Nycon v Lane - [2009] NSWSC 39

No judgment structure available for this case.

CITATION: Nycon v Lane [2009] NSWSC 39

HEARING DATE(S): 10/02/2009

JUDGMENT DATE :
11 February 2009

JURISDICTION: Equity Division

JUDGMENT OF: Macready AsJ at 1

EX TEMPORE JUDGMENT DATE: 11 February 2009

DECISION: Paragraph 46

CATCHWORDS: Corporations Law. Application to set aside statutory demand under s459G of the Corporations Act. Held there was a genuine dispute and demand set aside.

PARTIES: Nycon Custodian Pty Ltd v Lane Cove Council

FILE NUMBER(S): SC 5105/2008

COUNSEL: Mr MA Friedgut for plaintiff
Mr S. Johnson for defendant

SOLICITORS: Levitt Robinson for plaintiff
Sally Nash & Co for defendant

- 1 -

THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

MACREADY AsJ

WEDNESDAY 11 FEBRUARY 2009

5105/09 NYCON CUSTODIAN PTY LIMITED v LANE COVE COUNCIL

JUDGMENT

1 HIS HONOUR: This is the hearing of an application under section 459G of the Corporations Act seeking to set aside a statutory demand served by the defendant on the plaintiff. The demand was dated 15 September 2008 and was for the sum of $89,790.95. The description of the debt in the schedule was as follows:

“SCHEDULE

Description of the Debt Amount of the debt

Monies had and received by the
company which it has failed to repay
to the creditor being parking meter
collections

Total parking meter collections by the
company on behalf of the creditor $157,787.25

Less paid by the company to the
creditor $67,996.30

2 The demand was supported by an affidavit sworn by Mr Wrightson of the defendant Council on 15 September 2008. That affidavit was attached to the initial affidavit in support of the application and was not limited in terms of its evidentiary purpose. Under section 60 of the Evidence Act it is thus admissible for all purposes. (See Regina v Singh-Bal (1997) 92 A Crim R 399 at 405.)

3 There is a problem with the affidavit in terms of it dealing with the identity of the contracting party as it is inconsistent with a later affidavit sworn by the same deponent. However, it is useful in describing the process. Paragraphs 6 to 9 are in the following terms:

“6. The Creditor maintains electronic data information as to moneys which have been paid into each parking meter. When a coin is inserted into a parking meter, an electronic message is sent to the Creditor detailing the amount of money received into the parking meter on the issue of the parking meter ticket. That amount is reconciled with the moneys collected by the Debtor.

7. The Debtor collected monies from the Creditor's parking meters but failed to account to the Creditor for all of the moneys which had been paid into the parking meters and which it collected. The total of moneys paid into the parking meters reconciled from the Creditor's records being meter tickets issued from the meter ticketing report is $157,787.25.

8. The total amount paid by the Debtor to the Creditor is $67,996 30.

4 There is evidence, which was not objected to, which also verifies the figures referred to in this affidavit in support. The relevant period is from 6 December 2007 to 3 March 2008. Apparently when the cash moneys are collected from parking meters the cash is deposited into the Council’s bank account.

5 In the affidavit in support of the application, which was filed within time, the issues which were raised related to two matters, namely, that the plaintiff company only commenced trading in March 2008 and that it

"has never contracted with the defendant to collect monies paid into parking meters on the half of the defendant."

6 Quantification was not put in issue.

7 I had the benefit of hearing a number of submissions in respect of the principles to be applied and I think the most useful summation of what is a genuine dispute is that given by McLelland CJ in Equity in Eyota Pty Limited v Hanave Pty Limited (1994) 12 ACLC 669. At page 671 his Honour made the following comments in respect of the expression “genuine dispute”.

Eng Mee Yong v Letchumanan

South Australia v Wall

Milbor Investments

‘These matters, taken in combination, suggests that at least in most cases, it is not expected that the Court will embark upon any extended enquiry 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.’

