Re CMG Automotive Pty Ltd

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

CORPORATIONS LIST

S ECI 2019 05907

IN THE MATTER of CMG AUTOMOTIVE PTY LTD (ACN 127 915 404)

CMG AUTOMOTIVE PTY LTD (ACN 127 915 404)	Plaintiff
v
EDWARD METZ and ALLAN ALEXANDER STOJANOVIC trading as A’n’E Auto	Defendants

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JUDGE:	Gardiner AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	27 March 2020
DATE OF JUDGMENT:	23 November 2020
CASE MAY BE CITED AS:	Re CMG Automotive Pty Ltd
MEDIUM NEUTRAL CITATION:	[2020] VSC 779

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CORPORATIONS – Application pursuant to s 459G of the Corporations Act 2001 (Cth) to set aside a statutory demand by reason of alleged disputes and offsetting claims – Parties entered into oral agreement in respect of motor repair workshop – Plaintiff’s conduct during contractual relationship inconsistent with plaintiff’s contentions as to the terms of the agreement reached – Arguable dispute found to be established in respect of one offsetting claim, balance of alleged disputes and claims not established.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr Z de Kievit	Spiliotis Legal
For the Defendant	Mr P R Miller	Kalus Kenny Intelex

HIS HONOUR:

The plaintiff, CMG Automotive Pty Ltd (‘CMG’) makes application by originating process filed 23 December 2019 to set aside a statutory demand dated 4 December 2019 (‘the Demand’), served on it by the defendants Edward Metz and Allan Alexander Stojanovic trading as A’n’E Auto (‘A&E’), pursuant to s 459G of the Corporations Act 2001 (Cth) (‘the Act’).

The Demand claims that CMG is indebted to A&E for $104,871.80. The Demand was accompanied by an affidavit of Edward Metz, sworn 4 December 2019, which is in compliance with s 459E of the Act. The schedule to the Demand describes the debt as

Monies due and payable by [CMG] to [A&E] in the amount of $104,871.80 (Debt). The Debt consists of $104,871.80 in outstanding invoices issued by [A&E] to [CMG] in relation to mechanical works and repairs to vehicles performed by [A&E] at [CMG]’s request.

CMG relies on affidavits of its sole director, Mark Rimanic, sworn 23 December 2019 (‘the 21 day affidavit’) and 10 March 2020 (‘Second Rimanic affidavit’). A&E relies on an affidavit of one of the proprietors of A&E, Edward Metz, sworn 17 February 2020 (‘Metz affidavit’).

Background

CMG is a second-hand vehicle dealer and operates from several locations. At any given time it has approximately 600 vehicles in stock. It purchases second-hand vehicles and prepares them for sale and as part of this preparation process it engages third party mechanics to inspect and repair the vehicles and issue roadworthy certificates. Those mechanics also perform warranty work on the vehicles sold by CMG.

CMG sells approximately 300-400 second-hand vehicles a month and in the course of this is required to spend significant sums on mechanical work.

Messrs Metz and Stojanovic trade as motor mechanics under the name ‘A‘n’E Auto’ and they are collectively referred to in these reasons as A&E. As at November 2018, A&E provided motor repair services to CMG. In the period November 2018 to January 2019 Messrs Metz and Stojanovic of A&E and Mr Rimanic of CMG negotiated and entered into an agreement for the operation of a workshop. The agreement was not reduced to writing and some of the terms of the agreement are disputed. On 23 July 2019 A&E commenced trading at CMG’s workshop at Cranbourne West (‘the workshop’). During the period 9 July 2019 to 14 November 2019 A&E rendered invoices to CMG for its services and during the period 7 August 2019 to 24 October 2019 CMG made payments to A&E totalling $288,894 against the invoices rendered.

A&E’s Demand is in respect of outstanding invoices issued by it. CMG disputes the debts and contends it has offsetting claims against A&E.

Legal principles

The principles to be applied in applications under s 459G are the subject of numerous authorities of single judges and Courts of Appeal and Full Courts in the State and Federal courts and they are not controversial. In Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (in liq)[1] (‘Malec’) the Court of Appeal in this State succinctly summarised the principles applicable in applications to set aside statutory demands as follows (citations omitted):

The terms of s 459H of the Corporations Act and the authorities make clear that, on an application to set aside a statutory demand, the applicant is required only to establish a genuine dispute or offsetting claim. The applicant is required to evidence the assertions relevant to the alleged dispute or offsetting claim only to the extent necessary for that primary task. It is not necessary for the applicant to advance a fully evidenced claim. Therefore, the task faced by an applicant is by no means at all a difficult or demanding one.
In determining such an application, it is not necessary or appropriate for a court to engage in an in-depth examination or determination of the merits of the alleged dispute. This is because an application alleging a genuine dispute or offsetting claim is akin to one for an interlocutory injunction and requires the applicant to establish that there is a ‘plausible contention requiring investigation’ of the existence of either a dispute as to the debt or an offsetting claim. It is therefore 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. Further, the determination of the ‘ultimate question’ of the existence of the debt at a substantive hearing should not be compromised.
The court is required to determine whether the dispute or offsetting claim is ‘genuine’. It has been said that the criterion of a ‘genuine’ dispute requires that the dispute be bona fide and truly exist in fact and that the grounds for alleging the existence of a dispute be real and not spurious, hypothetical, illusory or misconceived. It has also been observed that the dispute or offsetting claim should have a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion. It must also have sufficient factual particularity to exclude the merely fanciful or futile. A rigorous curial approach is essential to the effective operation of the statutory scheme.
The court is not required to accept uncritically 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, as it may not have sufficient prima facie plausibility to merit further investigation as to its truth. The court is also not required to accept uncritically a patently feeble legal argument or an assertion of facts unsupported by evidence, although this should not be read as suggesting that the applicant must formally or comprehensively evidence the basis of its dispute or off-setting claim. Except in such extreme cases, the court should not embark upon an inquiry as to the credit of a witness or a deponent whose evidence is relied on by the applicant to set aside a statutory demand.[2]

[1][2015] VSCA 330.

[2]Ibid [47]-[51].

In Panel Tech Industries v Australian Skyreach (No 2),[3] Barrett J observed:

Once the company shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow. The court does not engage in any form of balancing exercise between the strengths of competing contentions. If it sees any factor that, on rational grounds, indicates an arguable case on the part of the company, it must find that a genuine dispute exists, even where any case apparently available to be advanced against the company seems stronger.[4]

[3][2003] NSWSC 896.

[4]Ibid [18].

In Spacorp Australia Pty Ltd v Myer Stores Ltd,[5] the Court of Appeal in this State observed:

The only question for us is whether the judge erred in determining that there was no genuine dispute. One can of course differ from the judge without deciding that the debt did not exist. A great range of states of mind on what we might call the ultimate question - the existence of the debt - may accompany the view that there is a genuine dispute, ranging from a clear conviction that the debt does not exist to the opinion that the genuine dispute hurdle has only just been cleared.
We think, if we may say so, that, except in a case in which it is as plain as a pikestaff that there is no debt (where bluntness may be in the interests of both sides), judges should, in general at all events, in dealing, whether at first instance or on appeal, with the question of genuine dispute, be at pains to perform the admittedly delicate task of disposing of that question without expressing a view on what we have called the ultimate question. For otherwise, on an application which resembles if it is not in law an interlocutory one, things may be said which embarrass the judge before whom the ultimate question comes.[6]

[5](2001) 19 ACLC 1270 (‘Spacorp’).

[6]Ibid [3]-[4].

In Solarite Air Conditioning Pty Ltd v York International Aust Pty Ltd,[7] Barrett J considered that a company will only fail to have a demand set aside on the genuine dispute ground if it is found that the contentions upon which it seeks to rely in mounting its challenge are so devoid of substance that no further investigation is warranted.[8]
[7][2002] NSWSC 411.
[8]Ibid [23].

It is to be remembered that the purpose of the statutory demand regime is to provide a mechanism for presumptions of insolvency to arise where the position of the parties in terms of the indebtedness is clear, can be readily ascertained and not be the subject of more than straightforward analysis.[9]
[9]See Yoogalu Pty Ltd v Intentia Australia Pty Ltd [2006] NSWSC 278, [32].

In the context of the genuineness of offsetting claims, Macpherson JA observed in JJMR Pty Ltd v LG International Corp:

Anyone can make a claim to a right of set-off against a creditor. What the definition in s 459H(5) requires, however, is that it be “genuine”. The same word in s 459H(1) has already elicited so many synonyms and shades of meaning that it will not help to add more. Its antithesis is to be seen in the word “artificial”. The claim to set off against the debt demanded must not have been manufactured or got up simply for the purpose of defeating the demand made against the company. It must have an existence that is objectively demonstrable independently of the exigencies of the demand that evoked it.[10]

[10]JJMR Pty Ltd v LG International Corp [2006] QCA 519, [18] (‘JJMR’).

In Yoogalu Pty Ltd v Intentia Australia Pty Ltd, on the question of whether a dispute must be raised prior to an application to set aside a statutory demand, Barrett J observed the following:

But there is no rule or principle requiring that the dispute upon which a s.459G plaintiff relies must have been communicated before the s.459G application is made. The fact that the present plaintiff may have mentioned only other matters in preliminary correspondence asserting its lack of liability under the invoices in question is irrelevant to the present proceedings. I have found that the contention that it was not liable to pay for invoiced Java conversion work was advanced by the plaintiff (as to $1,458,948.45) in the affidavit supporting the first s.459G application and (as to the revised figure of $1,106,976.60) in the affidavit supporting the second s.459G application. The fact that the point had not previously been taken is irrelevant.[11]

[11]Yoogalu Pety Ltd v Intentia Australia Pty Ltd [2006] NSWSC 278, [28] (‘Yoogalu’).

In its submissions, CMG contended that the claims made in the Demand were in the nature of unliquidated damages, not debts and are therefore not susceptible of being claimed in a statutory demand. Reference was made to the decision of Hansmar Investments Pty Ltd v Perpetual Trustee Co Ltd.[12] In the context of the facts of this case, the following passage of the judgment of White J is relevant:

In my view, where, under a contract, a person promises to pay a specific or readily calculable sum which does not depend upon an assessment, albeit that the sum is payable as liquidated damages for breach of contract, the person’s contractual liability is properly characterised as giving rise to a debt in that sum.
…I consider that a claim for a sum due under cl 9.3.1 is a claim in debt. As Sholl J observed in Alexander (at VLR 440; ALR 1083), claims on the common money counts for the payment of a reasonable price for goods or labour where no price or rate has been fixed are nonetheless liquidated demands even though there is an element of opinion involved in the assessment of what price is reasonable. A liability on such a quantum meruit claim is a debt for the purposes of the insolvent trading provisions of the Corporations Act.
In the present case, no claim is made for costs and expenses. It suffices to say that the calculation of the debt involves no element of opinion or assessment. It is simply the difference between the contract price between Permanent and the plaintiff less the deposit, and less the price on resale.
In my view, the claim in the statutory demand is a claim for a debt within the meaning of s 459E.[13]
[12](2007) 61 ACSR 321 (‘Hansmar Investments’).
[13]Ibid [55]-[60] (citations omitted).

