Re Haidi Holdings Pty Ltd
[2023] VSC 739
•13 December 2023
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2023 04112
IN THE MATTER of HAIDI HOLDINGS PTY LTD (ACN 005 058 999)
BETWEEN:
| HAIDI HOLDINGS PTY LTD (ACN 005 058 999) | Plaintiff |
| v | |
| TESORIERO INVESTMENT GROUP PTY LTD (IN LIQUIDATION) (ACN 161 088 115) | Defendant |
---
JUDGE: | Hetyey AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 30 November 2023 |
DATE OF JUDGMENT: | 13 December 2023 |
CASE MAY BE CITED AS: | Re Haidi Holdings Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2023] VSC 739 |
---
CORPORATIONS – Corporations Act 2001 (Cth) – Part 5.4 – Insolvency – Statutory demand – s 459G – Application to set aside – Demand claims unpaid present entitlements under trust – s 459H(1)(a) – Whether genuine dispute about existence and/or amount of debt – s 459H(1)(b) – Whether genuine offsetting claims – s 459J(1)(b) – Whether some other reason to set aside statutory demand.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms R Malone of counsel | Sinisgalli Foster Legal Pty Ltd |
| For the Defendant | Mr D McAloon of counsel | Allens |
TABLE OF CONTENTS
Introduction........................................................................................................................................ 1
Background......................................................................................................................................... 1
Procedural history.............................................................................................................................. 2
Statutory provisions and legal principles..................................................................................... 3
Genuine dispute ground.................................................................................................................. 6
Offsetting claim grounds................................................................................................................ 12
Material on offsetting claim grounds............................................................................. 12
Consideration of offsetting claim grounds.................................................................... 16
Section 459J(1)(b) ground............................................................................................................... 18
Conclusion......................................................................................................................................... 20
HIS HONOUR:
Introduction
By originating process dated 6 September 2023, Haidi Holdings Pty Ltd (‘Haidi’ or ‘plaintiff’) applies to set aside a statutory demand dated 18 August 2023 (‘statutory demand’ or ‘demand’) served on it by Tesoriero Investment Group Pty Ltd (in liq) (‘TIG’ or ‘defendant’), for the sum of $244,250.98. The plaintiff seeks to set aside the demand on a number of bases; namely a genuine dispute under s 459H(1)(a) of the Corporations Act 2001 (Cth) (‘Act’), two offsetting claims under s 459H(1)(b) and ‘some other reason’ under s 459J(1)(b). All of the grounds advanced lack a sufficient degree of cogency to be arguable and must fail.
Background
Haidi is the trustee of the John Tesoriero Family Trust (‘Family Trust’), whereas the TIG is the trustee of Tesoriero Investment Trust (‘Investment Trust’). Haidi and TIG are related entities in the sense that Mr Giovanni Tesoriero is a common director and shareholder of both companies.
On 2 November 2022, TIG was wound up in insolvency by orders of Allaway JR in the Federal Court of Australia and Mr Jason Preston and Mr Jason Ireland of McGrathNicol were appointed as joint and several liquidators (‘liquidators’). At the same time, Allaway JR made winding up orders in two related proceedings and appointed the liquidators as joint and several liquidators of 286 Carlisle Street Pty Ltd (in liq) (’286 Carlisle Street’) and 23 Margaret Street Pty Ltd (in liq) (’23 Margaret Street’). 23 Margaret Street is the trustee of the 23 Margaret Street Trust (’23 Margaret Street Trust’). The liquidators have since issued s 530B notices to various persons to deliver books and records in relation to TIG, 286 Carlisle Street, 23 Margaret Street and other related entities in liquidation.
The debt the subject of the statutory demand comprises two unpaid present entitlements (‘UPEs’) distributed by the plaintiff as trustee of the Family Trust to the defendant but not yet paid. The UPEs are as follows:
(a) $149,907.47 in the financial year ended 30 June 2018; and
(b) $94,343.51 in the financial year ended 30 June 2019.
The schedule to the demand states that the details of the UPEs were extracted from the plaintiff’s own accounting ledger.
