P.J. Nash Pty Ltd v Food and Beverage Australia Limited
[2013] VSC 188
•19 April 2013
| Send for Reporting | ||
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL LIST
S CI 2012 7189
| P.J. NASH PTY LTD (ACN 115 323 272) | Plaintiff |
| v | |
| FOOD AND BEVERAGE AUSTRALIA LIMITED (ACN 007 996 081) | Defendant |
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JUDGE: | Gardiner AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 25 March 2013 | |
DATE OF JUDGMENT: | 19 April 2013 | |
CASE MAY BE CITED AS: | P.J. Nash Pty Ltd v Food and Beverage Australia Limited | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 188 | |
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CORPORATIONS – Application to set aside statutory demand under section 459G of the Corporations Act 2001 (Cth) – Whether a genuine dispute and offsetting claim in respect of the debt the subject of the demand – Evidence established existence of genuine dispute and offsetting claim - Demand set aside.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M.J. Stirling | Richmond & Bennison |
| For the Defendant | Mr J. Richardson | Ian Moffatt |
HIS HONOUR:
In December 2012 the defendant (“FABAL”) served a statutory demand and accompanying affidavit on the plaintiff (“P.J. Nash”). The demand, dated 6 December 2012, claims that P.J. Nash is indebted to FABAL for $99,738.84. The schedule to the demand describes the debt as
Being the amount of $99,738.84 outstanding and due and payable by the company on account of sales commission, plant breeder’s rights royalties and GST that is properly due and payable by the company to the creditor and invoiced by the creditor to the company on 9 March 2011.
The demand was accompanied by an affidavit of Christopher Day sworn 6 December 2012. In paragraph 1 of that affidavit Mr Day deposes:
I was the Creditor’s Chief Executive Officer at all material times in respect of a debt of NINETY NINE THOUSAND SEVEN HUNDRED AND THIRTY EIGHT DOLLARS AND EIGHTY FOUR CENTS ($90,723.84) [sic] (‘the debt’) owed to the creditor by the debtor P.J. Nash Pty Ltd (ACN 115 323 272) on account of sales commission, plant breeder’s rights, royalties and GST that is properly due and payable by the Debtor to the Creditor and was invoiced by the Creditor to the Debtor on 9 March 2011.
It will be seen that there is a significant discrepancy in Mr Day’s affidavit as to the amount of the debt in terms of its description in words and figures which cannot be attributable to a typographical error. Mr Stirling, counsel for P.J. Nash, in response to a question from me in that regard, responded that no point was taken by P.J. Nash as to such inconsistency in the affidavit.
The invoice of 9 March 2011 which is referred to by Mr Day in his affidavit accompanying the demand breaks up the alleged debt into six components. The first four claim that P.J. Nash is indebted to FABAL for one per cent of gross sales, the remaining two debts said to be owing for “PBR [Plant Breeding Rights] in the Chiltern 07 Project”. In its affidavit material, FABAL does not elaborate as to the source of the liability of P.J. Nash to FABAL for the one percent claims or for the PBR claims.
On 24 December 2012, P.J. Nash made application pursuant to s 459G(1) of the Corporations Act 2001 (Cth) (“the Act”) to set aside the demand. The grounds for the application are stated to be that there is a genuine dispute as to the existence or amount of the debt to which the statutory demand relates and that P.J. Nash has an offsetting claim against FABAL. FABAL concedes that the application was made within the time prescribed by s 459G of the Act.
P.J. Nash’s application was supported by affidavits of Phillip Nash sworn 24 December 2012 and 19 March 2013. The latter affidavit is in reply to the affidavits filed by FABAL of George Arapoglou sworn 7 March 2013 and Christopher Day sworn 5 March 2013.
Legal principles
The principles to be applied when considering applications under s 459G of the Act have been the subject of a considerable number of authorities. These have been collected and considered in the decision of the Court of Appeal of this Court in TR Administration v Frank Marchetti & Sons Pty Ltd.[1] Dodds-Streeton AJ referred to the well known formulation of the relevant factors by McLelland CJ in Eyota Pty Ltd v Hanave Pty Ltd where his Honour stated:
It is however, necessary to consider the meaning of the expression “genuine dispute” where it occurs in s 450H (sic). 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 “…[2]
[1](2008) 66 ACSR 67 (“Marchetti”).
[2](1994) 12 ACSR 785 at 787.
Dodds-Streeton AJ went on to say at paragraph 71 of Marchetti:
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.[3]
[3](2008) 66 ACSR 67.
