged to have been delivered. Counsel for Malec, Mr Black, relied on this assertion in submitting that the matters objected to by counsel for Scotts, Mr De Young, in the third affidavit relating to fuel charged for by Scotts but not provided to Malec, was contained in the first affidavit and therefore did not offend the Graywinter principle.
[5]Affidavit of Matthew Malec of 21 April 2015 at paragraph 7.
Mr Malec states that he only had ‘a rough estimation’ as to what was owed to Scotts.[6] He accepts that he should have ensured that there was what he describes as a ‘proper contract’ in place, but it is not said how this would have prevented the situation that has arisen in regard to the alleged inaccuracy in the state of the account between the parties. Although he complains that Scotts did not comply with applicable laws governing the provision of fuel,[7] this was not pressed at the hearing of this matter. Contrary to this, it will be seen that Scotts’ evidence is that monthly statements and invoices were provided to Malec throughout the period of trading.
[6]Affidavit of Matthew Malec of 21 April 2015 at paragraph 7.
[7]Ibid, at paragraph 8.
Mr Malec admits that Malec fell behind with payments of the amounts it owed to Scotts. Scotts and Malec continued to operate a running account. When payments were made, they were made towards reducing overall indebtedness rather than towards a particular invoice. Mr Malec deposes that it was always unclear as to what the overall debt was at any given time. He states that at no time was he aware of the amount and extent of the debt and accuses Scotts of adopting this as a tactic to obscure what was owing, although how this would work to Scotts’ advantage is not explained.
Mr Malec admits that he entered into a personal guarantee with Scotts, but disputes the sum demanded for overdue account fees. He exhibits a document headed “Credit Application Form”[8] which as well as the guarantee includes a part headed “General Terms and Conditions of Credit Account” which contains provisions dealing with the trading terms between Scotts and the purchaser. Clause 2 of the General Terms and Conditions provides that an overdue account fee ‘may be charged on any overdue accounts at the rate of 1.5% per month’.[9] This is contrary to Mr Malec’s assertion in his affidavit that the only time interest would be payable was if Malec was unable to pay what was owing once requested. He also expressed a belief that interest was not payable as Malec was able to pay any debt due and owing.[10]
[8] Exhibit MM-3.
[9]Exhibit MM-3.
[10]Affidavit of Matthew Malec of 21 April 2015 at paragraph 8.
Mr Malec states that on 29 August 2013, Malec entered into what he describes as a further agreement through Mr Malec’s wife, Joanna Malec, with Wayne Martin, the General Manager of Scotts at the time. He deposes that it was acknowledged in communications that Scotts would not charge interest on the $135,000, which was then owing. Mr Malec exhibits emails[11] passing between Ms Malec and Mr Martin which are said to support the existence of such an agreement in that regard. On 29 August 2013 Ms Malec states as follows:
[11]Exhibit MM-4.
Hello Wayne
I know I said we would pay the balance tomorrow but due to cash flow issues arising that we did not foresee I was wondering if we could change it to the below?
70K tomorrow
70K next Thursday (5th of September)
Once I get the end of month statement we can do another payment plan for the next few weeks
Is this ok?
Thank you
Joanna Malec
Mr Martin responded:
Hi Joanna,
Payment of 70K tomorrow is ok.
I have attached a screen dump of how your account sits at the moment (still could be loads to go on which have been delivered recently).
70K next Thursday also ok.
This will leave 135K from July still owing. When do you think this will be paid?
Cheers
I note that there is no mention in these emails of the forgiveness or waiving of entitlement to interest as Mr Malec contends in his affidavit. Mr Malec contends that as at August 2013 he was aware that monies were due and payable to Scotts and he made every effort to honour their arrangement by making regular payments in order to discharge the debt. He states that he did this despite the ‘precarious financial situation of Malec’, contrary to his statement that Malec was able to pay any debt due and owing and his belief that interest was therefore not payable.
Mr Malec states that around November 2014, he suspected gross overcharging, duplication of invoices and incorrect calculations by Scotts although he does not state what gave rise to such suspicions. He says the suspicions were raised by his wife with Mr Mould of Scotts between 19 November 2014 and 4 December 2014.[12] This was after an earlier statutory demand for $563,000 had been served on Malec by Scotts in late October 2014. He states that Scotts did not address these concerns. On 21 November 2014 Ms Malec states:
Hi Hamish
I still have issue with the amount owing but thought I would start making payments towards the debt.
A payment of $3,000.00 was made to the Scott[s’] account today.
Thank you
Joanna Malec
[12]Exhibit MM-5.
In response Mr Mould stated on 22 November 2014:
Joanna,
$3,000 received with thanks.
I also note your response of ‘I still have issue with the amount owing but thought I would start making payments towards the debt.’
We need to resolve this as a priority. I have provided the full statement of invoices, receipts and other transactions since 2010 (Attached again for your reference). Please make it a priority to reconcile to your system and revert to me with any issues by this Wednesday COB, as we have a Board meeting on Thursday and will need to report to them on the status of this account.
Regards
Hamish Mould
In an email of 4 December 2014, Ms Malec states that she had done what she could to reconcile the account but had now forwarded it to her accountant to see if he could make sense of it.[13]
[13]Exhibit MM-5.