Procedural history
On 2 October 2023, the Court made timetabling orders, including for the filing of any evidence on which the parties rely and written submissions. The matter was fixed for final hearing on 30 November 2023.
In support of its application, Haidi relies upon: the affidavit of Mr Giovanni Tesoriero (in his capacity of one of Haidi’s directors) affirmed 6 September 2023; the affidavits of Mr Lou Stefanetti (the accountant for the Family Trust) affirmed 6 September and 3 November 2023; and its written submissions dated 13 November 2023.
In resisting the plaintiff’s application, the defendant relies upon the affidavit of Mr Ireland (as joint and several liquidator of the defendant) affirmed 17 October 2023 and its written submissions dated 27 November 2023.
The matter proceeded to hearing on 30 October 2023 and counsel appeared for both parties, although I understand the plaintiff’s counsel was only retained a day or so prior to the hearing. All of the grounds identified by the plaintiff to set aside the demand were pressed at the hearing.
During an exchange between the plaintiff’s counsel and the bench in relation to the material relied upon, the plaintiff’s counsel submitted that if the Court required additional information to support the grounds advanced, such information could be provided by way of a supplementary affidavit. The Court asked whether the plaintiff wished to make a formal application to adjourn the hearing to put on supplementary material. Counsel confirmed that no adjournment was sought.
Statutory provisions and legal principles
Section 459E(1) of the Act relevantly provides that a creditor may serve on a company a statutory demand relating to a debt or debts owed by the company, which are ‘due and payable’. A debt is ‘due and payable’ once it is ‘ascertainable, immediately payable and presently recoverable or enforceable by action’.[1]
[1]Re ReNu Waste Pty Ltd [2020] NSWSC 108 [22]–[32] (Rees J) (‘ReNu Waste’). See also Re Elgar Heights Pty Ltd [1985] VR 657, 669, 671 (Ormiston J); Remuneration Data Base Pty Ltd v Pauline Goodyer Real Estate Pty Ltd [2007] NSWSC 59, [39]–[42] (White J) (‘Remuneration Data Base’); NA Investments Holdings Pty Ltd v Perpetual Nominees Ltd (2010) 79 ACSR 544, 552–3 [63] (Lindgren AJA); Main Camp Tea Tree Oil Ltd v Australian Rural Group Ltd (2002) 20 ACLC 726, 731–2 [17] (Barrett J) (‘Main Camp’); Re Simmoll Pty Ltd [2021] VSC 693, [44] (Hetyey AsJ).
Section 459G(1) of the Act provides that a company may apply to the Court for an order setting aside a statutory demand served on the company.
Section 459H(1) of the Act is in these terms:
(1)This section applies where, on an application under section 459G, the Court is satisfied of either or both of the following:
(a)that there is a genuine dispute between the company and the respondent about the existence or amount of a debt to which the demand relates;
(b)that the company has an offsetting claim.
The following well-established principles concern the nature of a genuine dispute under s 459H(1) of the Act:
(a) for a dispute to be ‘genuine’, it must be ‘bona fide and truly exist in fact’;[2]
[2]Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452, 464 (Northrop, Merkel and Goldberg JJ) (‘Spencer Constructions’), cited with approval by the Victorian Supreme Court of Appeal in Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (in liq) [2015] VSCA 330, [49] (Kyrou, Ferguson and Kaye JJA) (‘Malec’).
(b) ‘the grounds for alleging the existence of a dispute … [must be] real and not spurious, hypothetical, illusory or misconceived’;[3]
[3]Ibid.
(c) the dispute must have ‘a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion, and sufficient factual particularity to exclude the merely fanciful or futile … Something “between mere assertion and the proof that would be necessary in a court of law” may suffice’;[4]
[4]TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd (2008) 66 ACSR 67, 79 [71] (Dodds-Streeton JA) (‘TR Administration’); Malec, [49].