It is important to remember that my task in this application is to ascertain whether there are genuine disputes or offsetting claims in respect of the debt the subject of the demand, not to express any opinion which may embarrass any other court subsequently considering the matter.[4] As Robson J stated in Rhagodia Pty Ltd v National Australia Bank:[5]
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).[6]
[4]Spacorp Australia Pty Ltd v Myer Stores Limited (2001) 19 ACLC 1270 at [3]-[4].
[5][2008] VSC 295.
[6]Re Morris Catering (Aust) Pty Ltd (1993) 11 ACSR 601 at 605.
Factual Background
P.J. Nash commenced operations at the Melbourne Wholesale Market at Footscray in September 2005 as a fruit and vegetable wholesaler. P.J. Nash had purchased the business from F.W. Westmore & Son Pty Ltd, which had commenced trading as a market wholesaler at the Victoria Market in 1946 and relocated to the Footscray Wholesale Fruit and Vegetable Market in 1970. P.J. Nash’s director, Mr Nash, was employed by F.W. Westmore & Son Pty Ltd for approximately 17 years before P.J. Nash acquired the business in September 2005.
Mr Nash contends that P.J. Nash has a genuine dispute in relation to the debt claimed by FABAL. Mr Nash also contends that P.J. Nash has an offsetting claim by reason that the balance of the account as between FABAL and P.J. Nash is such that FABAL is indebted to it for $155,877 together with accrued interest.
In September 2010, FABAL entered into a deed described as a Crop and Finance Tripartite Deed (“CFT deed”) with Rewards Projects Limited (“Rewards”), which was the responsible entity for several managed investment schemes and which had gone into administration. FABAL agreed to perform a number of services in relation to the fruit growing operations that Rewards managed on behalf of the investors in the schemes. The terms of the CFT deed provided for FABAL to have the ability to assign its rights and obligations under the deed to other parties.
On 17 September 2010, P.J. Nash and another company, Berry Connection Pty Ltd (“Berry Connection”) entered into an agreement (“the Back to Back Agreement”) with FABAL. Under the terms of the Back to Back Agreement, FABAL assigned its interest in the CFT deed to P.J. Nash and Berry Connection (which were collectively described as “B&M” in the agreement). In return for a commission of 13%, B&M agreed to perform the services which FABAL was obliged to perform under the CFT deed. B&M agreed to indemnify FABAL in respect of all of FABAL’s liabilities and obligations under the CFT deed. B&M was obliged to remit all proceeds from the sales of produce to an account styled “the Nominated Account“ on a weekly basis, save that it was entitled to retain commission of 13% on such sales.
The Back to Back Agreement provided that B&M would render invoices to FABAL for liabilities incurred by them to third party suppliers of produce and services in the performance of the agreement and that such liabilities would be paid from the Nominated Account within two days of the rendering of such invoices. It is common ground however that, aside from some initial remittances, in practice such liabilities were paid by P.J. Nash out of sale proceeds directly to the third party creditors before remission of the proceeds to FABAL. Mr Nash deposes that FABAL acquiesced in this practice, indeed he states the discharge of such liabilities was at the direction of Mr Arapoglou, a representative of FABAL .
In his affidavit, Mr Nash speaks only of P.J. Nash having obligations and entitlements under the Back to Back Agreement, but the terms of that agreement provide that the two companies, Berry Connection and P.J. Nash, have such rights and obligations.
Mr Nash became aware that, in November 2010, by reason of the change of circumstances in the operation of the businesses referred to in the CFT deed brought about by the appointment of receivers and managers and administrators to other members of the Rewards group, FABAL entered into a second CFT deed (“the second CFT deed”). The second CFT deed, which superseded the CFT deed, acknowledged, among other things, that the receivers and managers appointed to members of the Rewards Companies agreed to permit FABAL to have access to the properties on which the fruit growing operations were conducted. For the present context, nothing turns on the entry into or the terms of the second CFT deed.
Mr Nash deposes that P.J. Nash proceeded to perform its obligations under the Back to Back Agreement and made gross sales of produce of $3,310,971 in the period between October 2010 and 22 February 2011. Those sales were recorded in P.J. Nash’s computer system. FABAL was informed of that sales information in periodical remittance advices forwarded to FABAL between October 2010 and February 2011.
Mr Nash states that as a result of those sales of $3,310,971, P.J. Nash was entitled to commission of 13% of that figure i.e. $430,426. P.J. Nash was obliged to remit the balance, 87% of the total sale proceeds, that is, $2,880,545, to FABAL pursuant to the Back to Back Agreement but in fact has only paid $58,333 by direct payment into the Nominated Account as the agreement contemplated. This amount was paid on 4 November 2010. He states that the balance owing to FABAL was therefore $2,822,212 but because of amounts that P.J. Nash paid to third party suppliers at the direction of Mr George Arapoglou of FABAL, the sum of $2,978,089 has been paid. In his affidavit, Mr Nash identifies the third parties who were paid in that way, together with the amounts they were paid.