Mr Malec contends that inquiries and investigations carried out by and on behalf of Malec have uncovered significant anomalies in the amount of fuel allegedly delivered to Malec. Mr Malec states that in March 2015 he engaged an accountant to investigate his suspicions. A report prepared by WM Accounting (‘the WMA report’)[14] states that the tankard has an overall capacity of 31,400 litres, but only has a safe fill capacity of 28,000 litres. The author of the WMA report states that the dates of Scotts’ invoices issued to Malec for fuel delivered indicate that, on occasion, fuel quantities exceeding the safe fill level were delivered to Malec by Scotts on the same day. Because Malec’s tankard has a safe fill capacity of 28,000 litres, the report states that it would not have been possible for Scotts to have delivered any quantity of fuel exceeding 28,000 litres within a single day. Based on this, the report states that Scotts has overcharged in respect of any quantity of fuel in excess of 28,000 litres in cases where its invoices bear the same date and they collectively show a quantity of fuel in excess of that capacity as having been sold to Malec.
[14] Exhibit MM-6.
Because of this, Mr Malec believes that between 15 February 2010 and 2 August 2014, Scotts overcharged Malec an amount totalling $415,063. These concerns were raised with Scotts via emails exchanged with Mr Mould between 19 November 2014 and 4 December 2014. Copies of these emails are exhibited to Mr Malec’s affidavit.[15]
[15] Exhibit MM-5.
Mr Malec concludes by stating that the above amount should be offset against the sum demanded by Scotts and an agreement reached between the parties that Malec will pay the outstanding amount. In my view, Mr Malec in contending this adopts the position that, on the basis of the matters raised in the 21 April 2015 affidavit, the demand would not be extinguished but rather he considered that a sum representing the difference, after applying the amount of $415,063, would be payable to Scotts. This position was also made known in a letter from Malec’s solicitors to Scotts’ solicitors of 15 April 2015, where it was said that Malec was prepared to pay the difference, $108,709.44, within seven days if Scotts accepted that Malec had an offsetting claim of $415,063. I consider this to be significant in light of the controversy surrounding whether Mr Malec’s third affidavit of 10 June 2015 raises a new dispute or offsetting claim.
In his further affidavit of 19 May 2015, Mr Malec states that on 5 May 2015, James Jarvis, the solicitor for Scotts, provided a small number of delivery dockets. Of the material received, almost half of the delivery dockets did not have his signature, nor did they have the signatures of any representative of Malec’s. Mr Malec denies having received the fuel set out in the unsigned delivery dockets and is unable to confirm whether any fuel was delivered on those dates. He also states that a number of tax invoices have no details about the amount of fuel delivered, the amount charged per litre and/or the overall figure to be charged.
Mr Malec asserts that the material provided by Scotts is ‘unreliable and inconsistent with the records held by Malec. A number of delivery dockets and tax invoices do not correspond and cannot be relied upon.’[16] He provides the example of the email which is exhibit MM-6 to his first affidavit, where Scotts admitted to discrepancies in load sheets and requested confirmation from Malec that fuel had been received.
[16] Affidavit of Matthew Malec of 19 May 2015 at paragraph 9.
To summarise, Mr Malec’s affidavit of 21 April 2015, which is the only affidavit filed within the 21 day period prescribed by s 459G of the Act and where it must ‘raise’ the grounds of the alleged disputes and claims, contends first that there is a dispute as to the debt by reason that there is no evidence of delivery of the fuel. Secondly, Malec contends that there is no agreement in respect of interest accruing on the amounts outstanding. Finally, Malec contends that it has an offsetting claim in the sum of $415,063 which arises from the allegation that between 15 February 2010 and 4 August 2014 Scotts overcharged Malec for fuel. This amount represented the 24 times the tankard was overfilled above the safe fill limit and amounted it is said to 314,674 litres of fuel. It is said that $415,063 should be offset against the amount claimed on the demand and an agreement reached between the parties that Malec pay the difference.
I observe at this juncture that Ms Malec, who the evidence indicates had the conduct of all dealings with Scotts on behalf of Malec, has not, despite having such close involvement, sworn an affidavit in support of the application and no explanation was provided as to why this is the case. This is particularly significant given the fact that Ms Malec has expressly and implicitly acknowledged the existence of the debt in communications with Scotts in October 2014 when seeking indulgences from Scotts to pay the debt by instalments.
Scott’s evidence in opposition
In his affidavit of 2 June 2015, Mr Mitchell, Commercial Manager for the Scott Group, deposes that he was familiar with the operations of Scotts and its dealing with its customers, including Malec, and with Scotts’ record keeping and accounting processes. He also exhibits[17] a copy of Scotts’ Credit Application form signed by Mr Malec on behalf of Malec which provides for an overdue account fee of 1.5% per month.
[17]Exhibit PBM-1.
Mr Mitchell states that Scotts sold and delivered products to Malec on credit during the period February 2010 until June 2014. During this period, Scotts issued to Malec a written statement of its credit account with Scotts at the end of each calendar month. Mr Mitchell exhibits[18] the monthly statements which contain the following information:
[18]Exhibit PBM-2.
(a) The opening balance of Malec’s credit account with Scotts as at the beginning of the particular calendar month to which each statement related;
(b) in the case of the credit entries shown and the statements, each payment received by Scotts from Malec for the credit of its credit account with Scotts;
(c) in the case of the debit entries shown on the statements:
(i) the date and the number of the invoice issued to Malec by Scotts in respect of each individual sale of product;
(ii) the description of the products sold to Malec by Scott;
(iii) the quantity, in litres, of the product sold to Malec by Scott;
(iv)the sale price per litre of the product;
(v) the sale price, excluding goods and services taxed, being the price per litre multiplied by the quantity of the product sold;
(vi)the GST levied on the transaction calculated at 10% of the sale price;
(vii) the total sale price, inclusive of GST of the product sold and delivered to Malec by Scotts.