(d) a genuine dispute may involve a ‘plausible contention requiring investigation’ and raising the same sort of considerations as the ‘serious question to be tried’ test that applies in the case of interlocutory injunctions;[5]
(e) the Court should not uncritically accept statements about an alleged genuine dispute that are ‘equivocal, lacking in precision, inconsistent with undisputed contemporary documents … or inherently improbable …’;[6] and
(f) if the dispute appears to be something ‘merely created or constructed in response to the pressure represented by the service of the statutory demand’, then it is not advanced in good faith and will not be regarded as genuine.[7]
[5]Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd (2013) 85 NSWLR 601, 608 [31] (Beazley P, Meagher and Gleeson JJA) (‘Britten-Norman’); Malec, [48].
[6]Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, 787 (McClelland CJ in Eq), cited with approval by the Victorian Supreme Court of Appeal in TR Administration, 78 [64] (Dodds-Streeton JJA) and Malec, [50].
[7]Creata (Aust) Pty Ltd v Faull (2017) 125 ACSR 212, 224 [47] (Barrett AJA, Gleeson JA agreeing at 213 [1], White JA agreeing at 213 [2]) (‘Creata’). See also JJMMR Pty Ltd v LG International Corp [2003] QCA 519, [18] (McPherson JA), where the same point was made in respect of an offsetting claim.
The principles set out above apply equally to an application to set aside a statutory demand on the basis of an offsetting claim.[8] In the case of an offsetting claim, the following additional principles are applicable:
[8]See the discussion of the relevant principles by the Victorian Court of Appeal in the context of both genuine disputes and offsetting claims in TR Administration 79 [71] and Malec [47]–[50]. See also Britten‑Norman 609 [36], 615 [70] where the New South Wales Court of Appeal discussed the evidentiary threshold in establishing either a genuine dispute or offsetting claim under s 459H.
(a) a genuine offsetting claim ‘means a claim on a cause of action advanced in good faith, for an amount claimed in good faith’.[9] In this context, ‘good faith’ means arguable on the basis of the facts asserted, with sufficient particularity to enable the Court to determine that the claim is not fanciful;[10]
[9]Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743 [18] (Palmer J) (‘Macleay Nominees’). See also Edge Technology Pty Ltd v Lite-On Technology Corp (2000) 34 ACSR 301, 306–7 [29] (Santow J).
[10]Macleay Nominees [18]; Re J Build Developments Pty Ltd [2022] VSC 434, [29] (Hetyey AsJ).
(b) there must be some evidence to indicate the nature of the offsetting claim and the way in which it is calculated, including any loss which is said to arise;[11]
(c) whilst it is not necessary to particularise the offsetting claim to the last ‘dollar and cent’,[12] the evidence should be sufficient for the Court to make an estimate of the amount of the offsetting claim,[13] which must be capable of being quantified in monetary terms;[14] and
(d) in practical terms, there must be a mutuality in the identity or capacity of the creditor who served the demand and the person who has the offsetting claim.[15]
[11]Ibid. See also Broke Hills Estate Pty Ltd v Oakvale Wines Pty Ltd [2005] NSWSC 638, [30]–[31] (Gzell J); Mayaman Developments Pty Ltd v TQ Constructions Pty Ltd [2009] QSC 144, [22]–[23] (Daubney J).
[12]Elm Financial Services Pty Ltd v MacDougal [2004] NSWSC 560, [19] (Barrett J).
[13]Diploma Construction (WA) Pty Ltd v KPA Architects Pty Ltd [2014] WASCA 91 [90] (Pullin JA, with Newnes and Murphy JJA agreeing).
[14]Chase Manhattan Bank Australia Ltd v Oscty Pty Ltd (1995) 17 ACSR 128, 135 [30] (Lindgren J); Ozone Manufacturing Pty Ltd v Deputy Commissioner of Taxation (2006) 94 SASR 269, 284–5 [45] (Debelle J, with Besanko and Layton JJ agreeing); No 96 Factory Bargains Pty Ltd v Kershel Pty Ltd [2003] NSWSC 146, [27] (Barrett J, as his Honour then was).