8 In Re Morris Catering (Australia) Pty Limited (1993) 11 ACLC 919 at 922; (1993) 11 ACSR 601 at 605 Thomas J said:

“There is little doubt that Division 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)."

9 I respectfully agree with those statements.

10 In this case the defendant suggests that the plaintiff’s suggestion of a genuine dispute is a "mere assertion" or, to perhaps use the expression in Eng Mee Yong referred to above, is “inconsistent with undisputed contemporary documents … inherently improbable… not having sufficient prima facie plausibility to merit further investigation ".

11 In reference to the plaintiffs claim, the defendant produced substantial documentation. The period we are concerned with is from 6 December 2007 to 3 March 2008. For collecting the cash the company doing so on behalf of the Council is entitled to fees, depending on the number of meters and the fee payable and the amount of cash collected. The latter is 1.5% of the cash collected.

12 The council produced four invoices which had been submitted by the plaintiff claiming payment for the collection of cash. The invoices:

(a) had the plaintiff's company name and ABN number on them.
(b) had two business names on the heading.
(c) displayed the number of the plaintiffs security licence under the Security Industry Act on the invoice.
(d) gave details of the account for transfer of funds in payment of invoices which in two cases were the account number of the plaintiff and on the other invoices it was the account number of a different company, to which I will return.

13 The invoices were received by the council, processed and paid by them.

14 The plaintiff company was incorporated on 5 June 2006. Mr Hronopolous who swore the plaintiff’s affidavits in these proceedings was initially a director and remained so until 7 February 2006. He came back in as a director a year later on 22 June 2007. He owns all the shares in the company.

15 Companies carrying out this type of work can only do so if they hold an appropriate Master Licence under the Security Industries Act. There are various provisions which include the employment of unlicensed employees. Clearly a licence is important for that business to be carried out.

16 Documents from the Police files relating to the business held at the relevant time by the plaintiff are quite revealing. A letter of 21 June 2007 sent to the Security Industry Registry signed by Mr Con Adams and Mr Christopher James Poniris was these terms:

“Dear Sam,

Following our telephone conversation on June 20 1, 2007, I Con Adams holder of Master Licence number 409 235 1:04 am in the process of selling the client base to Christopher James Poniris, Security Licence number 407 064 153 who is a close associate of the above Master Licence.

Christopher has registered Nycon Custodian Pty Limited ACN No 120 046 013 and the Master Licence is to be transferred to his name under the new entity.

Con Adams will retain the company name Heliflight Pty Limited and continue flying Helicopters as it is currently servicing clients in the aviation sector.

Therefore the new Master Licence to be issued to Christopher James Poniris should be Nycon Custodian Pty Limited.

As requested the original Master Licence is now being surrendered and a cheque for the amount of $30.00.

Thanking you for your assistance in the above matter."

17 It is to be noted on the heading of the letter there is a reference to Nycon Armatrans, the Master Licencee which is the company involved, and there is a reference to Heliflight Pty Limited with its licence number 409 235 104, this company being the holder of the licence.

18 Also of interest is, of course, the process referred to of selling the client base to Christopher James Poniris who is a “close associate” which expression is defined in the Act. That refers to the transfer to Mr Poniris. The letter is signed by Mr Con Adams who was involved with Heliflight Pty Limited and until the next day was still a director.

19 The next interesting document that is produced is the letter of 30 October 2007 and it is in these terms:

“Dear Sam,

20 Once again this letter seems to have been sent by facsimile. There is no heading on it. Clearly Mr Adams has an involvement. It is his credit card that is being used to make the payment. He signed it and he gave the authority for the actual fees to be paid.

21 The other exhibits which were also tendered includes a Licence which shows at some stage a licence was issued to Nycon Custodian Pty Limited. It is expressed to be from 2005, which is probably likely to be the initial date when the Licence was first issued to Heliflight Pty Limited and is valid until 2010.