The monthly statement then informed of the closing balance of Malec’s account with Scotts as at the end of the particular calendar month to which each statement related, being the total of the debit entries, less the total of the credit entries shown on the statement.
The monthly statements were usually issued to Malec by Scotts within four business days after the end of each calendar month and were mailed to Malec at its mailing address shown underneath the monthly statement.
Mr Mitchell also exhibits,[19] as a bundle, copies of Scotts’ petroleum loading and delivery reports, Scotts’ delivery dockets and Scotts’ tax invoices issued to Malec in respect of each of the debts which are claimed in the statutory demand, save for invoices relating to products other than fuel, in which case only the tax invoices are included in the bundle.
[19]Exhibit PBM-3.
Mr Mitchell states that, in a typical transaction, prior to the delivery of any fuel by Scotts to its customers, Scotts’ fuel tanker driver completed a load report containing the following information:
(a) the type and quality of fuel, in litres, loaded into Scotts’ fuel tanker for delivery to its customers;
(b) which of the six compartments within the tanker the fuel was loaded into and the quality of fuel loaded into each compartment;
(c) the name of Scotts’ customers to whom the fuel was to be delivered by the driver and the quality of fuel to be delivered to that customer;
(d) the invoice number to be issued to each customer by Scotts; and
(e) the starting time of the driver’s trip to deliver fuel.
At the conclusion of the driver’s trip, the driver completed the load report by inserting the finishing time of the trip and the total time taken for the fuel deliveries and signed the load report.
Mr Mitchell deposes that in addition, Scotts’ driver completed a delivery docket in triplicate. The delivery docket recorded the quantity and type of fuel delivered to the customer by the driver and the date on which the fuel was delivered. One copy of the delivery docket was left with Scotts’ customer, one copy was returned to Scotts’ office and the remaining copy was retained within the driver’s delivery book.
The delivery dockets contained provisions for Scotts’ customer to sign the docket. However, Mr Mitchell believes that Scotts’ drivers often made deliveries of fuel to customers outside of normal business hours or when the customer’s premises were otherwise unattended, and it was therefore not possible for the driver to obtain a signature on behalf of the customer. He states that the driver would still leave the delivery docket at the customer’s premises, despite not obtaining a signature on the docket from the customer.
Mr Mitchell concludes by stating that exhibit PMB-3 records the price per litre of fuel delivered to Malec by Scotts’ driver and the date of delivery. In some, but not all cases, the invoices also record the quantity of fuel delivered and the total price payable by Malec to Scotts for the fuel.
Mr De Young referred to the first document in exhibit PBM-3, which was headed ‘Dangerous Goods Shipping Document’ and dated 19 March 2014 by way of explaining and illustrating how a typical transaction is documented in the bundle. That document relates to a particular Scotts truck and identifies several customers, including Malec, which was in turn identified by an invoice number. It notes the number of litres loaded onto the truck at the refinery into the various compartments of the tank. The total number of litres adjacent to the Malec invoice is 16,195 litres. The next document in the exhibit is a Scotts delivery docket in reference to that delivery on 19 March 2014. It notes that in respect of that invoice number, 16,195 litres of diesel fuel were delivered to Malec at a price of $1.51448 per litre. That is the price recorded in the invoice which is generated in respect of that transaction in exhibit PBM-2. The delivery docket also contains a notation in respect of the dip records. In that delivery, the driver conducted a dip recording of Malec’s tankard, recording an opening quantity of 9,800 litres, and a reading of 26,600 litres after the delivery. The difference between these two figures is 16,800, and, Mr De Young submitted that while not being completely accurate, it is a contemporaneous record which serves as a back up to check the accuracy of Scotts’ other documentary records.
For products which were supplied other than diesel fuel, i.e. diesel exhaust fluid, hydraulic fluid and transmission fluid, these items were pre-packaged. They are not the subject of the disputes or offsetting claim which Malec raises in this application, which all relate to the supply of diesel fuel.
Exhibit PBM-3 contains similar documentation to that which I have referred to in respect of every transaction the subject of the statutory demand.
Mr Mitchell exhibits an email from Ms Malec of 14 August 2014. She states:[20]
Thank you very much for speaking to me yesterday and giving us the opportunity to propose a payment plan for the outstanding debt. As our business is still in the recovery stages and we are unable to pay the debt in full right now, we propose to pay it within the next 12 months with a monthly payment starting September 2014. As our income is seasonal we would like to make the repayment amounts variable, where some months we pay less and some more depending on our cash flow. However, we do guarantee to have the debt settled by September 2015.
I hope this is acceptable and look forward to finalising our debt with Scotts.
PS. Is it possible to remove the interest being charged on this debt as with it adding almost another $10K per month it will push out the date of finalisation? We would greatly appreciate any assistance on the interest you can offer.
[20]Exhibit PBM-4.
Mr De Young submits, and I agree, that this email amounts to an acknowledgement of the debt, with no issue being raised in respect of it. It post-dates the last of the invoices the subject of the demand which was dated June 2014.