[15]See In2Ply Pty Ltd v Amerind Pty Ltd (in liq) (recs & mgrs apptd) [2014] VSC 603, [30(f)] (Randall AsJ); Re Statewide Developments Realty Pty Ltd [2016] NSWSC 154, [13]–[14], [22] (Black J). See also Farid Assaf, Assaf’s Winding Up in Insolvency (LexisNexis, 3rd ed, 2021), [7.36] (‘Assaf’s Winding Up in Insolvency’).
Once the applicant company can demonstrate that even one ground has a sufficient degree of cogency to be arguable, a finding of genuine dispute or genuine offsetting claim will follow.[16] Further, whilst the threshold for establishing a genuine dispute or offsetting claim is a relatively low one, an applicant must nevertheless satisfy the Court that such a dispute or offsetting claim exists on the balance of probabilities.[17]
[16]Malec, [51], citing Solarite Air Conditioning Pty Ltd v York International Australia Pty Ltd [2002] NSWSC 411, [23] (Barrett J, as his Honour then was).
[17]See Assaf’s Winding Up in Insolvency [6.25], citing IMO Speedy Loans Pty Ltd [2014] VSC 273, [17] (Gardiner AsJ); Moyall Investments Services Pty Ltd v White (1993) 12 ACSR 320, 324 (Ryan J); Southern Canola Producers Pty Ltd v Painter Griffith & Associates (1997) 15 ACLC 956 (Santow J); and Sterling Estates (SA) Pty Ltd v Bradley (2000) 34 ACSR 177, [16] (Hamilton J).
Section 459J(1)(b) of the Act provides that on an application under s 459G, the Court may set aside the demand if satisfied there is ‘some other reason’ why the demand should be set aside.
In Re MHC Pathology Pty Ltd,[18] I said the following in relation to s 459J(1)(b) of the Act:
… [T]he authorities are clear that the ‘other reason’ required by s 459J(1)(b) cannot be a defect in the demand.[19] Something else is required. In Arcade Badge Embroidery Co Pty Ltd v DCT,[20] the Court of Appeal of the Australian Capital Territory found that the other reasons envisaged by s 459J(1)(b) include ‘conduct that may be described as unconscionable, an abuse of process, or which gives rise to substantial injustice’.[21] Whilst the discretion conferred by the provision is broad, a judge should not set aside a statutory demand under s 459J(1)(b) simply because she or he subjectively considers it fair to do so.[22] The Court’s power under the sub-section exists to maintain the integrity of the statutory demand procedure in Part 5.4 of the [Act] and to counter its subversion.[23]
[18](2020) 356 FLR 222, 245 [75] (Hetyey AsJ).
[19]Spencer Constructions 458–9; Daewoo Australia Pty Ltd v Suncorp-Metway Ltd (2000) 33 ACSR 481, 493–4 [44]–[45].
[20](2005) 157 ACTR 22 (Crispin P, Gray and Marshall JJ).
[21]Ibid 26, [27]. See also Hoare Bros Pty Ltd v Deputy Commissioner of Taxation (1996) 62 FCR 302; Neutral Bay Pty Ltd v Deputy Commissioner of Taxation (2007) 25 ACLC 1341 (Keane, Holmes and Muir JJA).
[22]Meehan v Glazier Holdings Pty Ltd (2005) 53 ACSR 229, 240 [60]–[61] (Santow and Tobias JJ, and Young CJ in Eq).
[23]Rinfort Pty Ltd v Arianna Holdings Pty Ltd (2016) 111 ACSR 607, 633 [84] (Black J).
In applying the above principles, I will now deal with each of the grounds put forward by the plaintiff.