Evidence in the proceeding

In the 21 day affidavit, Mr Rimanic deposes that he is the sole director of CMG. Mr Rimanic deposes in his 21 day affidavit is that in about February 2019, he was approached by Mr Metz and Mr Stojanovic with a proposal that CMG engage only A&E to perform mechanical work in exchange for a profit share. Prior to this, A&E were engaged by CMG as one of a number of mechanics to perform mechanical work required. He states there were several meetings at A&E’s workshop in Dandenong South to discuss the proposed arrangement and the establishment of a new workshop. During the course of the discussions he was informed by Mr Metz and Mr Stojanovic that they were not able to fund the setup of the new workshop and for this reason asked CMG to fund the setup.

Mr Rimanic states that eventually an agreement was reached with A&E on the terms that:

(a) a new workshop be set up and appropriately fitted out;

(b) CMG was to initially fund the setup cost of the new workshop;

(c) CMG was to take out the lease of the premises of the workshop and sublet the premises to A&E;

(d) running expenses and profit of the new workshop was to be shared with 60 per cent to A&E and 40 per cent to CMG;

(e) A&E would invoice CMG for the mechanical work conducted, and that these invoices would be paid by CMG every few weeks subject to a reconciliation of the expense share and profit share terms;

(f) A&E would pay the wages of its own employees;

(g) CMG would pay the wages of its own employees conducting administrative duties with respect to the mechanics work, and this would be included as part of the running expenses to be shared;

(h) CMG would pay for running costs of the new workshop; and

(i) there would be a reconciliation undertaken every month where there would be an adjustment for the profit share and running expenses share terms.

(‘the CMG Agreement’)

Mr Metz is one of the proprietors of A&E. He disagrees with Mr Rimanic’s evidence that he and Mr Stojanovic approached Mr Rimanic in relation to setting up the workshop. CMG was a client of A&E who provided it with mechanical repair services from A&E’s workshop in Dandenong South and Hallam. Mr Stojanovic told Mr Metz that in or about mid November 2018 Mr Rimanic telephoned him in relation to setting up a workshop arrangement with CMG.

Mr Metz says that between November 2018 and January 2019 he and Mr Stojanovic had several meetings with Mr Rimanic at A&E’s workshop in Dandenong South. These discussions involved starting up a workshop together and the structure of such an arrangement. During the course of those meetings, Mr Metz states that he, Mr Stojanovic and Mr Rimanic reached an arrangement as follows:

(a) CMG would provide A&E with a fully fitted out mechanical workshop (including, equipment, tools and an initial stock of consumable parts) at no cost. In this regard, Mr Metz recalls Mr Rimanic saying that the workshop would be provided ‘at no cost’ or words to that effect. At this stage, Mr Stojanovic, Mr Rimanic and Mr Metz had not identified a location for the workshop. They agreed that once they had identified a location for a workshop, that if that workshop required renovation, CMG would carry out the renovations at its cost. Mr Metz believed that the provision of a workshop at no cost to A&E meant that CMG would pay for all outgoings and utilities, including electricity and insurance;

(b) A&E would pay for the following costs of running the workshop:

(i) wages, superannuation and other employee entitlements;

(ii) parts; and

(iii) replacement tools.

(c) A&E would provide discounted pricing to CMG for repairs, services and roadworthy inspections. This included trade prices for labour and parts and a discounted price of $110 (including GST) for conducting roadworthy certificate inspections. Mr Metz states that in his experience, the usual cost for conducting a roadworthy certificate inspection is $165 including GST or higher.

(d) A&E would invoice CMG every week for the services provided;

(e) CMG would pay all amounts owing pursuant to the invoices every Friday; and

(f) A&E would pay CMG 40 per cent of the profits obtained from its operation of the workshop (that is, sales less the costs in (b) above), which would be paid quarterly.

(‘the A&E Agreement’)

Mr Rimanic took issue with Mr Metz’s evidence as to the terms of the arrangement between the parties and stated in his affidavit in reply that:

(a) CMG never agreed that it would provide a fully fitted out workshop at no cost. The cost was to come out of shared business expenses.

(b) CMG paid for the parts and equipment the subject of the Burson Auto Parts invoice.

(c) The fees charged by A&E were its normal wholesale prices and the issue of pricing and in particular discounted pricing was not discussed by the parties. In addition Mr Rimanic says that the A&E pricing referred to by Mr Metz is retail pricing, not wholesale pricing charged to car yards.

(d) The issuing of invoices each week by A&E was not discussed however Mr Rimanic says it was agreed that invoices for the services provided would be applied towards and reconciled against the expenses and costs.

(e) That it was not agreed that CMG would pay amounts owing pursuant to the invoices each Friday. He states that the invoices were to be paid as needed and subject to the reconciliation of the expenses to be undertaken.

Mr Metz stated that in one of the meetings he had with Mr Stojanovic and Mr Rimanic in early December 2018, Mr Rimanic and Mr Metz had a conversation to the following effect:

Mr Rimanic: I want a 40 per cent profit share
Mr Metz: If you want 40 per cent profit share then you need to supply us with a fully set up workshop at your expense because otherwise it's not worth it for us.
Mr Rimanic: Ok I've got plenty of money and I've got really good relationships with the banks. I will pay the set up costs and give you a workshop.
Mr Metz:We can help you get the best possible prices on equipment from our suppliers.

Mr Rimanic: Yes organise that.

Mr Rimanic disagrees that the conversation occurred as recounted. He states that the 40 per cent profit share was agreed as being fair and not in the nature of a demand on his part. He states that Mr Metz’s demand for the supply of a fully set up workshop at CMG’s expense was not discussed or agreed to but Mr Rimanic says he did say that he could arrange for the initial funding of the workshop with his bank and that the expense would be reconciled against revenue.

Mr Metz states that under the A&E Agreement, A&E paid employee-related costs and tools as required for the workshop and he understood that CMG was paying all the outgoings in relation to the premises including utilities and insurance. In the course of the operation of the workshop, A&E paid approximately $16,545 which he did not seek to recover from CMG under the A&E Agreement for office stationery, maintenance, rubbish and recycling, any extra labour required, tools and equipment and Workcover expenses. The further costs paid by A&E for parts were only recovered when they were used in vehicles and invoices were issued in relation to those vehicles.

Lease

CMG entered into a commercial lease of premises for the workshop on 26 March 2019 and Mr Rimanic provided a personal guarantee for CMG’s obligations under the lease. The lease was from Bay Concepts Pty Ltd to CMG and was for a term of five years and six months commencing 1 April 2019 with a rent free period of 1 April 2019 to 30 September 2019. The commencing rental fixed under the lease was $54,825 per annum plus GST and outgoings. Mr Rimanic’s evidence is that it was contemplated that there subsequently be a sublease for the premises to A&E as per the CMG Agreement but this was never formalised prior to A&E’s departure from the premises.

Mr Metz disagrees with Mr Rimanic’s evidence that CMG would sublet the workshop to A&E. Mr Metz states that, from his experience as a motor mechanic, VicRoads requires licensed roadworthy testers to have a lease of premises to be able to issue roadworthy certificates. He deposes that in early October 2019 he had a discussion with Mr Rimanic in the workshop about a potential sublease in order to allow A&E to issued roadworthy certificates from the workshop. He deposes that he told Mr Rimanic that the only reason for the sublease would be to allow A&E to obtain a VicRoads license and he states that Mr Rimanic agreed with this approach.

Upon discussing the matter with Mr Stojanovic, Mr Metz says he was informed that VicRoads had advised Mr Stojanovic that roadworthy testers required a lease to be granted a license and that a sublease was not sufficient. After explaining this to Mr Rimanic, Mr Metz said that he and Mr Rimanic agreed that CMG and A&E would not proceed with a sublease and the topic was never discussed again. A&E never signed or sighted any document which purported to be a sublease from CMG to A&E. Accordingly, in order to issue roadworthy certificates, Mr Metz deposes that he or Mr Stojanovic would drive the vehicles to their Dandenong South or Hallam premises and issue the certificates there. A&E have leases of those locations and were in a position to issue valid roadworthy certificates so long as the testing was conducted at those locations.

In contrast, Mr Rimanic states that the initial agreement was that A&E would sublet the premises from CMG. He states that A&E requested that this occur and that the sublease be in the name of A&E and this was in the process of being prepared prior to the departure of A&E in November 2019. CMG did not have the opportunity to demand the rent as the reconciliation was ‘not complete or undertaken’ at the time of A&E’s departure.

In his evidence Mr Rimanic makes claims for rent of $45,519.99 as part of CMG’s claim for running expenses. Mr Metz states that from 23 July 2019 to the date that A&E vacated the workshop on 14 November 2019, CMG never demanded payment for rent, outgoings or any other expenses, nor did CMG send any invoice for rent to A&E. A&E never paid any amount to CMG in respect of rent and Mr Rimanic never said anything to A&E asserting that A&E was in a sublease with CMG. I note that Mr Rimanic’s evidence was that the lease had a rent period to 1 April to 30 September 2019. It was not explained how such a claim could, in the circumstances, be maintained against A&E.

The work undertaken by A&E

Mr Rimanic says that when the workshop commenced operations in July 2019, CMG directed most of the mechanical work required for its vehicles to A&E until A&E was at capacity. Vehicles were delivered to A&E at the workshop and in accordance with the terms of the CMG Agreement A&E was required to inspect the vehicles, undertake necessary repairs, issue roadworthy certificates and undertake necessary repair works to vehicles that had been sold to CMG under warranty.

Mr Rimanic deposes that from the period August to November 2019, CMG paid approximately $274,417[14] to A&E in respect of invoices that had been rendered to it and in the course of doing so issued remittance advices, the details of which are referred to in the 21 day affidavit. Mr Rimanic notes that a remittance advice of 8 November 2019 of $6,680 for several invoices issued by A&E are claimed in the Demand despite being the subject of that remittance. Mr Riminac says that as of 14 November 2019 the parties had not conducted any reconciliation as contemplated by the CMG Agreement to determine the allocation of running expenses and profit.
[14]This figure is what CMG contends it has paid to A&E. See the 21 day affidavit, [16].

Mr Metz states that to his knowledge both CMG and A&E conducted their relationship in accordance with the A&E Agreement save for the amounts that A&E now claims against CMG. Mr Metz states that all of the work that A&E performed at the workshop emanated from CMG or from their customers requiring warranty repairs on vehicles purchased from CMG.

Mr Metz states that he has reviewed A&E’s bank account statements and says there are no payments on 8 November 2019 or any payments that correspond with the remittance advice for $6,680.

End of workshop venture

On 14 November 2019, Mr Rimanic received a text message from Mr Metz which stated ‘premises is closed until further notice. Left keys with Collin’. He states there had been no prior indication of A&E’s desire to quit the premises and cease to provide the services required under the CMG Agreement. The workshop was vacated by A&E by the time the text message was received by Mr Rimanic.