In his affidavit of 2 June 2015 Mr Mould, Senior Accountant for Scotts, deposes as to the outcome of his review of the WMA report and the delivery records. As such, this affidavit deals with the alleged offsetting claim the subject of the WMA report relating to the overfilling claim for which Malec contends it is entitled to offset $415,063 against the amount claimed in the demand.
In response to the WMA report, Mr Mould exhibits[21] Scotts’ petroleum loading and delivery report, its delivery docket and its tax invoice issued to Malec for each of the entries which appear in the table which forms part of the WMA report and being labelled ‘Overfill’ in the table, except those relating to invoices 712003 and 154591. Mr Mould states that he has also reviewed the load reports, delivery dockets and invoices.
[21]Exhibit HGLM-1.
Mr Mould states that on his review of the WMA report, Malec’s claim in relation to the offsetting claim for overfilling is based on the following assumptions:
(a) that the tankard has an overall capacity of 31,400 litres, but only has a ‘safe fill’ capacity of 28,000 litres;
(b) that the dates of Scotts’ invoices issued to Malec for fuel delivered to it indicate that fuel quantities exceeding the ‘safe fill’ level of 28,000 litres were delivered to Malec by Scotts on the same day;
(c) that because its tankard only has a safe fill capacity of 28,000 litres, it would not have been possible for Scotts to have delivered any quantity of fuel exceeding 28,000 litres to Malec within a single day;
(d) that Scotts have overcharged Malec in respect of any quantity of fuel in excess of 28,000 litres in cases where its invoices bear the same date and they collectively show a quantity of fuel in excess of that capacity as having been sold to Malec; and
(e) that the total amount paid to Scotts by Malec in respect of such excess is the sum of the overcharged amount.
Mr Mould states that from his review of the WMA report and the delivery records it is apparent that the author of the WMA report has incorrectly assumed that the date of each invoice specified in the table forming part of the report was also the date of delivery of the fuel to which the invoice relates. In addition, it appears that the author has not made any allowance for fuel that would have been used by Malec on any particular day. He exhibits[22] a document entitled ‘Schedule of Disputed Fuel Deliveries’ which contains the following information:
[22]Exhibit HGLM-2.
(a) each invoice number which has been labelled ‘Overfill’ in the table contained in the WMA report;
(b) the amount of each such invoice;
(c) the date shown next to the invoice number in the monthly account statements which are exhibited to the affidavit of Mr Mitchell;
(d) the actual delivery date of the fuel referred to in the invoice which corresponds with the delivery date shown in the delivery records relating to each invoice;
(e) the quantity of fuel delivered to Malec by Scotts on that date which corresponds with the delivery record relating to each invoice;
(f) whether the delivery docket relating to each delivery of fuel has been apparently signed on behalf of Malec; and
(g) the starting and finishing time of the fuel tankers driver’s trip to deliver the fuel to Malec and the other customers of Scotts listed in each load report.
The Schedule of Disputed Fuel Deliveries was prepared by Scotts’ solicitors and provided to Malec’s solicitors on 4 May 2015.
The Schedule of Disputed Fuel Deliveries shows that Scotts made multiple deliveries of fuel to Malec on a single day on five occasions, namely:
(a) on 15 April 2010, when a total of 30,499 litres was delivered, which is within the overall capacity of Malec’s tankard;
(b) on 5 August 2010, when a total of 18,900 litres was delivered, which is within the safe fill capacity of Malec’s tankard;
(c) on 1 April 2012, when a total of 32,021 litres was delivered, which is slightly over the capacity of Malec’s tankard;
(d) on 1 September 2012, when a total of 40,809 litres was delivered but the deliveries are recorded in the driver’s load reports as having occurred in the morning and then in the afternoon; and
(e) on 18 October 2013, when a total of 34,314 litres was delivered but the deliveries are recorded in the driver’s load reports as having occurred in the morning and then in the afternoon.
Out of a total of 56 deliveries of fuel, 33 delivery dockets have apparently been signed by a representative of Malec’s.
Mr De Young submitted that in respect of the ‘impossibility’ argument raised by Malec, that is, that it was impossible for the multiple deliveries to have occurred on the dates mentioned having regard to the amounts of fuel delivered, on only two days in question, 1 April 2012 and 1 September 2012, was this in fact the case. It was also submitted that no complaint was made by Malec about such matters until Mr Malec’s affidavit was filed in this proceeding whereas the deliveries took place in 2012.
Mr Mould contends that where four of the invoices have been dated 1 July 2010 and the WMA report has labelled the invoices as Overfill, the delivery records show that the fuel to which these invoices related was in fact delivered to Malec on several days, 21 June 2010, 26 June 2010, 29 June 2010 and 1 July 2010.
Mr Mould exhibits a number of bundles of emails between Mr Martin and Ms Malec. The first bundle[23] indicates that there was concerted pursuit by Scotts for payment of outstanding account in late March and early April 2013. Malec sought an indulgence from Scotts for time to pay by rounded amounts. The tone of Ms Malec’s requests in those emails was quite desperate. Malec did not query the balance claimed by Scotts to be outstanding by Malec during this period.
[23]Exhibit HGLM-3.
The second bundle[24] contains emails passing between them in mid-April 2013 which were in a similar vein to the earlier series of emails in late March early April 2013. On 18 April 2013, Mr Martin advised Ms Malec that the balance outstanding at that point was $174,772.12. No issue was raised about this by Ms Malec.