Genuine dispute ground
In his affidavit, Mr Tesoriero broadly asserts that the debt claimed in the demand is disputed, without clearly identifying the basis of the dispute. However, on a generous reading of his affidavit, and following further articulation of the parameters of the alleged dispute by the plaintiff’s counsel, it appears the dispute relates to the following matters:
(a) the debt claimed by the defendant is for ‘an unpaid book entry or entries and those book entries are incomplete as at 2020 and inconclusive.’ There is therefore enormous uncertainty in relation to the financial documents relied upon;
(b) subsequent transactions have occurred between the parties with the result being that the defendant is indebted to the plaintiff for an amount far exceeding the debt claimed. The plaintiff’s counsel clarified it is not the plaintiff’s case there are no UPEs, but rather that the UPEs are not to be paid because of the offsetting claims raised by the plaintiff;
(c) in contrast to Mr Tesoriero and Mr Stefanetti for the plaintiff, Mr Ireland, as a joint and several liquidator of the defendant, does not have personal knowledge of matters relating to the UPEs and the financial transactions between the parties; and
(d) the defendant has not issued proceedings ‘to prove’ the debt, or obtained a court order or judgment against the plaintiff. The defendant’s liquidators have made a ‘strategic choice’ to utilise the statutory demand procedure instead.
In my opinion, none of these matters give rise to a genuine dispute about the debt the subject of the statutory demand. I have arrived at that conclusion for the following reasons.
First, the allegation that the financial documents supporting the debt claimed are unreliable is equivocal and lacking in precision. The plaintiff’s material does not set out in what material respect(s) the underlying financial records are unreliable, or how such unreliability affects the defendant’s calculation of the UPEs.
Secondly, the debt was contemporaneously recorded in various books and records of both the plaintiff and the defendant across a number of financial years. In particular, the Family Trust ledger account records a total sum of $397,344.01 owing to the defendant in respect of UPEs. This includes the UPEs for the 2018 and 2019 financial years which correspond in amounts to the sums claimed in the demand. The ledger also includes the UPEs for the 2014, 2015 and 2017 financial years (which are not the subject of the demand).
The same total UPE figure of $397,344.01 can be found in the defendant’s balance sheet for the financial year ended 30 June 2020 and is recorded as a current asset with the annotation: ‘Loan – John Tesoriero Family Trust’. Importantly, in their respective affidavits of 6 September 2023, both Mr Tesoriero and Mr Stefanetti set out a table which identifies the total UPE figure of $397,344.01 (which includes the UPEs claimed in the demand) as being owed to the defendant, albeit subject to alleged offsetting amounts (which are discussed later in these reasons). The UPE for 2019 is also recorded as income in the defendant’s profit and loss statement for the financial year ending 30 June 2019. Further, the defendant recognised the UPEs as trust distribution income in its tax returns for the financial years ending 30 June 2018 and 30 June 2019.
Whilst the plaintiff asserts the debt the subject of the demand is somehow affected by unreliable financial documents, none of the documents referred to above are the subject of any specific challenge by the plaintiff. Critically, neither Mr Tesoriero nor Mr Stefanetti gave evidence to suggest the Family Trust ledger account, which is a record maintained by the plaintiff, was itself inaccurate or unreliable. Moreover, I accept the defendant’s submission that:
(a) the Family Trust ledger account and the defendant’s balance sheet and profit and loss statement are ‘books’[24] kept by the plaintiff and the defendant respectively; and
(b) pursuant to s 1305(1) of the Act, they are therefore admissible as evidence in the proceeding and are prima facie evidence of the matters stated or recorded in those books.
[24]The term ‘books’ is defined in s 9 of the Act to include a register, any other record of information, and a document.
Thirdly, there are no contemporaneous documents to give the dispute a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion. It appears the dispute was first raised in response to the service of the statutory demand.
Fourthly, the contention that the plaintiff’s liability to pay the UPEs is offset by amounts owing by the defendants is more conveniently considered in connection with the offsetting claim grounds (see further below).
Fifthly, unlike a trial on the merits, an application to set aside a statutory demand does not involve the forensic weighing of the parties’ respective evidence. As previously stated, it is unhelpful to perceive that the account between the parties is more likely to be one result than another.[25]
[25]Malec, [48] (Kyrou, Ferguson and Kaye JJA).