Mr Rimanic states that after receiving the text message he telephoned Mr Metz who told him A&E were ‘running out of money’ and that the CMG Agreement placed too much pressure on them. He stated that he was taking his employees and ‘leaving the arrangement’ and that he ‘can’t do this any more’.

On 15 November 2019, Mr Rimanic telephoned Mr Metz to discuss resolution of matters with respect to the workshop and the reconciliation of running expenses and profits. According to Mr Rimanic, Mr Metz stated that A&E might wish to re‑enter into the CMG Agreement. Mr Rimanic asked if A&E’s employees would remain working at the premises in the absence of Messrs Metz and Stojanovic and Mr Metz responded by dismissing his enquiry and the telephone call ended.

Mr Rimanic states that by the end of November 2019 CMG had engaged other mechanics to conduct the workshop in the absence of A&E. He states that he did not hear anything further from A&E until 4 December 2019 nor did he receive any demand for payment from A&E or its lawyers until receipt of the Demand. This is at odds with the evidence given by Mr Metz who exhibits a serious of text messages pursuing payment from CMG in October 2019. In response to those text messages, it will be seen that Mr Rimanic made several unequivocal promises to pay.

Contention by CMG that there should be a reconciliation of expenses and setup costs

On 4 December 2019, on receipt of the Demand, Mr Rimanic called Mr Metz to dispute the claim. Mr Rimanic deposes that he stated to Mr Metz that there needed to be a reconciliation of money owing to CMG under the terms of the CMG Agreement, taking into account the setup, running costs and allocation of profits. In response, he states that Mr Metz said ‘it was not my concern’ to which he replied that it was. The call then ended. After the telephone conversation with Mr Metz he telephoned Mr Stojanovic and told him that he would be pursuing A&E for the money owed to CMG.

Mr Rimanic states that as part of the reconciliation of the expenses and profit share, the following matters are required to be taken into account and reconciled.

Setup costs and running expenses

Mr Rimanic in his 21 day affidavit states that CMG is required to be reimbursed by A&E for A&E’s share of the running expenses and setup costs pursuant to the CMG Agreement. Mr Metz disagrees and says that CMG was to be responsible for the setup costs and that in accordance with the A&E Agreement, Mr Rimanic found the premises and arranged for its fit out.

Mr Rimanic states that on the bases of the invoices issued by CMG he calculates the total setup costs of the workshop to be $134,903.93 and the running expenses to be $95,658.09 as detailed below. These items are the subject of a bundle of invoices exhibited to Mr Rimanic’s 21 day affidavit.

Fit out and renovation of the workshop

In February 2019, Mr Metz deposes he visited two sites that Mr Rimanic was proposing for the location of the workshop. On 25 February 2019, Mr Rimanic sent Mr Metz a text message noting the address of the workshop now at Cranbourne West. Shortly afterwards Mr Metz visited that premises with Mr Rimanic and found it to be suitable for the workshop. The premises consisted of a brand new warehouse which needed a lunch room to be constructed, electrical work and other works to make it suitable as a mechanical workshop.

Mr Rimanic and the contractors he engaged enquired of Mr Metz and Mr Stojanovic for their input from time to time concerning the layout of the workshop but otherwise Mr Rimanic made all the arrangements in respect of the necessary work. Mr Metz states that Mr Rimanic never consulted A&E about the cost of the trades engaged for the fit out and Mr Metz and Mr Stojanovic never enquired by reason that CMG had agreed to bear the costs of the fit out under the A&E Agreement.

Mr Rimanic deposes that in accordance with the terms the CMG Agreement, CMG obtained bank finance to fund the setup of the workshop. The costs of setup included

(a) the fit out;

(b) stock of parts for mechanical repairs;

(c) the security bond for the lease; and

(d) renovations to the premises to adapt it for use as a workshop.

The fit out and setup of the workshop was undertaken in April to June 2019.

Mr Metz states that he learned for the first time when reading Mr Rimanic’s 21 day affidavit that the cost of the fit out was said to be $43,765.70. Mr Metz states that Mr Rimanic never informed A&E of the fit out costs in that sum and never demanded that A&E pay that amount for the fit out. Mr Metz states that as far as he and Mr Stojanovic are concerned CMG had paid for the cost of the fit out as contemplated under the A&E Agreement.

Mr Rimanic disagrees that CMG agreed to provide the lease and fit out at its cost, rather it was arranged and initially funded by CMG as Mr Rimanic had arranged finance through his bank. He states that he did speak to Mr Metz concerning the cost and Mr Metz also arranged aspects of the fit out including shelving, bollards and equipment but he did not receive the final costs of the fit out until after A&E vacated the workshop. Mr Rimanic states that in any event, the cost of the fit out was to form part of the reconciliation of the revenue and expenses going forward.

Equipment, tools and parts

In December 2018 Mr Metz states that he met with Mr Rimanic at A&E’s Dandenong South workshop where he showed Mr Rimanic a number of quotes he had obtained for the equipment, tools and moveable parts required to set up the workshop. Mr Metz states that Mr Rimanic said words to the effect ‘choose the best one and when it’s done, invoice me and I’ll pay for it’.

Mr Metz says he informed Mr Rimanic that he would proceed to obtain such equipment, tools and parts, which he proceeded to do and which went onto A&E’s account with Burson Auto Parts. He exhibited to his affidavit an invoice of Burson Auto Parts for those items issued on 3 May 2019 for the amount of $149,164.90 including GST.

Mr Metz states that in accordance with the A&E Agreement, A&E invoiced CMG for the parts ordered from Burson Auto Parts. Mr Metz states that these costs form part of the setup costs and therefore costs that CMG agreed to meet under the terms of the A&E Agreement and that CMG paid A&E $149,164.90 for the parts. This payment was made by four instalments on 6 May, 26 July, 23 August and 23 September 2019. A&E issued invoices for these payments and Mr Metz exhibited screenshots of A&E’s bank account recording those payments from CMG.

Mr Metz states that A&E never received any demand for payment in relation to the equipment from Mr Rimanic or anyone else from CMG.

As to the finance costs for the purchase of the workshop equipment, tools and parts, Mr Metz states that the agreement was that this was to be paid by CMG. Tools, equipment and parts remain at the workshop and have not been removed by A&E.

Mr Rimanic says CMG paid the cost of the Burson Auto Parts invoice as A&E could not meet the costs. The items for the Burson invoice were all ordered by A&E on its account. There was no demand for payment made by CMG as A&E departed the premises before the revenue and expenses could be finalised and reconciled.

Mr Rimanic says that contrary to what Mr Metz states there were ‘some tools and parts missing’.

Workshop software

Mr Metz states that Eclipse software was installed at the request of Mr Rimanic. Neither he nor Mr Stojanovic wanted the software as they did not use it for the workshop. Mr Metz states that in late July 2019 he had a conversation with Mr Rimanic who said words to the effect ‘I need the Eclipse software installed and I will pay for it.’

Mr Rimanic says that it was agreed that the Eclipse software would be used as part of the inventory software and at no stage did Mr Metz or Mr Stojanovic tell him that they were not content with this. Mr Rimanic states that the cost of that software was to be part of the reconciliation of revenue and expenses to be undertaken in determining the profit shares.

Employee wages

Mr Rimanic claims $14,287.72 is to be taken into account paid in employee wages. Mr Metz disagrees with Mr Rimanic’s evidence that he, Mr Stojanovic and Mr Rimanic ever had discussions to the effect that CMG would pay the wages of its own employees conducting administrative duties with respect to the mechanical work, that this would be included in the running expenses to be shared and that no such discussions occurred. CMG only ever had one of its employees at the workshop, a stock controller by the name of Collin.[15] Collin was only present at the workshop for a few hours each day and had nothing to do with the operations of the workshop.
[15]Mr Metz did not know Collin’s last name.

Mr Rimanic states that payments were made to A&E to initially fund staff and running costs and there was to be a reconciliation of these expenses. He maintains that the agreement was that such wages were to be accounted for.

Insurance for the workshop

As to the insurance paid for the workshop, equipment, cars and staff Mr Metz states that he believes this was an outgoing cost to be paid by CMG. He also states that he had a conversation with Mr Rimanic in early July 2019 where he asked Mr Rimanic whether the workshop had insurance cover and Mr Rimanic said words to the effect ‘I have it covered’. Mr Metz states that he does not understand what is meant by ‘insurance for equipment, cars and staff’ and that it is not explained in Mr Rimanic’s evidence. Mr Metz never discussed it with Mr Rimanic, nor had he ever seen the invoices for insurance exhibited to Mr Rimanic’s affidavit.

Mr Metz states A&E was never consulted in relation to the scope of the insurance or the company from which it was obtained, and that Mr Rimanic never demanded payment for any insurances costs. Mr Rimanic responded that Mr Metz told him that everything was required to be insured.

Fuel card

Mr Rimanic says a running expense of $1,018.65 was paid by CMG for a fuel card used by A&E.

Mr Metz states that whenever CMG gave A&E a car to work on, A&E used to pay for the fuel until about September 2019. Mr Metz states that he raised this issue with Mr Rimanic on a number of occasions starting in late July 2019 with words to the effect that A&E could not keep putting fuel in the cars being worked on with A&E’s own money because CMG was a slow payer and that Mr Rimanic should provide A&E with a fuel card. Mr Rimanic responded that he would provide a fuel card.

In September 2019 Mr Metz states that he had a conversation with Mr Rimanic at the workshop in which Mr Rimanic gave him a fuel card and said words to the effect ‘use this card for any cars you get from us’. He refers to the fuel card statement exhibited to Mr Rimanic’s affidavit and states that he is certain that all of those entries are for CMG’s cars except for one payment of $50 on 31 October 2019 when Mr Metz used the card to pay for fuel for an SS Commodore he was using.[16] He also believes that the last entry on 4 November 2019 at 6.50pm was done by Collin as Mr Stojanovic and Mr Metz had left the workshop at about 10am that day. Mr Metz states that Mr Rimanic never demanded that A&E pay CMG for the use of the fuel card.
[16]This is detailed further at paragraph 93 below.

Mr Rimanic says Mr Metz requested CMG provide a fuel card. He states that he did not say that the fuel card could be used for any vehicles CMG sent to A&E and the cost of the fuel card was to be taken into account as part of the reconciliation. It is not explained by Mr Rimanic what the fuel card was to be used for.

Trade plates

Mr Rimanic states that $993.60 was paid by CMG for trade plates and that this is to be accounted for in the reconciliation.

Mr Metz states that the trade plates were provided by CMG to A&E to road test and transport CMG’s vehicles because the majority of them were unregistered. It was never discussed or agreed that A&E would pay for the trade plates and Mr Rimanic never demanded that CMG be paid for the trade plates.

Mr Rimanic says the trade plates were provided by CMG as it had an account with VicRoads. He does not respond to Mr Metz’s evidence concerning the absence of discussions or demands for payment in respect of this item.

Computers

Mr Rimanic says that $4,848 in setup costs paid for computers is to be accounted for in the reconciliation.