22 One of the other documents is described as a declaration and it is signed by an associate nominated for the purposes of the application. Mr Angelo Hronopolous is the person. The document tendered is just a photo copy. I do note, although I do not place a great amount of store on it, that the signature appears to be somewhat different to the signature used on other documents. At this stage the case has not got down to dealing with forgeries or forensic evidence.

23 All these documents suggest that by 30 October 2008 the plaintiff was duly licensed to carry on the work and Heliflight had surrendered its licence to enable that to happen.

24 It was shortly after this the plaintiff opened its bank account on 30 November 2007.

25 From late December someone was collecting the cash from the parking meters and paying some of it to the Council. One could be forgiven for thinking that the documents show that the person doing it was the plaintiff company.

26 What then is the response of the plaintiff to these remarkable revelations in the documents. The response was to:

27 These were amounts that were claimed in some of the four invoices to which I have referred and which are in evidence.

28 The explanation as to how these moneys came to be received by the plaintiff was dealt with in the second affidavit. For the purpose of understanding what is a said by the plaintiff in this regard I will include a number of paragraphs from his affidavit.

“15. As to paragraph 19 of the Wrightson affidavit, I again reiterate that the Plaintiff only commenced trading in or about March 2008 providing car park maintenance and security services at the Sydney Fish Markets and that that is the only work that has ever been conducted by the Plaintiff. I also reiterate that any tax invoices and certificates of the kind referred to in paragraph 19 of the Wrightson affidavit were not in fact issued by the plaintiff, as no person from the Plaintiff had any authority to issue any such documents.

16. In relation to the Wrightson affidavit, as to paragraphs 21, 23 and 25, I was not aware and I have no knowledge that any such discussions between Mr: Con Adams and representatives of the Lane Cove Council took place and I cannot comment in respect of same save as to say it is clear from the ASIC company extract of the Plaintiff which comprises annexure ‘B’ at pages 8 to 11 inclusive of May 9 October affidavit that Con Adams ceased to be a director of the Plaintiff on 22 June 2007 -- that is, upon a date before the Plaintiff commenced trading.

17. Whilst Con Adams has been an employee of the Plaintiff since 1 March 2008, he has never been authorised to enter contracts on behalf of the Plaintiff or to issue tax invoices on behalf of the Plaintiff. Nor was he authorised to speak to the representatives of Lane Cove Council on behalf of the Plaintiff.
18. I was aware that Con Adams was involved with Heliflight Pty Limited and it did not come to my attention in February 2008 that funds were received by the Plaintiff from The Lane Cove Council. In or about late February 2008 I approached Con Adams and I had a conversation with him in words to the effect of:

I said ‘ Con, do you know that money has been paid into Custodian's bank account by Lane Cove Council?’

Con said: ‘ Yes. I told them to pay it. I am in the process of closing down Heliflight’s bank account. I will come back to you with arrangements with what’s to happen regarding the payments.’

I said: ‘ Ok Con, so long as it's all squared off in Custodian's accounts.’

Con said: ‘ Of course. Leave it with me.’

…..

20. In or about late April 2008, I had a further conversation with Con Adams regarding the moneys paid by Lane Cove Council to the Plaintiff's account in words to the following effect:

I said: ‘Con, what are you doing about that money that has been paid into Custodian's bank account by Lane Cove Council? There is now a total of just over $6,500?’

Con said: ‘ Yes. That money has to be paid to Heliflight’s liquidator. Can you draw a cheque to the liquidator, Danny Vrkic?’

21. The Following the conversation referred to in paragraph 20 above, on 13 May 2008, I drew a cheque from they Plaintiff's account payable to Heliflight’s liquidator, Danny Vrkic, in the amount of $15,000 component of which represented a payment in the sum of $6,506 56 being in respect of the funds deposited by the Lane Cove Council to the Plaintiffs account.

29 The tender of paragraph 22 of the evidence before me was not made, it was only an intention.

30 The explanation is that it was Mr Con Adams who was doing all this collection through the previous operator, Heliflight, or perhaps through the plaintiff company. Inferentially it is suggested he must have forged the invoice documents.