Lastly, although the defendant has not issued proceedings ‘to prove’ the debt and to obtain a court order or judgment, there is no principle contained within the Act that only judgment debts which are capable of enforcement may be claimed in a statutory demand.[26] Instead, s 459E(3) of the Act provides that, in the case of a judgment debt, there is an exemption from the strict requirement that a statutory demand be accompanied by a supporting affidavit. The rationale for the exemption is that ‘[t]he judgment speaks for itself as to the amount which is due and payable and, prima facie, also in relation to the absence of a genuine dispute’.[27] Here, the demand is supported by Mr Ireland’s affidavit of 18 August 2023. In his affidavit, Mr Ireland verifies the debt claimed in the demand and identifies the source of his knowledge about the debt to be books and records of the defendant, which he has inspected in his capacity as joint and several liquidator.
[26]Re Sceam Construction Pty Ltd [2021] VSC 437, [37] (Hetyey AsJ).
[27]Anderson Formrite Pty Ltd v CASC Hire Pty Ltd (2005) 147 FCR 379, 391 (Siopis J).
That said, whether a resolution by a trustee to distribute trust income to a beneficiary constitutes a debt which may support a statutory demand is not a matter free from doubt. In Euroasian Holdings Pty Ltd v Ron Diamond Plumbing Pty Ltd (in liq) (‘Euroasian Holdings’),[28] Heerey J set aside a statutory demand which sought the payment of trust distributions the subject of resolutions by the trustee company. His Honour held that the rights of a beneficiary against a trustee in respect of trust income are enforceable in equity only and do not give rise to a debtor/creditor relationship.[29]
[28](1996) 64 FCR 147.
[29]Ibid, 150. Whilst the learned author of Assaf’s Winding Up in Insolvency seemingly endorsed this proposition at [3.68], he also stated that each case will turn on the facts, making reference to Re Norwest Legal Services Pty Ltd [2019] NSWSC 1896 where the proposition was expressed with necessary caveats.
By contrast, in Gusdote Pty Ltd v Ashley,[30] Foster J found there was no genuine dispute about the profits of a unit trust claimed in a statutory demand. His Honour distinguished Euroasian Holdings on the basis that the judgment did not make clear whether the trustee had put into effect a resolution to pay a distribution or whether the books and records of the trust showed the beneficiary as a creditor of the trustee.[31] His Honour instead followed the decision of Buss JA (with whom Martin CJ and Pullin JA agreed) in Chianti Pty Ltd v Leume Pty Ltd,[32] which involved analogous facts. There, a trustee had resolved to distribute the profits of a trust to the respondent. The amount of those distributions was shown in the books and records of the trust as a loan by the beneficiary to the trust. The trustee was taken to have admitted the existence of a debt owing to the respondent, on account of the distributed amounts in question, and the respondent was entitled to recover those amounts from the appellant by an action for money had and received.[33] In the more recent case of Re Norwest Legal Services Pty Ltd,[34] Black J ultimately set aside a demand pertaining to unpaid trust distributions on the ground of genuine dispute, because, among other things, it was unclear whether an amount due to a beneficiary at a particular date was still due at the time the demand was issued.[35] However, his Honour also observed, by way of obiter, that the beneficiary may have been in a position to establish a claim in debt or by way of unjust enrichment.[36]
[30](2011) 82 ACSR 469.
[31]Ibid, 496–7 [128].
[32][2007] WASCA 270.
[33]Ibid [68].
[34][2019] NSWSC 1896.
[35]Ibid [13].
[36]Ibid.
Further, in Seoud v Fortythird Garland Pty Ltd,[37] which involved a claim by a plaintiff beneficiary to recover trust income and interest, McMillan J relevantly distilled the following principles on the question:[38]
Although the relationship of trustee and beneficiary has differences in character to that of the relationship of debtor and creditor,[39] those forms of relationship are not mutually incompatible.[40] A trustee can become liable as a debtor to a beneficiary of the relevant trust in certain circumstances. Where the trustee acknowledges to a beneficiary that the trustee holds an amount of money to which that beneficiary is immediately and unconditionally entitled to payment, the trustee will become a debtor to the beneficiary in respect of that amount.[41] The amount to which the beneficiary is entitled may be recovered by the beneficiary at common law as money had and received.[42] Thus, there is an overlay of the equitable relationship of trustee and beneficiary and the legal relationship of debtor and creditor.[43]
[37](2019) 57 VR 262 (‘Seoud v Fortythird Garland’).