Mr Metz states that Mr Rimanic made the arrangements for the computer in the workshop. He never had any conversations with Mr Rimanic about the computer, however he considers this to be part of the setup costs of the workshop. Mr Stojanovic has told him that Mr Stojanovic never had any discussion with Mr Rimanic about the computer.

Mr Rimanic says Mr Metz requested that computers be acquired.

Lock replacement

$290 was incurred for the replacement lock for the workshop and Mr Rimanic says this is to be accounted for in the reconciliation.

On 24 April 2019 A&E invoiced CMG for this cost. Mr Metz states that he and Mr Rimanic had previously discussed that this was to be part of the setup costs and Mr Rimanic had told him to pay for it and then invoice CMG for the amount. On 12 June 2019 CMG paid A&E for this (together with the costs of the bollards which are referred to below) without protest. Mr Metz exhibits a bank statement showing payment of this cost together with the costs of the bollards of $2,850 totalling $3,140.

Bollards

A sum of $2,850 was incurred for the installation of bollards in the workshop.

On 3 May 2019, A&E invoiced CMG for this cost. Mr Metz states that he and Mr Rimanic had previously agreed this to be a setup cost and Mr Rimanic had told him to pay for it and invoice CMG for it. As noted above, on 12 June 2019 CMG paid A&E for this, together with the lock replacement cost, without protest.

Cleaning

$1,320 was incurred in cleaning costs for the workshop.

Mr Metz agreed that CMG arranged for the workshop to be cleaned and paid for the costs of this. This cleaning was done in early June 2019 and was necessary after the fit out. Mr Metz states that A&E was never consulted about this cost or the choice of cleaner and he and Mr Rimanic never had any discussions about it. Mr Rimanic never demanded that A&E pay CMG for the cleaning costs. Mr Metz states that the first time he saw any reference to the claim for cleaning was when he received Mr Rimanic’s affidavit.

Energy

$1,243.93 was incurred in energy costs for the workshop.

Mr Metz states that the cost of energy at the workshop was a utility and a cost CMG had agreed to bear under the A&E Agreement. He states that neither he nor Mr Stojanovic had ever agreed to pay for electricity or energy for the workshop and never discussed the issue with Mr Rimanic. He states that Mr Rimanic never demanded that A&E pay for the costs of electricity or energy bills for the workshop.

Security camera and alarm

$3,080 was paid for the installation of a security camera at the workshop with an alarm costing a further $1,661.

Mr Metz says the cost of the security camera was part of the setup costs for which CMG agreed to be liable under the A&E Agreement. He agrees that in about early April 2019, CMG installed a security system at the workshop and that Mr Rimanic told him about it after it was installed. Mr Rimanic never discussed anything more about the security system, including its cost, and never demanded that A&E pay for the cost of installation of the security system.

A similar situation prevails in regard to the alarm system. Mr Metz states that the alarm is a setup cost for which CMG agreed to be liable for under the A&E Agreement. He agrees that in or about early April 2019 CMG arranged for the installation of an alarm at the workshop and that Mr Rimanic informed A&E about the installation after it had occurred. Mr Rimanic never discussed anything further about the alarm nor were any demands made of A&E for the costs of installing it.

Printer

A printer was purchased for the workshop at a cost of $3,128.40.

In or about July 2019 Mr Metz says he had a conversation with Mr Rimanic in which he informed him that A&E needed a printer and that ‘a cheap Officeworks printer’ would be sufficient. Mr Rimanic told him ‘don’t worry about it, I’ve got it covered’ and within a couple of months had arranged for the delivery of a large printer to the workshop. Mr Metz states it was a very sophisticated printer and not necessary for A&E’s operations because there was very little printing work to be done; only the occasional invoice. Mr Metz says that most invoices were emailed and the first mention he saw of the cost of the printer was when he received Mr Rimanic’s affidavit. He states that CMG’s stock controller, Collin, mostly used the printer and that Mr Rimanic never demanded A&E pay for the costs of the printer.

Stationery

Mr Rimanic says $515.26 in running expenses for stationery are to be included in any reconciliation.

Mr Metz says the stationery was included in setup costs that CMG agreed to be liable for under the A&E Agreement and that Mr Rimanic never made a demand for the costs of the stationery to A&E. Mr Metz states the first time he saw the invoice for the stationery was when he received Mr Rimanic’s affidavit.

Painting

A cost of $6,100 was incurred in having the workshop painted.

Mr Metz says that this was included in the setup costs for which CMG agreed to be liable for under the A&E Agreement and that there was never a demand made of A&E for the costs of it. Again, he states that the first time he saw the invoice for the painting was when he received Mr Rimanic’s affidavit. Mr Metz states that in or about August 2019 the painter who performed the work came to the workshop asking for payment and for that reason believes CMG has not paid the painter.

Advertising

Mr Rimanic claims a cost of $1,002.10 in advertising is to be accounted for in any reconciliation.

Mr Metz deposes that neither he nor Mr Stojanovic are aware of any advertising being undertaken for the workshop.

Telephone services

Mr Rimanic claims $1,037.94 was paid by CMG for telephone services provided by Telstra to the workshop and are to be accounted for in the reconciliation.

Mr Metz states that it is not clear from the invoices provided what costs are ascribable to the workshop. The invoices are issued to Combined Motor Traders Pty Ltd. He states that in any event, the cost of telephones was part of the setup costs that CMG agreed to be liable under the A&E Agreement. Mr Rimanic never demanded A&E pay for the cost of the telephones.

Warranty claims

Mr Metz states that CMG provided warranties on cars it sold to its customers with a company known as Integrity Car Care Pty Ltd (‘Integrity’). He states that between 23 July 2019 and 14 November 2019, CMG’s customers would come to A&E for any repair work to the cars they purchased from CMG and would claim the costs on CMG’s warranty. A&E would inspect the vehicle and send a quote to Integrity for approval. Integrity would then notify A&E of whether the claim was accepted, and if so, what percentage of the claim it agreed to pay. Mr Metz states that with the customer’s approval A&E would then carry out the work and once complete would invoice Integrity. The funds received from Integrity during the period 23 July 2019 to 14 November 2019 total $6,950 and are accounted for in A&E’s sales and recorded as income.

In response to this Mr Rimanic says the amounts received by A&E from Integrity should be accounted for and paid to CMG as part of the reconciliation.

Holden SS Commodore

Mr Metz states that in mid-October 2019 Mr Rimanic lent him a Holden SS Commodore to drive for about two weeks. A&E had previously done work to that car at CMG’s request. He states that he did not ask to borrow the car, Mr Rimanic simply offered it to him and he accepted. Mr Metz says that he drove it for his personal use to and from the workshop. The car was never used in the operation of the workshop and because Mr Rimanic had lent it to him he decided not to invoice CMG for the labour and the work done to the car previously and charged for parts only as a matter of fairness. Mr Rimanic never spoke to him about paying for the use of the car nor has Mr Rimanic ever demanded payment from A&E. Mr Rimanic makes no comment in regard to this in his affidavit in response.

Calculating profit

Mr Rimanic, in his 21 day affidavit, states that since the departure of A&E he has attempted to undertake a calculation of the amount which is payable to CMG in respect of profit share. He deposes that at the date of his affidavit he had only been able to calculate the profit share for the month of August 2019 which he says equates to $33,976.80. Employing the Eclipse software, he states he has been able to produce an interim profit and loss balance sheet as at 31 August 2019. He states that CMG has been unable to access the complete computer records of the business of the workshop and therefore cannot accurately determine its entitlement to profit share for the remaining months other than to assert that it will be similar for each of the months September, October and November 2019.

In response, Mr Metz notes that at the top of the balance sheet are the words ‘as at date: 31/08/2019’. Mr Metz deposes that the workshop has never made a profit as CMG was A&E’s only client and has not paid approximately $105,000 in invoices which have been rendered by A&E to it. Mr Metz exhibits unaudited financial statements for the workshop prepared by A&E’s accountant, Mr Jerzy Martyniak.

Mr Rimanic maintains the workshop has made a profit and that notwithstanding Mr Metz’s evidence in respect to unaudited accounts, a proper reconciliation of revenue and expenses is required.

Mr Metz also notes that A&E issued several invoices to CMG for work performed from A&E’s Dandenong South and Hallam workshops which are therefore not subject to the profit share arrangement and he details those invoices dating from 11 July 2019 to 8 November 2019 totalling $10,929.30. Those invoices form part of the amount claimed in the Demand and copies of those invoices are annexed to the Demand.

Further adjustments

Mr Rimanic states that quite apart from the need to conduct a reconciliation of the running expenses and profit share, further adjustments are required in favour of CMG for mechanical work undertaken by A&E for a number of matters detailed below.

Roadworthy inspections

Mr Rimanic says further adjustment should be made for ‘the invoicing of inspections which CMG should not have been charged for’.

Mr Metz says there is not sufficient detail to respond to this contention but in any respect inspections done for CMG were to be charged for and invoiced and this was always the case. Inspections were previously charged for by A&E and paid for by CMG.

Defective and poor workmanship by A&E

Mr Rimanic deposes that defective and poor workmanship by A&E caused CMG to incur rectification expenses. Mr Rimanic says such defective workshop related to timing issues which required CMG to replace engines in cars. He does not provide further detail as to the poor workmanship.

While again noting the lack of sufficient detail to respond to this contention, Mr Metz says that prior to receiving Mr Rimanic’s affidavit he never received any allegation of defective workmanship from Mr Rimanic or anyone else at CMG in over a year of doing work for CMG.

Work undertaken without prior authorisation of CMG

Mr Riminac says A&E undertook work on vehicles without the prior authorisation of CMG and agreement as to costs. Mr Metz says A&E always ensured that work was carried out at CMG’s request and their authorisation.

Mr Rimanic indicates that as at the date of his affidavit he was not able to quantify the amount of the claims for improperly invoiced inspection charges, defective and poor workmanship of A&E or unauthorised work as CMG was still reviewing its records.

Mr Rimanic asserts inspections were not to be paid for and that there were ‘numerous instances of defective workmanship by [A&E]’ but no elaboration is provided. He also asserts that A&E rarely checked with CMG as to authorisation and approval of work it undertook.

Invoice 7074

Invoice 7074 is described as a ‘migration payment’ of $3475.20. Mr Rimanic says this is not payable by CMG. Mr Metz deposes that this relates to the working visa fee paid to the Department of Immigration for one of A&E’s specialist mechanics. The mechanic was retained because he was a specialist from Switzerland on Jeep vehicles and CMG sent A&E many Jeeps to work on. Mr Metz deposes that on or about 30 May 2019, Mr Rimanic told him to invoice CMG for the visa costs and that he would pay for it.

Shelving

Invoice 7091 is for shelves and other supplies purchased by A&E from Bunnings for $723.30 and is not payable by CMG says Mr Rimanic.

In contrast, Mr Metz says that on or about 1 July 2019, Mr Rimanic and he discussed that shelving was to be counted as setup costs and that Mr Rimanic told him to invoice CMG for these costs and he would pay them.

