Mine Builder Pty Ltd v Hannans Ltd
[2017] WASC 37
•16 FEBRUARY 2017
MINE BUILDER PTY LTD -v- HANNANS LTD [2017] WASC 37
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2017] WASC 37 | |
| Case No: | COR:243/2016 | 9 FEBRUARY 2017 | |
| Coram: | MASTER SANDERSON | 16/02/17 | |
| 7 | Judgment Part: | 1 of 1 | |
| Result: | Application dismissed | ||
| B | |||
| PDF Version |
| Parties: | MINE BUILDER PTY LTD HANNANS LTD |
Catchwords: | Corporations law Application to set aside statutory demand Turns on own facts |
Legislation: | Nil |
Case References: | Nil |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
HANNANS LTD
Defendant
Catchwords:
Corporations law - Application to set aside statutory demand - Turns on own facts
Legislation:
Nil
Result:
Application dismissed
Category: B
Representation:
Counsel:
Plaintiff : Mr S M Murphy
Defendant : Mr J P Cook
Solicitors:
Plaintiff : DLA Piper
Defendant : Mendelawitz Morton Commercial Lawyers
Case(s) referred to in judgment(s):
Nil
1 MASTER SANDERSON: This is the plaintiff's application to set aside a statutory demand. A copy of the demand appears as attachment SWP1 to the affidavit of Steven William Parnell sworn 11 November 2016. The description of the debt found in the schedule to the demand reads as follows:
Outstanding contractual debts and interest due and payable by the Company to the Creditor for the purchase of Gold Rights pursuant to the terms of a written agreement between the Company and the Creditor dated 10 March 2015 as described in the schedule hereto.
2 The amount of the debt is said to be $1,164,383.56. The plaintiff alleges there is a genuine dispute as to the enforceability of the debt. No issue is raised as to the amount of the debt and as to the fact there are monies outstanding. What is put in issue by the plaintiff is the right of the defendant to payment of the debt as at the date the statutory demand was issued.
3 The determination of this application is dependent upon the proper interpretation of the relevant facts. At all material times the plaintiff acted through its sole director and shareholder Mr Parnell. For its part the defendant acted through Mr Damian Hicks one of its directors. Mr Hicks swore an affidavit in opposition to the application dated 16 December 2016.
4 The relevant history begins with a letter from the plaintiff to the defendant dated 1 March 2015. In that letter the plaintiff offers to purchase a mining lease defined in the correspondence as 'Gold Rights' from the defendant for an amount of $1 million. The consideration was to be paid in four tranches - the first within seven days of the execution of the 'letter agreement'. The second payment of $200,000 was to be paid 90 days after the first payment. The third payment of $300,000 was to be paid within 90 days of the second payment. The final payment of $400,000 was to be paid within 90 days of the third payment. The letter agreement envisaged a transfer of the Gold Rights immediately upon the letter agreement being signed. It is common grounds between the parties the letter agreement was executed on 10 March 2015. That meant the first tranche of $100,000 was to be paid on 17 March 2015 with the remaining three tranches to be paid as agreed. At no time has any payment been made by the plaintiff to the defendant.
5 The evidence of Mr Parnell is to the effect that cash flow to the plaintiff which was anticipated to flow from a third party did not eventuate so the plaintiff was not in a position to meet its obligations under the letter agreement. The failure of the plaintiff to make payment led to discussions between Mr Parnell and Mr Hicks. Mr Hicks sent to Mr Parnell a document which is described on its face as 'General Security Deed'. This document appears to have been forwarded by email to Mr Parnell on or about 15 May 2015. Subsequent to its receipt Mr Parnell and Mr Hicks held a discussion. The substance of that discussion is set out in par 28 of Mr Parnell's affidavit. In summary Mr Hicks pressured Mr Parnell to sign the General Security Deed on behalf of the plaintiff. Mr Parnell said he would do so. In par 28.8 Mr Parnell sets out what he says followed after he agreed to sign the General Security Deed:
Mr Hicks said that if Mine Builder signed the Security Deed and kept Hannans fully informed as to the status of the dispute with Mr McKay, Hannans would continue to work with Mine Builder to resolve the dispute with Mr McKay.
6 The General Security Deed is a curious document. It appears to have been drafted by solicitors but there is nothing on the face of the document to indicate who those solicitors might have been. It is possible the defendant had a document which was used for another transaction and was simply adapted by the defendant without reference to solicitors for the purposes of this transaction. It is nowhere explained in the evidence where the General Security Deed originated. I mention these facts only to explain why the General Security Deed is not directed squarely at what were then the differences between the plaintiff and the defendant. What I mean by that will become clear if I set out some of the relevant terms of the document itself.
7 The parties to the deed are said to be the plaintiff who is described as the 'Grantor' and the defendant who is described as the 'Secured Party'. Recital A is to the effect the plaintiff wished to obtain 'financial accommodation' for the payments it was required to make under the letter agreement. Recital B says the deed was given 'to secure those payments, among other things'.