Mr Nash deposes that P.J. Nash operated out of a store at the Footscray Wholesale Fruit and Vegetable Market. Mr Arapoglou would attend that premises regularly during the fruit growing season and use the office as a base when he was not operating from the Berry Connection premises at Woori Yallock. Joe Pignataro, a representative of Berry Connection, occasionally attended the meetings at Footscray and was usually accompanied by Mr Arapoglou. Mr Arapoglou, in conjunction with Mr Pignataro, directed Mr Pignataro of Berry Connection and Mr Nash on behalf of P.J. Nash as to which third party suppliers or service providers should be paid, including the amounts they were to be paid. The third parties were service providers or suppliers carrying out obligations which FABAL had under the CFT deed. As I have observed, this practice of paying suppliers directly rather than through the mechanism of the Nominated Account was contrary to the terms of the Back to Back Agreement. Mr Nash deposes that, between October 2010 and January 2011, Mr Arapoglou directed P.J. Nash to pay Berry Connection $976,137. The balance was paid to third party suppliers.
Mr Nash deposes that because P.J. Nash was only obliged to remit the sum of $2,822,212 to FABAL under the terms of the Back to Back Agreement, and because it has made payments to third party suppliers at FABAL’s direction in the total sum of $2,978,089, P.J. Nash is entitled to reimbursement from FABAL in the sum of $155,877 being the difference between those two sums. In that sense, it characterises such amount, which it contends is the actual balance of account between them, as an offsetting claim.
FABAL’s affidavit evidence in opposition
In his affidavit, Mr Arapoglou deposes that he was employed by FABAL from August 2010 until June 2011. He states that from the time that the CFT deed and the Back to Back Agreement was entered into in September 2010 he was, for the most part, based in Victoria. His responsibilities for FABAL were that he was to monitor and report to FABAL on crop sales achieved and expenses incurred by P.J. Nash and Berry Connection pursuant to the Back to Back Agreement.
Mr Arapoglou deposes that he did not provide any direction to Mr Nash or Mr Pignataro not to make payment of the sale proceeds into designated FABAL accounts and, in particular, he states that he did not give the directions that Mr Nash asserts were made in that regard in his affidavit. He states that he ‘gave no directive and no interest (sic) in providing input in which the creditors (suppliers and third parties) of B & M would be paid in preference to the other creditors of B & M’. He asserts that ‘The decision as to which supplier/third party would be paid in preference or priority to others was a decision made by [Mr] Nash and/or [Mr] Pignataro for their benefit’.
In his affidavit Mr Day, who is the chief executive officer of the FABAL group and a director of FABAL, states that under the terms of the CFT deed, FABAL was required to account to Rewards on a weekly basis for the balance of the proceeds from the sale of fruit from the properties involved in the project after FABAL had received its sales and marketing commission, which was fixed at 15% of sale proceeds, together with other expenses, including harvesting charges, packing, freight, fees and levies.
FABAL was entitled to assign any of its rights or obligations under the CFT deed. Mr Day deposes that pursuant to the Back to Back Agreement, FABAL assigned its rights under the CFT deed to P.J. Nash and Berry Connection. In return, those companies jointly and severally agreed to perform the obligations of FABAL under the CFT deed at their own cost and risk, to indemnify FABAL in respect of its obligations under the CFT deed and to make payment on a weekly basis into the Nominated Account of all the proceeds of the fruit sales save for an entitlement to retain their 13% commission. FABAL would, upon receipt of a request from by P.J. Nash and Berry Connection, release moneys from the Nominated Account to enable payment of the invoices for the expenses incurred to the third party suppliers. Mr Day states that the purpose of the Nominated Account regime was to assist FABAL with its reporting obligations and to provide transparency to Rewards Group and the administrators.
Mr Day states that in accordance with the obligations under the Back to Back Agreement, Berry Connection and P.J. Nash incurred the liabilities directly with suppliers and third parties. However, save for the first three payments received from sales into the Nominated Account of $81,630.76 on 2 November 2010, no further payments were made by the companies into the Nominated Account.
Mr Day states that the decision not to continue to use the Nominated Account was unilaterally made by Berry Connection and P.J. Nash, not FABAL and was made without the consent of FABAL. However, he states FABAL did not object to this approach of bypassing the Nominated Account as it was still able to achieve its reporting obligations to Rewards and the administrators through other means.