[24]Exhibit HGLM-4.
The third bundle of emails[25] reveals an even more desperate position as far as Malec is concerned. Ms Malec wrote to Mr Martin on 22 April 2013stating, ‘I am heading to the bank right now and will have proof of payment for you before 10am. If you could put in a tentative booking for Toni for about 10am as we have run out of fuel already’. In an email of 7 August 2013, Mr Martin indicated to Ms Malec that $232,000 worth of fuel had been purchased in July.[26]
[25] Exhibit HGLM–5.
[26]Exhibit HGLM-8.
Exhibit HGLM–9 contains emails passing between Mr Martin and Ms Malec on 23 September 2013. Mr Martin enquires what the size of Malec’s tankard is and what sort of records are kept each day by Malec in terms of dips. Mr Martin states that he had a delivery discrepancy on one of Scotts’ load sheets that the driver thinks went to Malec and he was hoping to confirm how much fuel was received on 6 September 2013. In response Ms Malec stated:
Our bowser has a safe fill capacity of 28 [thousand] litres although [it] can be pushed up to 31 [thousand] litres. We don’t have any procedures in place for dipping the tank – we did for a couple of months although we found ourselves dipping tank 5 times + per day as we don’t know what time the fuel trucks come and trucks keep fuelling up… It really did not work. We found the regular drivers to be spot on with the quantities and decided just to do random checks upon filling.
Hope this helps.
Mr Martin then inquired whether Malec recorded what each of its trucks puts in at each fill, to which Ms Malec responded:
[W]e do a weekly report that displays each vehicles fuel usage – the bowser tracks this electronically.
Mr Mould exhibits[27] a bundle of emails commencing on 3 March 2014 and concluding on 1 May 2014. A payment plan was attached to the 1 May 2014 email. The payment plan, which is a document prepared and proffered by Malec, notes a balance at 27 April 2014, not including fuel supplied in April 2014, of $399,845.93. It proposes a series of payments which would completely discharge that debt by 31 May 2014.
[27]Exhibit HGLM-12
Mr Mould exhibits[28] an email chain between Scotts and Malec dating from 1 October 2014 to 22 October 2014. On 1 October 2014, Mr Martin asks that Malec confirm the debt owing as $563,360.81. It notes that there has been a request by Malec to extend payment terms by paying rounded amounts, mainly of $70,000 per month, due at the end of each month to 30 August 2015 and requests a waiver of interest accumulating on this debt in order to assist in finalising the debts.
[28]Exhibit HGLM-11.
In response, Mr Mould states that he was not authorised to accept the request for instalment payments, but if the matters referred to were confirmed by Malec including the amount of the debt, Scotts would not take any further action without communicating first with Malec. Mr Mould said he would have to refer the matter to Scotts’ board for its agreement. While Ms Malec did not confirm the amount of the debt as requested, she enquired of Mr Mould on 9 October 2014 whether he had heard from the board and did not take issue with the amount of the debt stated by Mr Martin.
On 22 October 2014 Mr Mould told Ms Malec that the board had not accepted the payment terms proposed and had instructed its in-house legal advisor to issue a statutory demand for payment of the debt. In response, also on 22 October 2014, Ms Malec expressed her disappointment at the rejection of the offer. She states:
… We wish to pay the debt off but unfortunately our cash flow does not allow for me to do so right now. All I am asking for is a little bit of time to enable us to pay it. Our cash flow is getting stronger all the time and I know for certain that we can pay this off.
I understand my offer was rejected but is there a counteroffer the board would like to propose? I wish to avoid wasting the courts [sic] time by you pursuing money that we are willing to pay you. Please consider allowing us to pay this and kindly let me know what is more of an acceptable time frame.
The final bundle of emails[29] contains emails passing between Ms Malec and Mr David Schwab, Scotts’ Chief Financial Officer, from 22 October 2014 to 29 October 2014. Ms Malec followed up her email extracted in the previous paragraph with another email on 22 October 2014 as follows:
I am sorry to bother you but I am hoping to resolve the issue of our debt outside of court and thought I might be able to discuss this with you. I understand our proposal was not acceptable but could we please come to some sort of arrangement that would allow us to pay this debt off without resulting to (sic) legal action. We do not wish to avoid payment we only ask for time. Please kindly consider our request as we are very willing to cooperate and make payment in a manner that our cash flow permits but is satisfactory to you at the same time.
Would a 6 month proposal be something you could consider?
Could we please keep the lines of communication open and work this out outside of court? …
[29]Exhibit HGLM-12.
In response to this email, Mr Schwab, states on 23 October 2014 as follows:
As discussed I confirm that I am prepared to set aside any legal recovery action on the Malec Brothers Transport debt on the following basis:
- Acknowledge that the debt of $563,360.81 (the debt) is due and payable to Scotts Agencies Pty Ltd (Scotts) in full and without deduction.
- Agree to pay the debt by equal monthly instalments on [the] 30th day of each month with the final due on 16 March 2015.
- Should Malec fail to pay any one instalment in full and on time, the balance of the debt will be immediately due and payable at Scotts option.
However I note that a statutory demand was posted to your registered office yesterday that can be ignored if the above conditions are satisfied.
Could you please provide your acceptance to these terms by reply email.
On 29 October 2014, Ms Malec wrote to Mr Schwab:
We are happy to agree to all your stipulations but we do have an issue with the monthly payments.