Duplicate roadworthy inspections

Mr Rimanic says that four invoices concern duplicate roadworthy inspections undertaken on two vehicles by A&E: invoices 10003 and 10186 for an Audi Q5 vehicle and invoices 10051 and 10103 for a Jeep Grand Cherokee vehicle.

As to the Audi, Mr Metz deposes that the vehicle was sent to A&E for roadworthy inspections on two separation occasions. On the first occasion, on around 25 July 2019, A&E carried out the inspection and was instructed by CMG not to carry out the necessary repair work. On the second occasion, about 27 August 2019, A&E carried out the inspection requested and conducted repair work as instructed by CMG. The second invoice details the repair work and charges.

The Jeep was also sent to A&E for roadworthy inspections on two occasions, Mr Metz deposes. On the first of those occasions, on around 1 August 2019, A&E carried out the inspection and was told not to carry out any of the repairs. The car was returned to CMG. On the second occasion, around 13 August 2019, A&E was instructed to carry out the inspection and replace the windshield wiper inserts, which it did.

Mr Rimanic asserts that the dual inspections are ‘not necessary for [A&E] to conduct and charge for…’.

Promises to pay

Mr Metz’s evidence included communications between him and Mr Rimanic in which he catalogues a number of payments by CMG and promises to pay by it through Mr Rimanic. In addition, CMG, he says, has previously paid $288,894 to A&E without protest. Mr Rimanic states that payment was made ‘and was to be accounted for in the reconciliation of expenses that was to be undertaken’.

On 8 October 2019, Mr Rimanic sent Mr Metz a text message that stated ‘Jasmyn has paid you today and will pay you again tomorrow’. Mr Metz understands that Jasmyn is CMG’s accounts clerk. On 16 October 2019, Mr Rimanic sent Mr Metz a text message stating ‘Jasmyn just putting through payment for you now approx. $25k. Will do more tomorrow.’ Mr Metz exhibits screenshots of those text messages.

On 16 October 2019, CMG paid $20,350 towards outstanding invoices. This is apparently the payment referred to in the text messages to which reference has just been made.

On 1 November 2019, Mr Metz deposes he had a conversation with Mr Rimanic at the workshop, during which he told Mr Rimanic that A&E needed more payments from him and that A&E only had $4,000 in its account. He states that Mr Rimanic said to him (with Collin present) that he would make further payments towards the outstanding amounts. On the same day, Mr Metz sent Mr Rimanic a text message stating:

I don’t think there’s point opening shop on Monday as I don’t have any money for parts anyway or to pay wages (which I do Monday’s)…

On 2 November 2019, Mr Rimanic and Mr Metz had the following text message exchange:

Mr Rimanic: Ok to leave shop closed Monday nothing urgent Jasmyn will do payment today sorry we missed banking yesterday.
Mr Metz:Can you please make sure money comes through, I need to pay wages.
Mr Rimanic: Will do.

A copy of that exchange is exhibited by Mr Metz.

On 6 November 2019 Mr Metz states he had to close the workshop because A&E did not have funds to pay employees. He states that he called Mr Rimanic later in the day who said words to him to the following effect:

I will pay about 20 or 30k and from Monday I will pay some every day to bring the account up to date.

Mr Metz states that on 7 November 2019 A&E received a payment of $21,157 from CMG and the following day Mr Metz received a remittance advice for $6,680 by email, however he did not retain a copy of that email. Mr Metz states that immediately after receiving the remittance advice he attempted to call Mr Rimanic but that he did not answer. Mr Metz states that he then sent a text message asking:

Hi Mark, I thought you were payment 20 to 30k today I got remittance for $6600?

To which Mr Rimanic replied:

Will do more Monday

A copy of the exchange is exhibited.

Mr Metz says that when he received a remittance advice the payment would come in that same night or early the next day. He states that he waited for several days but on this occasion the money did not come through.

On 11 November 2019 Mr Metz says he had a telephone conversation with Mr Rimanic during which Mr Rimanic provided an excuse for why the money had not been paid but that he cannot recall what this excuse was. Mr Metz states that Mr Rimanic said he would pay $6,680 promptly on that day and further money towards the invoices.

Mr Metz states the following day he had another telephone conversation with Mr Rimanic and again asked for payment. He deposes that he said to Mr Rimanic words to the following effect:

There is no point opening the shop any more as I cannot operate and I am just digging us deeper into debt

In response Mr Rimanic said words to the following effect:

I’ll pay today and everything will be fine, and in about 7 to 10 days when I open the Dandenong yard, I'll get some funds from the bank and bring the account up to date.

Mr Metz that he believes that the Dandenong yard being referred to was a new car yard Mr Rimanic was opening for CMG.

Mr Metz says that on 13 November 2019 he had another telephone conversation with Mr Rimanic during which Mr Rimanic promised to make a payment that day but no payment was received. Mr Metz states that on the following day he had no choice but to tell A&E’s employees at the workshop that A&E could not keep operating and that the workshop would be closing; one of the hardest things he has had to do in his working life.

That the same day Mr Metz sent a text message to Mr Rimanic telling him that the shop was closed until further notice and that he had left the keys with Collin. A copy of this correspondence is exhibited. Soon after the text message was sent Mr Rimanic called and said words to the following effect:

In 7 to 10 days I’ll get the funding when Dandenong yard is open.

To which Mr Metz responded:

It's up to you, you let me know.

Mr Metz states that on 18 November 2019 he received a telephone call from Mr Rimanic who said words to the following effect:

Don’t talk to anyone around the traps. You better keep your mouth shut or else.

Mr Metz stated that he responded:

What are talking about? I haven’t told anybody anything except telling my suppliers to not sell parts to anyone for the Cranbourne shop because it is on hold.

Mr Rimanic does not respond to Mr Metz’s evidence in respect of the various text exchanges which are detailed in Mr Metz’s affidavit and summarised above, nor does he address Mr Metz’s evidence in relation to the receipt of the payment of $21,157, the remittance advice issued by CMG on 8 November 2019 or the text messages exchanged shortly after the receipt of the remittance advice. He denies that he had a conversation of the substance referred to in Mr Metz’s evidence of 12 November 2019 in which promises to pay were made. He also denies that on 13 November 2019 he made a promise to pay the amounts outstanding and otherwise denies the conversations recounted by Mr Metz and outlined above. He asserts ‘I told [Mr Metz] that we needed to resolve this as there is money that is owed back to CMG’. These denials are made in the context of the uncontroversial exchange of text messages referred to in Mr Metz’s evidence during this time period which are in substantially the same terms, that is, indication that payment would be made in response to requests in that regard from Mr Metz.

Mr Metz says that he is informed by Mr Anish Wilson of A&E’s solicitors, that on 4 December 2019 the Demand was served at CMG’s registered office. That same date Mr Rimanic called him and Mr Metz states that he asked him specifically about the $6,680. He states that Mr Rimanic verbally abused him and they had a conversation to the following effect:

Mr Rimanic: I stopped it as you left me in the lurch.
Mr Metz:No we were still operating when that payment was supposed to be made.
Mr Rimanic: I’ll drag this case out for 5 years so we better resolve it.
Mr Metz:Pay us what you owe us and it’s resolved.

Mr Metz deposes that Mr Rimanic never raised any of the matters that are raised in his affidavit as to why CMG purports not to be liable to A&E for the amount claimed in the Demand. In particular, he states that in each of the text messages and conversations to which reference has been made, Mr Rimanic never mentioned any of the matters that are now raised in his affidavit. He states that he does not believe that the matters raised in Mr Rimanic’s affidavit as to why CMG purports not to be liable to A&E for the amount claimed in the Demand are genuine.

Loss for engagement of other mechanics

Mr Rimanic states in the Second Rimanic affidavit that as a result of A&E’s termination of the CMG Agreement, CMG was required to engage new mechanics to undertake the services A&E was required to provide. He states that it was only mid‑February 2020 that mechanics were able to be employed in the workshop and from mid-November 2019 expenses such as rent, insurance and utilities were incurred. He also asserts that CMG was forced to outsource the mechanical work to others resulting in costs of $200,000 per month. It is not clear what the relevance of this evidence is; such a loss was not raised in the 21 day affidavit and cannot now be raised by application of the Graywinter principle. Such a claim was not, in any event, substantiated.

Mr Rimanic says that there is a genuine dispute in respect to the amount claimed in the Demand and that by reason of offsetting claims it has against A&E for share of profit, running expenses and setup costs, it has claims well in excess of the amounts claimed in the Demand.

CMG’s submissions

In his submissions, Mr de Kievit, counsel for CMG, contended that the Demand is not a demand for the payment of debts, rather it is a claim in contract. CMG disputes that it is liable to pay the amount claimed by A&E and such a claim is an unliquidated claim. He referred to the authorities which distinguish claims for debt (which are susceptible to being the subject of a statutory demand[17]) and damages for breach of contract and other unliquidated claims (which are not). Mr de Kievit also directed the Court to Byrne v Australian Airlines Ltd[18] as authority for the proposition that a claim in debt is a form of action for a liquidated sum and not for damages or compensation. In his oral submissions in support of this position, Mr de Kievit contended that there was no judgment debt in existence and the nature of A&E’s claims are, in substance, claims for compensation or damages and, because the amount is disputed, are unliquidated claims.
[17]Box Valley Pty Ltd v Kidd (2006) 24 ACLC 471, 477.
[18](1995) 131 ALR 422, 429 (Brennan CJ, Dawson and Toohey JJ).

As an alternative submission, Mr de Kievit contended that the 21 day affidavit plainly demonstrates that there is a genuine dispute between the parties as to the existence of alleged debts to which the Demand relates. He contended that the parties are at odds about the terms of the agreement struck in respect of their joint enterprise. He submitted that A&E have conceded that the CMG Agreement exists but that the terms of the agreement are disputed by the parties. In this regard, A&E, for its part, contends there is no agreement that the expenses of the setup costs and running expenses be applied against profit and as such there is disagreement as to how profit is to be calculated.

When I pressed him for the differences in the party’s position in regard to the arrangement, Mr de Kievit agreed that the workshop setup costs were to be funded, initially at least, by his client, who proceeded to borrow funds for that purpose. Mr de Kievit also appeared to accept that his client was to take out a lease to which Mr Rimanic is liable as guarantor. The divergence as to the terms of the arrangement arise when it comes to the question of running expenses and setup costs which CMG contends are to be shared. In its evidence, CMG contended that it was contemplated that A&E would invoice CMG for the mechanical work conducted and these invoices would be paid by CMG every few weeks ‘subject to a reconciliation of the expense share and profit’. The position being put by Mr de Kievit was, it seemed, that A&E would be liable for its employees’ wages for the workshop which would then be brought to account in the reconciliation process. Mr de Kievit submitted that a proceeding of this type is not ordinarily the occasion for the Court to construe a contract where there are competing views about its meaning.[19]
[19]Re Litigation Insurance Pty Ltd [2017] NSWSC 334, [31].