8 Nowhere in the deed is it acknowledged that payments due under the letter agreement were outstanding. In fact there is no reference to the timing of the payments at all. By cl 2 of the deed the plaintiff grants to the defendant what is described as a 'Security Interest'. Effectively the plaintiff charges all of its assets and undertakings to make payment of the 'Secured Money'. In cl 1 'Secured Money' is widely defined and would no doubt include those amounts payable under the letter agreement. The General Security Deed then goes on to provide a suite of rights to the defendant in the event the Secured Money is not paid. There is no doubt the effect of the deed is to transform the unsecured obligations of the plaintiff found in the letter agreement to secured obligations with the defendant having a broad right to enforce those obligations.
9 Returning then to Mr Parnell's evidence in pars 30 - 32 he gives evidence of what he believed to be his agreement with Mr Hicks. Counsel for the defendant objected to these paragraphs. He said they were inadmissible because they were no more than the personal beliefs of Mr Parnell and they were consequently irrelevant to the then existing contractual arrangement between the parties. In my view the objection is properly made and the three paragraphs in question ought be struck out. But even if they were admissible it is difficult to see how Mr Parnell's belief squares with the discussion he had with Mr Hicks and which he sets out in par 28 of his affidavit. In effect he says he was of the view that if he signed the General Security Deed the defendant would have no right to enforce the letter agreement unless and until the plaintiff's dispute with Mr McKay was resolved. That personal belief is at odds both with what is found in par 28 and the terms of the General Security Deed. The General Security Deed was executed by the plaintiff on 21 July 2015: see par 34 of Mr Parnell's affidavit.
10 Despite the provision of the General Security Deed Mr Hicks was still clearly concerned about the payments due under the letter agreement. On 29 July 2015 he wrote to Mr Parnell outlining his concerns. A copy of this letter is attachment DPH3 to Mr Hicks' affidavit. In the letter he asks Mr Parnell to execute certain off-market transfer forms for shares in a third party owned by the plaintiff. In exchange for the executed transfers Mr Hicks gives the following undertaking:
We undertake not to initiate legal action against Mine Builder Pty Ltd or its directors prior to 3 August 2015. We reserve our rights to commence legal action if the First and Second Payments are not made forthwith, or the Third and Fourth Payments are not made in accordance with the Transfer Agreement.
11 It is the defendant's position there was not ever any enforceable agreement which prevented it issuing a statutory demand. The only agreement which amounted to a forbearance was reflected in the letter of 29 July 2015 and that forbearance expired on 3 August 2015. Whatever subjective belief Mr Parnell may have had it is entirely inconsistent with the documentary evidence and cannot amount to a contract between the parties.
12 On behalf of the plaintiff it was submitted it can be inferred there was a contract to the effect the defendant would not enforce its rights under the letter agreement until the dispute with the third party had been resolved. It was submitted this inference could be drawn first from the discussions between Mr Parnell and Mr Hicks detailed in par 28 of Mr Parnell's affidavit and second from the fact the plaintiff provided 'financial accommodation' to the defendant by signing the General Security Deed. Why, counsel asked rhetorically, would that deed have been entered into if the plaintiff was not of the belief the defendant was offering a forbearance to sue while the plaintiff attempted to resolve its third party difficulties.
13 In my view the position is quite straightforward. It is a matter of analysing the contractual arrangements between the plaintiff and the defendant. The plaintiff undertook to make certain payments pursuant to the letter agreement. It then secured those payments by the General Security Deed. Nothing in that deed contained any forbearance. The parties then agreed the defendant would not issue proceedings before 3 August 2015. But after that date it was free to do so. There is nothing in the evidence which suggests otherwise.
14 There was no dispute between the parties as to the principles to be applied in determining whether a statutory demand should be set aside. It is for the plaintiff to establish there is a genuine dispute. There have been any number of judicial pronouncements as to what the phrase 'genuine dispute' actually means. For present purposes it is enough if I say that the plaintiff must establish a plausible contention which requires further investigation. Here an analysis of the facts establishes there is no plausible contention, the dispute is not genuine and there is no basis for setting the demand aside.
15 For the sake of completeness I should note it was the defendant's contention if there was no arguable contractual impediment to the plaintiff enforcing its rights under the letter agreement then some form of equitable right had arisen as a consequence of the dealings between the parties. Presumably this was an argument in favour of some form of estoppel although counsel in both his written and oral submissions submitted there was some form of 'unconscionability'. In my view there is nothing in the facts even assuming the version of those facts most favourable to the plaintiff which could give rise to any equitable right which would prevent the defendant from exercising its legal rights. The contractual position is clear and equity would not act to stop enforcement of those rights.
16 For these reasons I would dismiss the plaintiff's application. The plaintiff should pay the costs of the application including reserved costs.
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