Is it possible that we agree that a payment is made starting next month of whatever we can afford but we have the debt paid off by the 16 of March?
What we plan on doing is hitting the debt with some large sums in Jan, Feb and March but this year making payments that are a little bit smaller… I hope this is acceptable to you and we can move forward to clear this debt up (emphasis added).
I observe at this point that, in October 2014, Malec, rather than taking any issue with the debt or the accuracy of Scotts’ account, accepted the figure being put as being owing to Scotts. Indeed, at no point was any issue raised at all with the quantum of the debt until several months after the last supply of fuel. In Mr Schwab’s email of 23 October 2014 he sought acknowledgement that the debt as at that date was $563,360.81 and Ms Malec, who conducted all the negotiations with Scotts, expressly agreed to Mr Schwab’s stipulations, including that acknowledgement. Malec’s quest, as it had been over the previous several months, was to seek time for payment by extended terms. Scotts had last supplied and invoiced Malec on 2 June 2014, nearly five months before, and no issue at all had been raised about the debt. It was not until November 2014 that it was.
In his affidavit of 3 June 2015 Martin David Lewis, joint liquidator of Scotts, states that a running account was operated by Malec and Scotts. Mr Lewis deposes that the total amount of the debts which are specified in the statutory demand have been calculated by applying all of the payments received from Malec against the individual debts owing on the account in the order in which they were incurred by Malec.
Mr Lewis concludes by stating that the debts remain due and payable and that he does not believe that Malec has any off-setting claim against Scotts in respect of amounts that Malec claims to have overpaid to Scotts.
In his affidavit of 3 June 2015, James Jarvis, who is the solicitor for Scotts liquidators, exhibits[30] correspondence passing between the parties commencing with a chain of emails between Scotts liquidators and Malec from 11 December 2014 to 7 January 2015.
[30]Exhibit JBJ-1.
On 11 December 2014 an employee of the liquidators, Ms Rawlins, emailed Ms Malec making a demand for $560,360.81. In response Ms Malec wrote to Ms Rawlins on 23 December 2014 and indicated that her accountant would give her a call the week of 5 January 2015 to discuss the matter ‘and try and resolve it ASAP’. Ms Rawlins wrote to Ms Malec the same day stating that they looked forward to hearing from Malec in the week commencing 5 January 2015. On 7 January 2015 Ms Malec stated, ‘I contacted my accountant and it is not the invoice copies we are after but proof of delivery. We are after the POD’s to make sure that the fuel we are being charged for was actually delivered. Could we have all the delivery dockets for all the invoices that are showing outstanding in your system?’[31]
[31]Exhibit JBJ-1.
Mr Jarvis contends that appropriate supporting documentation has been provided to substantiate the deliveries and the amount claimed in the demand. In this regard, on 5 March 2015, in response to Ms Malec’s request for proof of delivery, Mr Jarvis provided Ms Malec with the following documents:[32]
[32] Exhibit JBJ-2.
(a) a copy of Malec’s credit application form dated 18 March 2009;
(b) a summary of debits and credits to Malec’s account with Scotts from February 2010 to August 2014;
(c) a summary of the amounts which remain outstanding to Scotts from Malec;
(d) statements of Malec’s account with Scotts from February 2010 to August 2014; and
(e) loading and delivery reports, delivery dockets and tax invoices the subject of the statutory demand.
The loading and delivery reports, delivery dockets and tax invoices were also sent to Malec’s solicitors on 23 March 2015.[33] On 4 May 2015, further loading and delivery reports, delivery dockets and tax invoices from April 2010 to October 2013 and a schedule of disputed fuel deliveries were provided to Malec’s solicitors.[34]
[33] Exhibit JBJ-4.
[34] Exhibit JBJ-9.
Mr Jarvis denies Malec’s overfill allegations. He repeats the contention made by Mr Mould that Malec has incorrectly assumed that the dates specified in the monthly account statements correspond with the dates of the fuel deliveries.[35] Mr Jarvis stated in his letter to Malec’s solicitors on 20 April 2015: [36]
The prices per litre of fuel which appear in the four invoices dated 1 July 2010 are all different, which clearly indicates that the deliveries occurred on separate dates. It should also be readily apparent to Malec and its accountants that a number of invoices have the same date and follow an interval of some weeks after the date of the previous invoice. The three invoices all dated 25 May 2010 are an example. The invoices which preceded those are both dated 1 May 2010. Does Malec suggest that it received no deliveries of fuel from Scott[s] for a period of over three weeks?
[35] Exhibit JBJ-9.
[36] Exhibit JBJ-8.
In addition, Mr Jarvis refers to an email from Ms Malec dated 23 September 2013 where it was stated that:
Our bowser has a safe fill capacity of 28 (thousand) litres although [it] can be pushed up to 31 (thousand) litres
and
We found the regular drivers to be spot on with the quantities and decided just to do random checks upon filling.[37]
[37] Exhibit JBJ-8.
Mr Jarvis contends that it was clear from the exchange that Malec was prepared to allow Scotts to fill its bowser to its capacity of 31,000 litres and not just the safe fill level of 28,000 litres. He states that from the correspondence above, it can be concluded that Malec was satisfied that it was receiving the fuel quantities for which it was being charged and was in the practice of conducting random checks to verify this.