In response to the submission made by Mr Miller that CMG had not pressed the recovery of sums which are now the subject of the alleged offsetting claims, Mr de Kievit referred to the decision of Barrett J in Yoogalu[20] extracted above.[21]
[20](n 9).
[21]See paragraph 14.

He submitted that the approach that the Court should take in regard to the assessment of an existence of a genuine dispute is well established and referred to the recent decision of Gleeson J in Re Crowe Consulting Pty Ltd.[22]Mr de Kievit contended that there is a plausible contention requiring investigation as to the existence of the debts claimed in the Demand and that CMG’s contentions are substantive and warrant investigation. Mr de Kievit placed emphasis on what he described as the summary nature of a s 459G application, referring to the decision of the New South Wales Court of Appeal in Britten-Norman Pty Ltd v Analysis and Technology Australia Pty Ltd,[23] a case concerning an offsetting claim under s 459H(1)(b). In this regard he also referred to the statements of principle in Malec[24] which are extracted at paragraph 8 above.
[22][2019] NSWSC 1414, [47]-[49].
[23](2013) 85 NSWLR 601, 608, 609-613.
[24](n 1).

Drawing on the phraseology of those authorities, Mr de Kievit contended that CMG’s contentions as to the existence of genuine dispute was a legal argument or question of construction which is not ‘patently feeble’. In such circumstances the Court should not attempt to reach a definitive resolution as to the correct outcome. He referred to several authorities in respect to that position, the most seminal of which is the joint judgment of Brooking and Charles JJA in Spacorp[25] to which reference was made above. Mr de Kievit also referred to the decision of Young J in John Holland Construction & Engineering Pty Ltd v Kilpatrick Green Pty Ltd[26] as authority for the proposition that applications under the Act should not be used as a way for defendants in statutory demand cases to bring disputed debts before the Court. In particular, he submitted that the statutory demand procedure should not be used by creditors as a means of obtaining an advantage for which the process is not designed, particularly application of pressure to compel the recipient of a demand to pay the disputed amount claimed by the alleged creditors in the demand.[27]
[25](2001) 19 ACLC 1270, 1271.
[26](1994) 14 ACSR 250.
[27]Citing Createc Pty Ltd v Design Signs Pty Ltd (2009) 71 ACSR 602 and David Grant & Co Pty Ltd v Westpac Banking Corp (1995) 184 CLR 265 (Gummow J).

As to CMG’s alleged offsetting claim against A&E, Mr de Kievit contended that CMG has funded and paid significant setup and ongoing operational costs in respect of the arrangement with A&E which are detailed in CMG’s evidence. He stated that that evidence revealed that the revenue generated by the arrangement between the parties has not been reconciled against the expenses of the joint venture and CMG has received no distribution of profit. Furthermore, CMG’s business has suffered a significant disruption of A&E’s purported termination of the agreement.

Mr de Kievit contended that there has been no reconciliation of the expenses incurred in the setting up of the joint enterprise against the revenue and this is required in order to determine the amount of a proper distribution of profit and that it was only after CMG put on its application to set aside the Demand that A&E have attempted in any way to provide such a reconciliation in the form of unaudited financial statements. There had been several months of joint trading but no reconciliation of expenses against revenue being done and no profit distributions being made. Mr de Kievit submitted that by reason of the inability to access the computing records maintained by the computer system, CMG were unable to give evidence as to the magnitude of the offsetting claim constituted by the setup and running costs. Mr de Kievit said it was a term of CMG Agreement that such a reconciliation was required to be conducted.

As such, Mr de Kievit submitted, CMG’s offsetting claim raises a serious question to be tried and constitutes a ‘plausible contention’ meeting the standard required in the authorities with respect to quantification.[28] He contended an offsetting claim under s 459H is defined broadly and referred to the decision of Randall AsJ in In2Ply Pty Ltd v Amerind Pty Ltd (in liq).[29] As to the standard of the evidence required, Mr de Kievit submitted that it is not incumbent for CMG to prove its offsetting claims to the quality which would be required to be advanced at trial and contended that CMG has however identified with evidence, the magnitude of its offsetting claims.[30]
[28]Citing Crontec Automotive Tooling Pty Ltd v Allsteel Australia Pty Ltd [2006] NSWSC 555, [34].
[29][2014] VSC 603, [30].
[30]Citing Elm Financial Services v Macdougal [2004] NSWSC 560, [19].

In his oral submissions, Mr de Kievit addressed the evidence adduced by A&E in relation to text messages passing between the parties which included promises to pay. Mr de Kievit stated that there was no unequivocal acceptance of liability to pay the amounts claimed in the Demand. As to the evidence of A&E in respect of alleged telephone conversations, Mr de Kievit pointed to Mr Rimanic’s denials that such conversations occurred.

A&E submissions

Mr Miller of counsel, who appeared on behalf of A&E, summarising his client’s evidence contended it was Mr Rimanic of CMG who telephoned Mr Stojanovic with a proposal that the workshop be set up together and from November 2018 to January 2019 Messrs Metz, Stojanovic and Rimanic conducted discussions and entered into an agreement for the operation of a workshop. Certain terms of the agreement are disputed and he pointed to the evidence of the parties to that regard.[31]
[31]Rimanic 21 day affidavit [8]-[9], Metz affidavit [8]-[9].

It was not, however, controversial that the workshop venture commenced operations on 23 July 2019 with A&E commencing trading at the workshop and during the period 9 July to 14 November 2019 A&E rendered invoices to CMG. During the period 7 August to 24 October 2019 CMG paid to A&E $288,894 to the invoices rendered.

Promises to pay

Mr Miller’s submissions placed some considerable emphasis on promises made by CMG to pay amounts demanded by A&E. He contended that as at 8 October 2019 CMG was behind in paying A&E’s invoices and A&E pursued CMG for payment, in response to which CMG made the promises to pay which are detailed in paragraphs 113 to 129 above. He also referred to the conversations and text messages exchanged between Mr Rimanic and Mr Metz between 1 November to 18 November 2019, which are detailed above in paragraphs 116 to 127, in which Mr Rimanic indicated that CMG would make further payments. Mr Miller pointed to the evidence that during the period 8 November 2019 until the issue of the Demand on 4 December 2019, neither Mr Rimanic nor any other person on behalf of CMG disputed that the amounts claimed by A&E in the invoices were owing.

Mr Miller emphasised the context of the text messages. By way of example, on 8 October 2019 Mr Rimanic texted Mr Metz stating ‘Jasmyn has paid you today and will pay you again tomorrow’. On that day a payment was made of $17,165. Mr Miller pointed to the fact that the text message did not mention that there ought to be a reconciliation as there were outstanding amounts for setup and running costs. Furthermore, the next day there was another payment for $10,420 which was not expressed to be paid under protest and again there was no assertion of any amount owing for setup or running costs. He referred to the text message on 16 October 2019 from Mr Rimanic which stated ‘Jasmyn just putting through payment for you now approx. $25k. Will do more tomorrow’. Mr Miller pointed to the fact that there was no suggestion of any dispute or any amount owing by A&E to CMG. On that day there was a payment of $20,350 to A&E. This was followed by another payment on 21 October 2019 of $5,470. Mr Miller contended that CMG was paying A&E what it could from time to time rather than discharging particular invoices. Mr Miller then detailed each of the payments which followed in late October 2019, again without protest or assertion that A&E was indebted in any way to CMG.

Mr Miller referred to the text messages passing in early November 2019 in respect of the closure of the business. Mr Rimanic, as the evidence indicates, had texted Mr Metz stating that ‘Ok to leave shop closed Monday nothing urgent Jasmyn will do payment today sorry we missed banking yesterday’. Mr Metz said he needed to pay wages and for Mr Rimanic to ensure the money came through, to which Mr Rimanic responded ‘Will do’, again without protest or mentioning any requirement of a reconciliation to be conducted. As to the balance of communications and records of payments made by CMG in November 2019 together with promises to pay, Mr Miller pressed the significance of these communications in the context of assessing whether there are genuine disputes in respect to start-up costs or the running expenses of the joint enterprise. He stated that one would expect that if there were such disputes or a need for reconciliation as CMG contends, that it would be mentioned in those text exchanges. He submitted, as the cases state, the Court is not required to accept uncritically the evidence of the applicant when assessing whether a dispute or offsetting claim is genuine. Indeed, Mr Miller contended that the disputes sought to be raised are not genuine having regard to the communications, in particular the text messages, passing between the parties prior to the issue of the Demand.

The alleged disputes and offsetting claims

Mr Miller placed emphasis on the fact that despite numerous promises to pay, CMG now seeks, after receipt of the Demand but not before, to raise a series of offsetting disputes and claims as follows:

(a) an offsetting claim that A&E is liable to pay $134,904.93 to CMG for the costs of setting up the workshop;

(b) an offsetting claim that A&E is liable to pay a share of $95,658.09 to CMG for the running expenses of the workshop;

(c) an offsetting claim that A&E is liable to pay $33,976.80 to CMG for a share of the profits of the workshop;

(d) an offsetting claim (or dispute) that works undertaken by A&E were defective;

(e) a dispute that invoice 7074 for $3,475.20 and invoice 7091 for $723.30 is due and payable by CMG; and

(f) a dispute that invoices 10003, 10186, 10051 and 10103 relate to duplicate roadworthy inspection services performed on two vehicles.

Mr Miller summarised the substance of the authorities dealing with the standard to be applied in assessing the existence of genuine disputes and offsetting claims. In addition to the authorities referred to by Mr de Kievit, he referred to the judgment of Dodds-Streeton JA of the Court of Appeal of this State in TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd.[32]
[32](2008) 66 ACSR 67, 77 [56]-[57] (with whom Neeve and Kellam JJA agreed).

On the question of the assessment of the claims made for set up costs, Mr Miller submits the authorities indicate that the Court, in assessing the genuineness of such a claim, is not required to accept CMG’s claim uncritically. In this regard, Mr Miller emphasised that the Court can, and indeed should have, regard to the following matters:

(a) CMG never asserted at any time during the trading relationship or during the time that A&E was requiring payment for the outstanding invoices that A&E was liable to contribute to the set up costs, only doing so following the issue of the Demand on 4 December 2019;

(b) the conduct of CMG and A&E during the trading relationship is inconsistent with CMG’s claim as the following examples demonstrate:

(iv) Mr Metz and Mr Rimanic discussed that A&E would obtain quotes for the equipment, tools and consumable parts to set up the workshop;

(v) A&E purchased equipment, tools and consumable parts to set up the workshop from Burson Auto Parts for $149,164.90;

(vi) pursuant to the A&E Agreement, A&E invoiced CMG for the equipment, tools and consumable parts to set up the workshop for $149,164.90;

(vii) CMG then paid the amount of $149,164.90 to A&E;

(c) A&E similarly invoiced CMG for the costs of replacing the lock and bollards at the workshop and CMG paid. Further, CMG paid for the fit out of the workshop and the security camera, alarm and painting of the workshop without consulting or seeking payment or contribution from A&E prior to service of the Demand. It is inconsistent with CMG’s claim for CMG to have done this; and

(d) it is also inconsistent with CMG’s claim for it to make payments against A&E’s outstanding invoices up until 24 October 2019, without ever asserting that A&E were liable to contribute to the set up costs.

