MSA Renex Corp Pty Ltd v Create Environment Pty Ltd
[2021] VSC 377
•13 April 2021
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2021 00103
| MSA RENEX CORP PTY LTD (ACN 133 138 593) | Plaintiff |
| v | |
| CREATE ENVIRONMENT PTY LTD (ACN 604 342 154) | Defendant |
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JUDGE: | Efthim AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 25 March 2021 |
DATE OF JUDGMENT: | 13 April 2021 |
CASE MAY BE CITED AS: | MSA Renex Corp Pty Ltd v Create Environment Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2021] VSC 377 |
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CORPORATIONS – Application to set aside a statutory demand pursuant to s 459G of the Corporations Act 2001 (Cth) – Whether there is a genuine dispute pursuant to s 459H of the Corporations Act 2001 (Cth) – Whether the debt remains due and payable – Alleged conversations said to give rise to estoppel – Allegation implausible – No genuine dispute or matter requiring investigation – Variation of statutory demand.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S Freire | Clayton Utz |
| For the Defendant | Mr C R Northrop | Russell Kennedy |
HIS HONOUR:
The plaintiff, MSA Renex Corp Pty Ltd, applies pursuant to s 459G of the Corporations Act 2001 (Cth) (‘the Act’) to set aside a statutory demand dated 4 January 2021, which was served on it by the defendant, Create Environment Pty Ltd.
The demand claims that the plaintiff is indebted to the defendant in the sum of $1,500,000.00. The debt is described in the schedule of the demand as:
Receivable advanced by the creditor to the company on or about 22 June 2015 pursuant to the Share and Sale Option Agreement dated 19 June 2015.
The Law
Section 459G of the Act provides:
Company may apply
(1)A company may apply to the Court for an order setting aside a statutory demand served on the company.
(2)An application may only be made within 21 days after the demand is so served.
(3)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.
The meaning of a genuine dispute in the context of the challenge of a statutory demand was formulated by McLelland CJ in Eyota Pty Ltd v Hanave Pty Ltd.[1] His Honour said:
It is, however, necessary to consider the meaning of the expression “genuine dispute”… 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 in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be” not having “sufficient prima facie plausibility to merit further investigation as to [its] truth” (cf Eng Mee Yong v Letchumanan [1980] AC 331 at 341), or “a patently feeble legal argument or an assertion of facts unsupported by evidence”: cf South Australia v Wall (1980) 24 SASR 189 at 194.[2]
[1](1994) 12 ACSR 785.
[2]Ibid 787.
In TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd,[3] Dodds-Streeton JA, with whom Neave and Kellam JJA agreed, referred to the principles that are to be taken into account in determining a genuine dispute and off-setting claim. Her Honour said:
As the terms of s 459H of the Corporations Act and the authorities make clear, the company is required, in this context, only to establish a genuine dispute or 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…[4]
[3](2008) 66 ACSR 67.
[4]Ibid [71].
It is not for the Court to determine the merits of a dispute when an application is made to set aside a statutory demand. In Mibor Investments Pty Ltd v Commonwealth Bank of Australia,[5] Hayne J said:
…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 the dispute. All that the legislation requires is that the Court conclude that there is a dispute and that it is a genuine dispute.[6]
[5](1993) 11 ACSR 362.
[6]Ibid 366-7.
Background
The plaintiff and the defendant are shareholders in Renex Founder Hold Co Pty Ltd (‘Renex Founder’), each holding one of two issued shares in that company. Renex Founder was established in about 2015 for the purpose of conducting a business that accepts and treats hazardous waste and other industrial waste which would otherwise be sent to landfill.
The debt is claimed to be owing pursuant to a Share Sale and Option Agreement dated 19 June 2015 (‘First Agreement’). The First Agreement relates to the sale by the plaintiff of its shares to the defendant in a company known as Renex Holdings (Dandenong) 1 Pty Ltd (‘Renex Holdings’), which operated a waste management facility in Dandenong North.
The First Agreement provided that the plaintiff would sell its beneficial interest in 2,780,000 shares that it held in Renex Holdings to the defendant for $1,498,000.00. It also provided that the plaintiff would grant and the defendant would buy an option to acquire the legal interest in the shares for a fee of $1,000.00.
On 21 June 2015, the defendant paid the purchase price of $1,498,000.00 to Premier Developments Pty Ltd, a company associated with Marinos Angelodemou, the director of the plaintiff, at the plaintiff’s direction. It did not pay the option fee of $1,000.00 to or at the direction of the plaintiff.
The First Agreement contemplated that on 15 June 2015 a capital restructure of Renex Holdings would be effected pursuant to which the plaintiff’s notes in that company were to be converted into shares in accordance with the Restructure Deed.
On 9 October 2015, Korda Mentha were appointed as voluntary administrators of Renex Holdings. According to Mr Angelodemou, the share sale completion failed to occur due to the appointment of the voluntary administrators and not due to the failure of the conversion of the notes into shares.
The sum of $1,498,000.00 had been paid for the shares but no shares were received and the money was not refunded to the defendant.
Mr Angelodemou deposes that, in October 2015, he, Domenic Pulitano and Joe Pulitano, the latter two of whom are both directors of the defendant, were taking a tour of the waste management facility at Dandenong South, which was then operated by Renex Holdings. He does not recall the precise date of the tour but believes it was between 10 and 31 October because he recalls that Renex Holdings had entered voluntary administration that occurred on 9 October 2015. During that tour he had a conversation with Domenic and Joe Pulitano during which they discussed the funds advanced by the defendant pursuant to the First Agreement and the administration of Renex Holdings.