During the harvest from October 2010 to February 2011, each of the three projects operated at a loss of $708,487. This was reported to Rewards and its receiver on 1 April 2011. Accordingly, he contends, there has not been any obligation for the payment of profits to be made to Rewards or its receivers.
As to the matters raised by Mr Nash in his affidavit as to the balance of the account being $155,877 in favour of P.J. Nash, Mr Day states that Berry and P.J. Nash were responsible for payments to third parties, not FABAL, and where there were no profits, those companies would be responsible for the losses. In addition, Mr Day states that at no time has FABAL received an invoice or any demand from the third parties to whom Mr Nash refers in his affidavits, nor are they exhibited to Mr Nash’s affidavit.
As to the allegation made by Mr Nash in his affidavit that the payments were made at the behest of a representative of FABAL, Mr Arapoglou, Mr Day states that FABAL was not responsible for those payments.
Mr Day states that at no time prior to receiving the Nash affidavit had P.J. Nash ever raised the issue set out in his affidavit relating to the alleged offsetting claim. Rather, in correspondence they raised the existence of a claim against another entity in the FABAL group, Total Beverage Australia Ltd, for the sum of $165,345.28.
I observe again at this point that the position put by Mr Nash is not only consistent with the practice of third party payments which emerged, it also is consistent with Mr Day’s statement in his affidavit that FABAL did not, over the period that such payments were being made, object to such course.
P.J. Nash’s evidence in reply
In his affidavit in reply, Mr Nash states that the decision not to pay to the Nominated Account was not unilaterally made by Berry Connection and P.J. Nash. Rather, it was made in the manner described in his earlier affidavit, namely, that Mr Arapoglou directed P.J. Nash as to which third party supplier accounts should be paid by reference to each specific invoice and each specific sum or lump sums which he stated ought to be paid. As to Mr Arapoglou’s affidavit where he stated that he did not direct P.J. Nash to make the payments contended, Mr Nash disputes this and says this is not borne out by contemporaneous communications.
Among those communications are the following:
(a)emails from FABAL to P.J. Nash and/or Berry Connection of 17 and 18 November 2010 and 14 December 2010 that point to the awareness of Arapoglou that P.J. Nash was making direct payments to the parties identified. On 9 November, Mr Arapoglou stated in an email to Mr Day, and circulated to several others, ‘Updates regarding operational expenses paid by Berry Connection and Westmores will be sent later today while Oasis expenses will be sent tomorrow’. On 17 November, Mr Arapoglou states ‘I understand from Phil that there are further amounts that have been paid by Westmores direct to suppliers. Can you provide details of the exact amounts and dates paid so we can ensure your “loan account” is up to date. Also, if you can provide this update each Monday that would be great’.
(b)a memo from Mr Westmore at P.J. Nash to Mr Arapoglou of 21 April 2011 which was responded to by Mr Arapoglou by an email of the same date pointing to the same awareness.
(c)an email from Robin Westmore at P.J. Nash to Chris Day of 13 April 2012 which makes reference to the fact that P.J. Nash paid invoices from sale proceeds with full knowledge of a FABAL employee, that is, Mr Arapoglou.
I consider that it is arguable for the purposes of the current context that FABAL acquiesced in a variation to the regime set out in the Back to Back Agreement for the payment of third party expenses and remission of sale proceeds. I accept the submissions of counsel for the plaintiff, Mr Stirling, that P.J. Nash has established a genuine dispute arising from the operation of the Back to Back Agreement and the performance of it and that it is not the role of this Court to determine such controversy.
It seems clear that on any view of the matter the departure from the terms of the Back to Back Agreement, which Mr Day himself concedes was not objected to, have now given rise to the need for a detailed analysis of the contractual position between the parties followed by a complicated reconciliation of accounts between the parties which cannot take place in the context of this present application. In addition, I consider that P.J. Nash has established to the requisite standard that, if the reconciliation of the accounts between the parties for which it contends is made out, it has established to the requisite degree the existence of a genuine offsetting claim.
FABAL’s evidence ignores the clear practice which emerged, in which FABAL apparently acquiesced, of P.J. Nash paying expenses directly rather than submitting invoices for payment to FABAL from the Nominated Account. Despite Mr Day’s adoption of Mr Arapoglou’s denials as to him ever making directions as to such payments, Mr Nash’s description of Mr Arapoglou’s involvement in this process is consistent and plausible with the system and pattern of payments made to third parties. Whatever the outcome of the controversy in that regard, it cannot be resolved in this application.
I will order that the statutory demand dated 6 December 2012 and served on P.J. Nash by FABAL be set aside. I will hear the parties on the question of costs.
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