Moreover, Mr Miller contended that the claim for workshop setup costs is not supported by Mr Rimanic’s evidence. Mr Miller submitted that CMG had adduced no evidence that A&E agreed to fund or contribute to the setup costs and indeed the contention as to existence of an agreement in that regard is inconsistent with the established facts. This he said, coupled with the absence of evidence as to A&E’s agreement to meet setup costs, indicates that the claim made by CMG as to setup costs is not genuine.[33]
[33]In reply, Mr de Kievit contended that the evidence was that A&E, at least initially, had no funds to pay setup costs including consumable parts, equipment and tools. He contended that CMG had better cash flow and was in a position to pay for consumable parts which were included in the Burson Auto Parts invoice.

Mr Miller submitted as to running costs A&E’s position is that it agreed to pay for wages, superannuation and other employee entitlements, together with parts and replacement tools where necessary, but not the outgoings and utilities for the workshop. CMG, on the other hand, contends that A&E agreed to pay for 60 per cent of the running expenses of the workshop and that A&E is liable to pay its share of running costs in the amount of $95,658.09. Again, Mr Miller emphasised that CMG never asserted during the trading relationship that A&E was liable to contribute to the running costs and the conduct of the parties during the trading relationship is not consistent with an agreement in that regard. Mr Miller contended that the same situation applied in relation to the evidence as to the fuel card and insurance for the workshop. In respect of the claims made for cleaning and the printer, the evidence is that CMG arranged that without consulting A&E and never requested payment for it previously.

In respect to these claims, Mr Miller again contended that the authorities dealing with these applications do not require the Court to accept CMG’s claim uncritically and in this regard he submitted that the Court should have regard to the following matters:

(a) CMG never asserted at any time during the trading relationship or during the time that A&E was requiring payment of the outstanding invoices that A&E was liable to contribute to the running costs claimed in the amount of $95,658.09. CMG has only made the assertion following the issue of the Demand on 4 December 2019;

(b) the conduct of CMG and A&E during the trading relationship is inconsistent with CMG’s claim, exemplified by the following:

(viii) Mr Rimanic gave the fuel card to Mr Metz during the trading period and told him to use it for any vehicles obtained from CMG. CMG never requested payment for the fuel card at any time;

(ix)in respect to the insurance for the workshop, CMG never requested payment from A&E at any time. On the contrary, Mr Metz and Mr Rimanic discussed this in early July 2019. Mr Rimanic said words to the effect ‘I have it covered’;

(x) CMG arranged the cleaning without consulting A&E or demanding payment;

(xi)in respect to the printer, CMG never demanded payment from A&E. On the contrary, in July 2019 when A&E requested a printer, Mr Rimanic told Mr Metz words to the effect ‘don’t worry about it, I’ve got it covered’;

(xii) as to rent for the workshop, CMG never demanded payment from A&E for rent (or outgoings or other expenses). Mr Miller contended that it was curious CMG would incur the expenses of the rent for a period July through to November and not seek to be reimbursed for it or raise it when A&E was requiring payment after the trading period;

(xiii) on the Eclipse software, Mr Rimanic told Mr Metz in July 2019 that ‘I need the Eclipse software installed and I will pay for it’;

(xiv) otherwise, in respect to energy, stationery, advertising and Telstra phone charges CMG paid for those items and never demanded payment from A&E.

(c) it is inconsistent with CMG’s claim for it to pay for all of these items without conferring with A&E or seeking payment from A&E during the period July 2019 to December 2019; and

(d) it is also inconsistent with CMG’s claim for it to make payments against A&E’s outstanding invoices up until 24 October 2019, without ever asserting that A&E were liable to contribute to these running costs.

Mr Miller submitted that CMG’s offsetting claim that A&E agreed to pay or contribute to the setup costs is not supported by the evidence and it is not a genuine claim.

Profit share

Mr Miller stated that it was common ground that it was a term of the agreement that A&E pay 40 per cent of the profits of the workshop to CMG; CMG now claims that A&E is now liable to pay $33,976.80 as a share of the workshop. Mr Miller pointed to the evidence of A&E, more particularly to the trading financial statements of July 2019 to November 2019 which show that it has made a loss during that period. CMG, in support of its offsetting claim, appears to rely on a balance sheet generated by the Eclipse software which shows a profit of $33,339.65. Mr Miller submits that the financial statements prepared by A&E’s accountant, which show no profit during the trading period, have the effect that CMG’s claim for a share of profit does not meet the threshold for a sufficiently arguable claim. Alternatively, CMG’s arguable claim of the profits, 40 per cent of $33,339.65, is $13,335.86.

Other offsetting claims or disputes

Mr Miller submitted that on the issue of defective works by A&E, CMG failed to lead any evidence in respect of the alleged defects or any loss suffered by CMG as a result. A&E denies the allegations of defective works and when the evidence is assessed CMG’s claim (or dispute) does not rise above mere assertion and is unsupported by sufficient evidence. In addition, Mr Miller pointed to the evidence that CMG did not raise any allegation of defective work in A&E’s part either during the trading period or during the time A&E was pursuing CMG for payment of the outstanding invoices. As such, Mr Miller submits that CMG’s claim or dispute is not genuine.

CMG maintains that invoice 7074 for $3,475.20 is a claim for the fee for a migration working visa and that it is not due and payable by CMG. A&E, through Mr Metz, deposes that Mr Rimanic told him to render an invoice to CMG for a working visa paid by A&E for one of A&E’s specialist mechanics and no dispute was raised about this invoice until after the Demand was issued. Mr Miller asserted that the dispute raised by CMG concerning this invoice is not genuine.

CMG had contended in respect of invoice 7091 (for $723.30) that the invoice was for shelves and supplies purchased by A&E from Bunnings and is not due and payable by CMG. The evidence of Mr Metz is that Mr Rinamic told him to render an invoice to CMG and that CMG would pay for them. Again, CMG did not dispute this invoice until after the Demand was issued and Mr Miller again said that dispute was not genuine.

CMG maintains that invoices 10003 and 10186 relate to duplicate roadworthy inspections performed on the same vehicle. The evidence of Mr Metz is that two roadworthy inspections were required on an Audi motor vehicle and that CMG requested that A&E perform the inspection on both occasions. These invoices were not disputed until after the demand was issued. Similarly, in respect of invoices 10051 and 10103, CMG asserts they relate to a duplicate roadworthy service performed on the same vehicle, a Jeep Grand Cherokee. Mr Metz’s evidence is that two roadworthy inspections were required and that CMG requested them on both occasions. Again, CMG did not dispute the invoices until after the Demand was issued. Mr Miller submits that the dispute raised by CMG in respect of these invoices is not genuine.

Nature of the claim

In his oral submissions, Mr Miller addressed the contention by Mr de Kievit that the amounts claimed in the Demand are not debts but are in the nature of damages for breach of contract. In this regard he pointed to the factual background in which A&E historically issued invoices which have been paid without protest. He contended that the amounts claimed in the invoices are certain, are in the nature of a liquidated sum and are a ‘debt’ properly so called for the purposes of being the subject of a statutory demand. In regard to the characterisation of the invoices as ‘debts’, he referred to the case of Hansmar Investments[34] and contended that CMG was attempting to engineer disputes and claims for not complying with the Demand.
[34](n 12).

Mr Miller submitted that in respect of the decision of Barrett J in Yoogalu,[35] while it may be accepted that it is not necessary to show that the subject dispute was raised prior to the Demand being issued, the failure to do so still forms part of the ‘factual landscape’ that is before the Court upon which the Court is obliged to make a critical assessment of the evidence in order to consider whether the alleged offsetting claims are genuine.
[35](n 9).

Consideration

At the outset, if one analyses the position being put by CMG, it does not, as such (save for unsubstantiated and undeveloped assertions as to defects), seek to confront the individual invoices by contending that the work their subject should not have been undertaken or that excessive charges were exacted. Rather, its case is that there should be brought to account against the amounts of indebtedness arising from the invoices, various offsetting claims which have been identified above.

Characterisation of the debts claimed in the Demand

Before moving to the individual disputes and claims which have been raised, I shall first deal with CMG’s submission that the debts claimed in the Demand are not debts properly so called by reason they are unliquidated claims for damages for breach of contract. I do not accept that submission. The Demand makes claims pursuant to identified invoices for work and labour done and I consider them to be liquidated claims for debt. As White J observed in Hansmar Investments[36] in the passage referred to above,[37] referring to the decision of Sholl J of this Court in Alexander v Ajax Insurance Co Ltd,[38] claims for the payment of goods or labour where no price or rate has been fixed are nonetheless liquidated demands even though there is an element of opinion involved in an assessment of what price is reasonable. Here, the invoices the subject of the Demand are conventional claims for work and labour done. I do not consider that it is arguable that they are in the nature of unliquidated claims.
[36](n 12).
[37]See paragraph 15.
[38][1956] VLR 436, 445.

Promises to pay

Perhaps the most significant feature of the evidence which leads me to come to the conclusion that I have reached in regard to the disputes and claims raised by CMG are the numerous promises to pay on CMG’s part which are detailed in Mr Metz’s evidence. Those promises were, to a large part, contained in text messages passing between Mr Metz and Mr Rimanic and in them Mr Rimanic made unconditional promises that funds would be remitted and these promises were made without reservation on his part. I cannot accept Mr de Kievet’s submission that the promises to pay by Mr Rimanic were not unequivocal acceptances of liability to pay. These communications were in response to Mr Metz’s demands for payment. There was no suggestion in any of the text messages, as one might expect there to be, that the various expenses and other claims to which reference has been made and which are now raised by CMG were required to be brought to account before any funds would be remitted to A&E. I accept Mr Miller’s submission that while there is no principle which requires that a dispute or claim must be raised prior to the issue of a demand as observed in Barrett J in Yoogalu, the failure to do so is relevant to what he described as the ‘factual landscape’ underlying CMG’s claims. That is, it is still appropriate to take such failure into account in assessing whether the disputes and claims are genuine or whether they are not bona fide or spurious and being concocted for the purpose of defeating the creditor’s demand.

Over the passage of time, as has been mentioned, CMG paid A&E $288,894 in payment of A&E’s invoices for work performed under the workshop arrangement. Mr Metz deposes as to a number of telephone conversations in the same vein as the text messages. Mr Rimanic denies those conversations took place but does not attempt at all to provide any context to the text messages to defray Mr Metz’s position that unconditional promises to pay were made. It is against that background that I now proceed to consider each of the individual disputes and claims that are raised in assessing whether they are genuine and arguable claims or whether they are spurious, not bona fide and not worthy of further investigation.