31 That company, Heliflight, was owned through another company by Mr Hronopolous from February 2006. He had been a director of it for two months after that acquisition but then ceased to be a director. In May 2008 the company was placed into liquidation.

32 No doubt Con Adams was about to be barred from being a director. One finds he ceased to be a director of Heliflight in June 2007 and there were no directors of the company until shortly before it was wound up and someone was appointed to deal with the winding up.

33 One might be forgiven for thinking that all this might be sorted out by the council producing the relevant contractual agreements between the parties at the appropriate times. Unfortunately this did not happen. The Council could only produce an unsigned copy of an agreement between it and Heliflight Pty Limited. The arrangement with Heliflight seems to have been in place since August of 2005.

34 The whole matter of the missing money seems to have blown up on 8 May 2008 in discussions between council officers and Mr Con Adams. In this regard a letter was sent by e-mail on 8 May 2008 and is in these terms:

“Wayne Rylands.

As per our telephone conversation, 8 May 2008, I confirmed the following.

1. Meter money is collected by Nycon Armatrans for and on behalf of ‘Lane Cove Council’ and we continue to do so.

2. Lane Cove Council representative ‘Wayne Ryland’ brought to our attention outstanding monies from meter collections dating back a number of years.

3. Nycon Armatrans regrets this and confirms that all money, once accurate amounts are identified, will be paid back with any interest that may be lost from financial safe keeping.

Sir, I am absolutely devastated that this has occurred. I can assure you that we are doing all within our power to identify why this occurred and to ensure it never happens again. Please have this understanding, I am totally aware that Lane Cove Council has entrusted this role to Nycon. I am not accustomed to letting any one down let alone a valued client. This will be investigated with accurate records and reports kept and forwarded to you as confirmation of our endeavour to correct this as soon as possible.

I look forward to meeting with you on Monday 12 May 2008.

35 Thereafter there were further discussions between Mr Con Adams and the Council. Significantly, there was no involvement of Mr Hronopolous in these discussions. Mr Wrightson, the executive manager of corporate services for the Council gave this evidence as to discussions that he had with Mr Con Adams:

“25. On to June 2008 a meeting was held at the premises of the Defendant with Con Adams, Stephen Larkin, Peter Brown the General Manager of the Applicant, myself and Wayne Rylands, the Executive Manager, Open Space & Urban Services. At the meeting Con Adams said words to the effect:

He said ‘I’m only dealing with matters relating to Heliflight Pty Ltd, not Nycon Custodian or Nycon Services Australia.’

I said "Con what are you proposing to do about the money owing by Heliflight” an investigation of the tax invoices and Council records show that from 3 December 2007 the coin collection from the Council's parking meters appears to have been carried out by two other entities in succession being Nycon Custodian and Nycon Services Australia. This was done without Council's knowledge and there are also inconsistencies in the conduct of the businesses of each of those entities in the coin collection and remittance.’

Con Adams said at the meeting words to the effect:

He said ‘ I will repay all the outstanding monies to the council personally and if necessary I will sell property I own to raise the funds. There have been previous situation is relating to two uninsured robberies and I have always made sure that my clients have been repaid.’

I said ‘ When is this going to take place?’

36 The council seems to have been perplexed that it was apparently now dealing with the plaintiff company and another company rather than its contractor, Heliflight Pty Limited. It does not suggest in this affidavit any contractual discussions with Mr Hronopolous and the comments made in the meeting probably stemmed from what it had by then discerned from the documents which it then held.

37 Acceptance of the plaintiff’s story involves an acceptance of the following propositions:

(a) that Mr Adams forged the invoices sent to the Council.
(b) he used the licence of a company owned by Mr Hronopolous for the purpose of the continued collections of the cash.
(c) he procured the transfer of the licence to the plaintiff company without the knowledge of Mr Hronopolous and used a forged document from him.

38 Is it likely that he might have done this? He certainly had the motive having been forced to resign from his company as a director and being disqualified from managing corporations. What better way to continue would there be? Provided he could get it past the council he could continue on without his name being involved using somebody else's company as a front.