He further deposes that during that conversation:
(a) Joe Pulitano on behalf of the defendant said words to the effect that the funds advanced by the defendant pursuant to the First Agreement had gone to Renex Holdings and had been lost because that entity was in administration; and
(b) Joe and Domenic Pulitano represented on behalf of the defendant that the defendant would not pursue MSA Renex for the $1,498,000.00.
Mr Angelodemou states that, due to the representation, the defendant regarded the advance as lost and would not be pursued, and subsequently the plaintiff decided to purchase the assets of Renex Holdings from its voluntary administrators in tandem with the defendant. This was done by Renex Founder purchasing the shares. Had it not been for the representation, MSA Renex would have bought the assets itself and not involved the defendant.
By a Share Sale Agreement dated 16 September 2019 (‘Second Agreement’), the defendant agreed to sell and the plaintiff agreed to purchase the defendant’s 50 per cent shareholding in Renex Founder for a purchase price of $18,500,000.00 on the completion of the sale and purchase of Renex 1 Receivable. The Renex 1 Receivable is defined in clause 1.1 of the Second Agreement to mean the amount of $1,500,000.00 paid by the defendant to the plaintiff under the First Agreement.
Clause 4.3 of the Second Agreement provides that the purchase price was to be paid by the plaintiff to the defendant in three instalments. The first instalment of $5,000,000.00 was to be paid on the completion of the sale and purchase of the share (at the time which the defendant was obliged to deliver to the plaintiff a completed transfer of the shares in favour of the plaintiff). The second instalment of $7,000,000.00 was to be paid on or before 31 July 2020 together with the Renex 1 Receivable on or before 31 July 2020. The third instalment of $6,500,000.00 was to be paid on or before 31 December 2020.
The defendant did not transfer its share in Renex Founder to the plaintiff. By email dated 14 January 2020, the defendant by its solicitors gave notice to the plaintiff’s solicitors that by reason of the failure to satisfy conditions precedent by the required date, the Second Agreement was thereby terminated.
By letter dated 7 December 2020, the defendant’s solicitors demanded repayment of $1,500,000.00 within 14 days. A statutory demand dated 4 January 2021 was then served on the plaintiff.
Consideration
The plaintiff asserts that the condition for repayment of the Receivable pursuant to the First Agreement was never triggered. The First Agreement contemplated that a capital restructure of Renex Holdings would be effected and that the plaintiff would then sell its beneficial interest in 2,780,000 of those shares to the defendant for a price of $1,498,000.00. Completion of the transaction did not occur.
The plaintiff submits that the fact that the sale transaction completion did not occur by the end date enlivened a contractual right for the defendant to terminate the First Agreement pursuant to clause 3.4(a) by notice in writing to the plaintiff. The giving of such notice would have triggered an obligation on the plaintiff to return the purchase price within three business days of notice of termination.
The plaintiff submits that there is no evidence that the defendant has ever exercised its right pursuant to clause 3.4(a) of the First Agreement to terminate the agreement. It says therefore that the purchase price paid pursuant to the First Agreement is not a debt due and payable by the plaintiff to the defendant.
I do not accept that submission. It is clear that the Second Agreement acknowledges that the debt remains due. Clause 1.1 includes the following definitions:
-‘Renex 1 Agreement’ means the Share Sale and Option Agreement between the Buyer [MSA Renex] (as seller) and the Seller [Create] (as buyer) in respect of 2,780,000 ordinary shares in Renex Holdings (Dandenong) 1 Pty Ltd (ACN 151 011 675) dated on or about 19 June 2015.
-‘Renex 1 Receivable’ means the amount of $1,500,000 paid by [Create] to [MSA Renex] under the Renex 1 Agreement on or about 19 June 2015 and which [MSA Renex] acknowledges is repayable to [Create].
The plaintiff asserts that the Second Agreement overtook the obligation in the First Agreement to repay the amount of $1,498,000.00 because the Second Agreement expressly set out the circumstances in which the Renex 1 Receivable is payable. Even if that submission is correct it does not mean that that sum is repayable. The plaintiff clearly acknowledged the debt and set up a mechanism by which it would be paid.
The plaintiff submits that, if it were found that the purchase price paid pursuant to the First Agreement constituted a debt due and payable and it was not subsequently subsumed by the Second Agreement, then a conversation between Mr Angelodemou, Domenic Pulitano and Joe Pulitano during October produced an estoppel. That estoppel is said to preclude the defendant from asserting its strict legal rights by pressing for payment of the purchase price.
I note that that conversation was not contradicted by the defendant. The defendant in opposition to the plaintiff’s affidavit filed an affidavit made by its solicitor, Adam Nahum Ayliffe.
The defendant submits that there is no independent evidence to verify or corroborate what is contended to have occurred and the account given by it is spurious, especially in the light of later events. The defendant further submits that the conversation described by Mr Angelodemou in his affidavit does not make sense and the representations are so vague as to be meaningless.
If that conversation was made, then why was it acknowledged in the Second Agreement that the debt was due? Here it does not, in view of the agreement, appear plausible that that conversation was made. The plaintiff’s contention of a genuine dispute is not plausible, requiring further investigation. The defendant has not contradicted that the conversation took place but that does not mean that the alleged representations will lead to a genuine dispute.
The defendant has paid $1,498,000.00 for the purchase of shares pursuant to the First Agreement. These shares were not provided to the defendant. The plaintiff has received the funds and the defendant has not received anything in return.
The statutory demand claims that the plaintiff owes the defendant $1,500,000.00. Only $1,498,000.00 was paid to the plaintiff. The statutory demand will be varied pursuant to s 459H(4) of the Act to claim $1,498,000.00.
There is no genuine dispute. The plaintiff’s application will be dismissed.
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