Mr Jarvis deposes that prior to the statutory demand being served, Malec did not raise any issues with Scotts concerning the delivery of fuel or the amount claimed.[38] Rather, correspondence from Ms Malec and Malec’s solicitors indicated a willingness to enter into a payment plan.[39] Ms Malec stated in her email on 22 October 2014 ‘we do not wish to avoid payment we only ask for time.’[40] Mr Jarvis contends in an email of 23 March 2015 that having paid the total amounts of the relevant invoices over two and a half years ago, Malec cannot now assert that it has been over charged.[41] In a further email of 20 April 2015, he states that no explanation has been provided as to why Malec did not raise the issue of alleged overcharging by Scotts until 30 October 2014, despite having been supplied with fuel by Scotts for a period of almost four years.[42]
[38] Exhibit JBJ–4.
[39] Exhibits JBJ-3, JBJ-4 and JBJ-5.
[40] Exhibit JBJ-5.
[41] Exhibit JBJ-4.
[42] Exhibit JBJ-8.
Malec’s affidavit in reply
In his further affidavit of 10 June 2015, Mr Malec deals in the first several paragraphs with the controversy surrounding the deliveries which Scotts alleged took place on 1 April 2012, when it is said a total of 32,021 litres was purported to be delivered and 1 September 2012, where a total of 40,809 litres was said to be delivered. In response to Mr Mould and Mr Jarvis’ affidavits, he states his understanding of those affidavits as being that there were occasions where Scotts’ records show that more fuel has been invoiced to Malec than what the tankard holds, Mr Mould and Mr Jarvis’ explanation for two out of five instances where more than the capacity of the tankard was invoiced by Scotts was that multiple deliveries were made on a number of occasions in a single day (presumably as Malec’s fleet was using the fuel and returning to fill up). Mr Malec focuses on the deliveries on 1 April 2012 and 1 September 2012. He states that both those dates fall over the weekend and Malec only rarely makes deliveries over the weekend. Mr Malec states it did not do so on either of those days as Malec was closed. He exhibits Malec’s records in this regard which he deposes establish that no deliveries were made on either of those days. Because of this, Mr Malec states that there is no way that the fuel could have been used, or how Scotts could provide a further delivery on those days. Malec’s delivery records, which are exhibited,[43] reflect that Malec’s made no deliveries on either of those days.
[43]Exhibit MM-11.
Aside from the deliveries on 1 April 2012 and 1 September 2012, I consider that Malec, who bears the onus in this application, has not successfully rebutted the comprehensive evidence of Scotts in relation to the contention that Scotts had not evidenced the delivery of the fuel. Nor has it satisfactorily confronted, aside from the two dates mentioned, the material presented in answer to the matters raised in the WMA report. In my view, Scotts has on the evidence that is filed and which has been referred to above, rebutted the position of Malec that it has an offsetting claim for $415,063, the ‘overfilling’ claim, subject to the two dates mentioned.
In addition, Scotts have also rebutted Malec’s position that there was a genuine dispute in respect of interest payable on the outstanding account. Scotts have exhibited the Application for Credit Account signed by Malec which includes an entitlement to charge 1.5% per month on outstanding balances. There is no evidence to support the position contended by Malec that Scotts have waived its right to claim interest.
I now turn to the balance of Mr Malec’s affidavit of 10 June 2015. Mr Malec states that besides the delivery records, the tankard also provides automated reports as to how much fuel is used by Malec in its trucks. The reports state the time the vehicle is fuelled, identifies the driver, the date, the vehicle receiving the fuel, the odometer of the vehicle, and how much fuel is taken out of the tankard to fuel the vehicle on a particular occasion. Mr Malec deposes that the tankard reports state that the following quantities of fuel were drawn from the tankard in the periods stated:
(a) for the period 1 January 2012 to 31 December 2012, 2,518,908.23 litres of fuel were used by Malec;
(b) for the period 1 January 2013 to 31 December 2013, 1,610,130.93 litres were used by Malec. During that period the tankard recording system was offline for two months and the figure Mr Malec gives is an estimate of the fuel that would have been used in that time by averaging the amount of fuel used per day for the other ten months of the year; and
(c) for the period 1 January 2014 to 3 June 2014, 669,476.31 litres were used by Malec.
Mr Malec then asserts the total amount of fuel not provided but charged for by Scotts based on the tankard records is 2,559,573.53 litres. Mr Malec exhibits MM-13 a document headed Summary Table 1, which he contends reflects the fuel charged for by Scotts, compared with the fuel used by Malec.[44] In addition, there is exhibited[45] a copy of the automated reports which the system produces.
[44]Paragraph 8 refers to the expression ‘compares the litres amount used by the defendant’, but the context is such that this must be a reference to the use of the fuel by Malec.
[45]Exhibit MM-14.
Mr Malec states that since Malec has received fuel from an alternative supplier, the invoices provided to Malec and the fuel recorded by the tankard records is almost an exact match save for a small amount which can be put down to accidental fuel wastage. Mr Malec illustrates this by exhibiting MM-15 a documented headed Summary Table 2, which reflects the amount charged from 1 January 2015 to 28 April 2015 compared with the tankard reports relating to deliveries from the current supplier during that period.