39 He clearly had a large part to play in using his credit card for all payments to the authorities.

40 The things that support this version include:

(a) the complete absence of any contact between Mr Hronopolous and the council over the relevant period.
(b) the continued involvement of Mr Adams with the Council. When things went wrong it was Mr Adams they contacted.
(c) the plaintiff company's bank accounts up until March 2008 are consistent with the plaintiff's stance. The first payment from Sydney Fish Markets was on 19 March 2008.

41 One of the points against the whole story is the lack of any explanation of how Mr Adams could have done all this without Mr Hronopolous’ knowledge. However, one must remember Mr Adams was a director of the company up until 22 June 2007 when Mr Hronopolous was re-appointed. Mr Poniris was also appointed then and he resigned on 26 October 2007. Mr Hronopolous then becomes the sole director. These dates all tie in with what was happening to the licence under the Security Industry Act.

42 Plainly the whole story has not been told: particularly the relationship between Mr Hronopolous and Mr Adams over the relevant period.

43 Although the claim by the plaintiff points to bizarre and probably alleged behaviour by Mr Adams, the motive was there and some objective facts support the plaintiff's claim.

44 Having looked at some of the objective facts which seemed to have emerged, it seems to me one cannot describe the plaintiff's claim as a mere assertion.

45 It is not appropriate in this application to come to a final view about the likelihood of this explanation being proved. In my view, given the other objective facts, as I say I do not think it is a mere assertion and I find there is a genuine dispute.

46 I make orders 1 and 2 in the originating process. I note that the interlocutory process filed on 16 October was not argued.

47 I have heard submissions about costs. The defendant suggests that each party should pay their own costs. The plaintiff's submission is because they succeeded, that this was a case where the applicant properly advised should have known that it had no chance of success, and that it is appropriate to award indemnity costs. Reference was made during submissions on costs to Re Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd and others (1988) FCA 202. That is a principle that has been applied for many years.

48 I frankly did not think this is a case for indemnity costs. This is a matter where there are substantial discretionary elements. I can see that other people might have taken a different view and that different results might have happened depending on whether or not there was to be cross-examination. There are many imponderables and I certainly do not think I could describe the case where someone, properly advised, could believe that there was no chance of success. Accordingly, I decline to award indemnity costs.

49 The orders I have currently made, of course, will include the costs of the interlocutory application in any event. The only question is whether it is appropriate for that order to stand for the whole of the proceedings. There is nothing in the evidence before me that suggests what happened prior to the proceedings being commenced but if the proceedings had been left simply on the basis of what was in the original affidavit, there is much support for the submissions that have been made. It was not until the matter unfolded at a later stage that one finds all the evidence coming out, particularly the evidence in reply to the council's evidence.

50 However, the event that has happened is that the plaintiff has succeeded. Ordinarily costs should follow the event. Because of the fact that I think both parties in a sense have been working in the dark as to what has been actually happening in this matter, my view is that I should simply follow the event and accordingly I will not vary the order I have made. The exhibits should be retained for 28 days.

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Citations

Nycon v Lane [2009] NSWSC 39

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CITATION:	Nycon v Lane [2009] NSWSC 39
HEARING DATE(S):	10/02/2009
JUDGMENT DATE :	11 February 2009
JURISDICTION:	Equity Division
JUDGMENT OF:	Macready AsJ at 1
EX TEMPORE JUDGMENT DATE:	11 February 2009
DECISION:	Paragraph 46
CATCHWORDS:	Corporations Law. Application to set aside statutory demand under s459G of the Corporations Act. Held there was a genuine dispute and demand set aside.
PARTIES:	Nycon Custodian Pty Ltd v Lane Cove Council
FILE NUMBER(S):	SC 5105/2008
COUNSEL:	Mr MA Friedgut for plaintiff Mr S. Johnson for defendant
SOLICITORS:	Levitt Robinson for plaintiff Sally Nash & Co for defendant