The alleged dispute concerning the terms of the agreement

CMG contends that it has a genuine dispute arising from an alleged controversy as to the terms of the agreement between them, more particularly, the position as to the liability for workshop setup costs, running expenses and the formula to be applied in the calculation of profit. CMG’s position is that those costs and expenses were to be brought to account and applied against the gross profit generated by the workshop. In this regard, CMG says, by way of an offsetting claim, that A&E is liable to pay $134,904.93 towards the setup costs. It says that A&E agreed to pay 60 per cent for the running expenses for the workshop and that A&E’s share of the running costs in the sum of $95,658.09. CMG contended that it was contemplated that A&E would invoice for work done and these invoices would be paid by CMG every few weeks ‘subject to a reconciliation of the expense share and profit’. This included rental for the workshop premises of which CMG was lessee and Mr Rimanic the guarantor.

The passages of the authorities dealing with whether a claim is arguable and genuine emphasise that the Court, in assessing the position, is not required to accept uncritically the evidence of an applicant in CMG’s position. That is to say, it is not simply a matter of an applicant contending an alleged controversy exists in regard to the terms of the agreement; the Court is required to subject the alleged controversy to some level of scrutiny and analysis and have regard to contemporaneous events and documented communications.

In Powerhouse Australasia Pty Ltd v Viarc Pty Ltd, Dodds-Streeton J observed:

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.[39]

[39]Powerhouse Australasia Pty Ltd v Viarc Pty Ltd [2006] VSC 508, [48].

As the evidence indicates, A&E contends that quite a different arrangement was agreed as to these matters. A&E contends that CMG agreed to pay the setup costs, including equipment, tools together with a stock of consumable parts for initial use. As to running costs, A&E contends that it agreed to pay for the wages, superannuation and other employee entitlements of its staff together with consumable parts and replacement tools but not the outgoings and utilities for the workshop.

The agreement by which the workshop enterprise was to be constituted is oral, but I do not consider that this of itself means that grounds for an alleged dispute is thereby established. The Court is obliged to assess the evidence of the manner in which the parties conducted themselves in going about the workshop arrangements. If one looks at that conduct, the period of the trading relationship ranged from July to November 2019, during which period of time A&E invoiced CMG for A&E’s work at the workshop. During the period ranging from 7 August to 24 October 2019, CMG paid A&E $288,894 against the invoices rendered. The Demand makes claims for the outstanding invoices rendered during the trading period before A&E left the workshop. I regard it as most significant that, despite being invoiced for quite significant sums of money during the trading relationship, and making significant payments, the point was never taken by CMG that A&E had an obligation to contribute to the setup costs, nor was any issue made about it by CMG in the period after it concluded trading when A&E was pursuing payment for the outstanding invoices. This only occurred after the issue of the Demand in December 2019.

In addition, the evidence is that A&E purchased the equipment, tools and consumable parts to commence operations of the workshop and paid $149,164.90 including GST to Burson Auto Parts. A&E then invoiced CMG for those items and CMG paid that amount in full to A&E without demur. The evidence indicates that there were other items such as a replacement lock and bollards at the workshop which A&E invoiced CMG for and for which CMG paid. Furthermore, the fit out of the workshop was paid for by CMG without any consultation with A&E concerning the cost of that fit out and there was never a request for a contribution to the fit out costs until after the service of the Demand. The same situation applied in respect of the costs of security cameras, alarms and painting of the workshop, for which CMG paid and for which it did not seek payment from A&E until after the service of the Demand.

I accept Mr Miller’s submission that this evidence is quite inconsistent with the position being put by CMG. I consider that the explanations given by Mr Rimanic in his evidence to be most unconvincing and not supported by events or the communications between the parties during the course of the trading relationship and the period shortly after when A&E was pursuing its claim for the balance outstanding on the invoices and before the Demand was served.

A similar situation applies, in my view, in regard to the offsetting claim for running costs in the sum of $95,658.09. A substantial proportion of this figure was in respect of rent and outgoings, software expenses and an item described as ‘administration wages’. As I have mentioned, on the claim for rent, the evidence is that for the period of 1 April to 30 September 2019 there was to be no rent payable under the lease. During the period of the trading relationship and subsequently, CMG never made a claim that A&E was liable to contribute to the running costs now the subject of its offsetting claim. Again this claim was only made subsequent to the issue of the Demand.

I accept Mr Miller’s submission that the conduct of CMG and indeed A&E during the trading relationship is not consistent with the position being put by CMG in relation to the liability for running costs. The parties are commercial people operating businesses and I do not regard it as plausible that if CMG considered that it had an entitlement to be reimbursed for part of the running costs by A&E for matters such as the fuel card, insurance, cleaning and other items, that CMG would not have pressed for such matters to be brought to account once, or certainly soon after, the trading period commenced. The rent for the premises, which is a significant item, was never demanded of A&E during the period of the trading relationship or the period shortly after prior to the service of the Demand. Similarly, no claims were ever made for utilities, stationery, advertising or for telephone expenses. Again, I find Mr Rimanic’s explanation in his evidence put in rebuttal of A&E’s contentions and evidence in regard to these issues to be most unconvincing and implausible. They have, to my mind, the character of what McPherson JA in the decision of JJMR as being ‘manufactured or got up simply for the purpose of defeating the demand’.[40]
[40](n 10).

Offsetting claim in regard to profit share

CMG contended that there is a genuine dispute which arises in respect of the terms of the agreement regarding more particularly the terms as to calculation of the share of profits of the workshop and pointed to the evidence as to the parties’ differences in this regard. As to the quantum of this alleged claim, it has relied upon a balance sheet generated from the accounting software at the workshop which identifies a profit of $33,339.65 as of August 2019. It is asserted by Mr Rimanic that for the months of September, October and November 2019, profit in a similar amounts in addition to the August amount are owed but his basis for this assertion is never developed, the only explanation being inability to access records. It is not explained how he was able to produce a balance sheet for the August period. A&E’s position is that rather than make a profit, the workshop made a loss during the trading period extending from July to November 2019 and has produced financial statements to support its position in that regard.

I do not consider that it is appropriate for me to determine, on the evidence available, the position in regard to this claim other than the say that on an application of the relevant tests it is arguable by reason of the difference in the evidence of the parties as to the calculation of share of profits. I consider that CMG has established that there is an arguable claim for profits for the month of August 2019 which warrants investigation through conventional inter partes proceedings as to the profits claim. I do not consider that the claims asserted by Mr Rimanic for September, October or November 2019 have been substantiated.

The amount of that offsetting claim should be calculated by reference to CMG’s evidence as to the alleged profit of $33,339.65. The parties agree that the terms of the agreement were that A&E pay CMG 40 per cent of the profits of the workshop. As such, the share of profit claim is 40 per cent of that figure, $13,335.86.

Defective works

CMG made very general assertions in its evidence concerning defective workmanship on the part of A&E. The assertions in that regard in the 21 day affidavit were never developed or evidenced or the subject of any attempt at quantification and I consider that no offsetting claim can be maintained on this ground.

Invoice 7074

In his 21 day affidavit, Mr Rimanic had asserted that this invoice related to a ‘migration payment’ and that it is not payable by CMG. In response, Mr Metz’s evidence is that this invoice is in respect of payment for a working visa paid by A&E for one of its specialist mechanics who was required to be engaged to work on Jeep motor vehicles. The engagement of the mechanic was required because CMG sent many Jeep vehicles for A&E to work on. Mr Metz states that on or about 30 May 2019 Mr Rimanic told him to invoice him for the costs of the visa and CMG would pay them. Mr Rimanic says nothing in response to Mr Metz’s evidence concerning this in his affidavit in reply.

As such, CMG has not evidenced the nature of the dispute it claims in respect of this invoice and its position does not rise above mere assertion in the 21 day affidavit. The evidence of Mr Metz is plausible and uncontradicted. CMG has not discharged the onus it bears in establishing a genuine dispute in respect of this invoice.

Invoice 7091

This invoice is for shelves and other supplies for the workshop purchased by A&E. In the 21 day affidavit Mr Rimanic simply asserts that it is not payable by CMG. Mr Metz’s evidence is that on about 1 July 2019 he and Mr Rimanic discussed that the costs of the shelving would be part of the setup costs and that Mr Rimanic directed Mr Metz to invoice him and he would pay. In response, in his affidavit in reply, Mr Rimanic merely asserts that ‘[Mr Metz] wanted the shelving’. Mr Rimanic does not rebut Mr Metz’s evidence in respect of the discussion regarding A&E being paid for the shelves. As with the previous invoice, Mr Rimanic’s evidence does no rise above mere assertion. Mr Metz’s evidence, on the other hand, is plausible and uncontradicted. The shelving costs were, it seems, part of the setup costs of the workshop and I have found that CMG’s position as to setup costs as discussed above is not made out in any event. CMG has not discharged the onus it bears in establishing a genuine dispute in respect of this invoice.

Duplicate roadworthy inspections

In the 21 day affidavit, Mr Rimanic asserts that that invoices 10003 and 10186 (which relate to an Audi motor vehicle) and invoices 10051 and 10103 (which relate to a Jeep motor vehicle) are not claimable because they ‘included duplicate roadworthy inspection service performed on the same vehicle’. In response, Mr Metz’s evidence is that in each case the subject vehicle was delivered to A&E for roadworthy inspections to be undertaken on two separate occasions. He says that on the first of each such occasions, A&E carried out an inspection and were told not to carry out any repairs. On each of the second occasions when the vehicle was delivered to A&E, A&E conducted the inspection. A&E carried out repair work on the Audi vehicle as instructed by CMG which are detailed in the second invoice for that vehicle. As to the Jeep vehicle, another inspection was conducted and A&E were instructed to replace the windshield wiper inserts, which it did. In response Mr Rimanic states merely that ‘it was not necessary for [A&E] to conduct and charge for two inspections’. He does not elaborate further.

Again, CMG has not discharged the onus which it bears in establishing a genuine dispute in respect of these invoices and despite the opportunity to do so has not elaborated in its response to Mr Metz’s evidence. I find that CMG has not established genuine disputes in respect of these invoices.

Other matters sought to be raised

CMG sought to raise a claim in the Second Rimanic affidavit that it incurred a cost of $200,000 per month for engaging replacement mechanics to perform the works required by CMG after what Mr Rimanic describes as A&E’s termination of the CMG Agreement. As I have noted in paragraph 184 above, CMG is not entitled to raise such an alleged claim as no fair notice was given of it in the 21 day affidavit. If I am not correct about this and some such claim can be gleaned from the 21 day affidavit, it was never developed or evidenced by CMG and never rose above mere assertion. In particular, there is no substantiation at all of how the alleged quantum of such claim is calculated. As such, insofar as CMG makes an offsetting claim in respect of this issue, I find that it is not sustainable.

Conclusion

By reason of the foregoing analysis, I find that CMG has established a genuine dispute in respect of the claim it makes for profit share but it has not established that it has genuine disputes or claims in respect of the other matters raised by it. As I have noted in paragraph 177 above, the amount of the claim for share of profits is $13,335.86.

I will make orders that the Demand be varied so that it is an effective Demand for $91,535.94. I will make final orders varying the Demand in those terms on 2 December 2020. As indicated in the email transmission from my Associate, any submissions that the parties wish to make in respect of costs are to be filed and served by 30 November 2020.

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[2020] VSC 779

23 November 2020