The quantum in dollar terms of this claim, 2,559,573.53 litres of fuel was charged for but not delivered, is not stated but on the assumption that the approximate price of the diesel fuel is $1.20 per litre,[46] it amounts to a claim of approximately $3 million. In my view this is quite a different claim than that raised in Mr Malec’s first affidavit, that relating to the overfill claim for $415,063. In Assaf Statutory Demands and Winding Up in Insolvency,[47] the author states as follows:
It is now well established that a supplementary affidavit cannot be used to raise new grounds of objection to the statutory demand although there are some authority to the contrary. In Energy Equity Corp Limited v Sinedie Pty Ltd, the Full Court of the Supreme Court of Western Australia held that an affidavit filed outside the 21 day period, which raises a new ground or grounds to set aside a statutory demand (as opposed to an affidavit which expands on grounds in an earlier affidavit which has satisfied the threshold test), cannot be used in an application to set aside a statutory demand. The Full Court’s decision in Energy Equity is a corollary of two principles: the principle described in Graywinter that an applicant’s initial affidavit in support must satisfy a minimum threshold level in order for it to be sufficient for the purposes of s 459G, and the principle established in David Grant, that an application made under s 459G is to be made within 21 days of the date of service of the demand. It has been held that, in refusing special leave to appeal in the Energy Equity case, the High Court has affirmed that no new grounds can be relied on which are not contained in the material filed within the 21 days (citations omitted).
[46]This is an approximate price to that being charged by Scotts in the invoices which are in evidence.
[47]2nd edition, Farad Assaf, Lexus Nexus at [4.45].
Affidavits filed within the 21 days need not go into all the evidence that supports the grounds relied upon to set aside the demand, and there is no doubt that the affidavits can be supplemented. In this instance, however, the magnitude of the claim itself is several times the offsetting claim mentioned in the first affidavit and I consider it to be of quite a different character.
If one examines the first affidavit of Mr Malec, I do not consider that the claim of 2,559,573.53 litres of fuel being charged for but never supplied is ‘raised’. There is no hint of a claim of that type or magnitude. The overfilling claim is for a very particular sum, is the subject of the WMA report and is for a fraction of this claim. Certainly if the affidavit filed within the 21 days of service of the demand is designed to inform the creditor of the disputes and offsetting claims it is required to meet in resisting the application, there is no indication of the larger claim made in the third affidavit. I do not consider it to be contended that it can be brought under the aegis of the very generalistic assertion in the first affidavit that Scotts had not proved delivery of the fuel. It was said by Mr Black in submissions that that contention raised the subject of the trading relationship between the parties, but I consider that to be such a generalistic notion as to be meaningless in informing a creditor considering that statement as to what the basis of the dispute or offsetting claim was so that material could be martialled to meet it. As it is, Scotts have put forward very comprehensive material relating to the supply of the fuel over the period of the trading relationship and it has not been satisfactorily rebutted.
For this reason I would reject the reception of paragraphs 6, 8 and 9 of Mr Malec’s third affidavit. Because of this, it is not necessary to consider whether the evidence adduced under those paragraphs comes within an exception to the hearsay rule by application of s 69 of the Evidence Act 2008 (Vic), but for completeness I would also accept Mr De Young’s submission in this regard. Mr Malec’s affidavit provides no evidence how the fuel readings are processed into the system. It is not described how the various types of entries are made into what Mr Malec describes as the automated system, for example, how is the odometer reading of the truck ascertained, how is the driver identified, how is the amount of fuel drawn from the tank automatically recorded and inputted into the system. There is no description of how such matters are recorded. Mr De Young submitted that there are two elements to admissibility of business records. The first is that the records in question have to form part of the records belonging to the company. The second is it must contain a previous representation made or recorded in the document in the course of, or for the purposes of the business. Sub-section 2 states that the hearsay rule does not apply to the document (so far as it contains the representation) if the representation was made (a) by a person who had or might reasonably be supposed to have had personal knowledge of the asserted fact or (b) on the basis of information directly or indirectly supplied by a person who had or might reasonably be supposed to have had personal knowledge of the asserted fact. In my view, Mr Malec’s affidavit does not contain evidence to substantiate that the records comply with the requirements of s 69 of the Evidence Act 2008 (Vic) or of the other provisions of that Act dealing with computerised programs. I also agree with Mr De Young’s submission that the evidence in this regard is somewhat at odds with the statement of Ms Malec in her email of 23 September 2013 to Mr Martin of Scotts that there were no procedures in place for dipping the tank… ‘we found ourselves dipping the tank 5 times + per day… We found the regular drivers to be spot on with the quantities and decided just to do random checks upon filling.’[48]
[48]Exhibit HGLM–9 to Mr Mould’s affidavit.
I consider, on an application of the case law which I have extracted above, that Malec has established that it has an offsetting claim in respect of the fuel which was alleged to have been supplied by Scotts on 1 April 2012 and 1 September 2012.
The parties have agreed that the total of the invoices for the supply of fuel on those particular days, together with the interest component which has been charged, results in a total of $128,997.23. If this is applied against the amount claimed in the demand, there remains a balance of $474,370.71.
Having regard to the foregoing, I will make orders as follows varying the demand to take into account the establishment to my mind of an offsetting claim in respect of the fuel which was alleged to have been supplied by Scotts on 1 April 2012 and 1 September 2012. I will order as follows:
1. Pursuant to s 459H of the Act, the statutory demand dated 31 March 2015 and served on the plaintiff by the defendant be varied so that it is an effective demand for $474,370.71.
2. I declare that the demand is to have had effect as so varied as from when the demand was served on the plaintiff.
Subject to what submissions the parties make as to costs my view is that costs should follow the event and that the plaintiff should pay the defendant’s costs including reserved costs.
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