[38]Ibid 275, [56].
[39]See generally JD Heydon and MJ Leeming, Jacobs’ Law of Trusts in Australia (LexisNexis, 8th ed, 2016) 11–12 [2-13]; Thomson Reuters, Westlaw, The Law of Trusts: Ford & Lee (online at November 2018) [1.3310]–[1.4530].
[40]‘A debt and a trust obligation are not mutually exclusive concepts’: Coshott v Learoyd [2001] FCA 88 [42] (Wilcox J).
[41]Turner v New South Wales Mont de Piete Deposit and Investment Co Ltd (1910) 10 CLR 539, 545–546 (Griffith CJ); Corporate Initiatives Pty Ltd v Federal Commissioner of Taxation (2005) 142 FCR 279, 284 [22] (Spender, Heerey and Lander JJ); Tindon Pty Ltd v Adams [2006] VSC 172, [50]–[52] (Hargrave J); cf Commissioner of Inland Revenue v Ward (1969) 69 ATC 6050, 6071 (McCarthy J); Euroasian Holdings, 150.
[42]R v Brown (1912) 14 CLR 17, 25 (Griffith CJ); Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516, 541 (Gummow J); Chianti Pty Ltd v Leume Pty Ltd (2007) 35 WAR 488, 510–511 [70] (Buss JA, Martin CJ and Pullin JA agreeing); Gusdote Pty Ltd v Ashley (2011) 193 FCR 227, 254–256 [121]–[129] (Foster J); Fischer v Nemeske Pty Ltd (2016) 257 CLR 615, 653 [105], 654 [109] (Gageler J, French CJ and Bell J agreeing), see also 646 [82] (Kiefel J dissenting on the facts), but cf 673 [187]–[189] (Gordon J) (‘Fischer v Nemeske’).
[43]Fischer v Nemeske, 653 [105] (Gageler J).
Justice McMillan ultimately held that financial statements of the trust, which purported to record drawings in satisfaction of the plaintiff’s entitlements to trust income, constituted an acknowledgement that those amounts were immediately owing to the plaintiff.[44] That was sufficient to establish the plaintiff was a creditor of the trustee on the facts.[45]
[44]Seoud v Fortythird Garland, 279 [71].
[45]Ibid.
However, in the present case, aside from the general complaint that the defendant has not obtained a judgment to support the debt, the plaintiff did not actually suggest the defendant lacks the status of creditor and only has equitable rights in respect of the UPEs. Nor did the plaintiff argue that the defendant’s absolute entitlement to payment of the UPEs was subject to some contingency or condition found in the trust deed for the Family Trust or the underlying resolutions of the plaintiff as trustee (none of which is in evidence). As previously discussed, the evidence given by each of Mr Tesoriero and Mr Stefanetti in fact acknowledges the existence of the debt but maintains that it is extinguished by offsetting claims. This was reinforced by the plaintiff’s oral submissions. Further, none of the authorities on the indebtedness of a trustee to a beneficiary for unpaid trust income were referred to by the parties in this case and the Court did not have the benefit of submissions on the question. The point was simply not argued.
In the circumstances, it is neither necessary nor appropriate for me to determine whether the UPEs constitute debts that are ‘due and payable’ for the purpose of s 459E(1) of the Act, and therefore capable of supporting a statutory demand.
The arguments in support of the contention there is a genuine dispute are otherwise not made out.
Offsetting claim grounds
I turn next to the two offsetting claims put forward by the plaintiff as bases to set aside the demand.
Material on offsetting claim grounds
In his affidavit of 6 September 2023, Mr Tesoriero deposes the debt claimed by the defendant is offset by two ‘payments or investments made by [the Family Trust] on behalf of [the Investment Trust]’ as follows:
a. Carlisle Street Investment $100,000…
b. Margaret Street Trust $1,143,700….
(I will refer to these transactions as the ‘first transaction’ and the ‘second transaction’, respectively).
The plaintiff submits that each of the first and second transactions give rise to genuine offsetting claims. In the case of the second transaction, the plaintiff contends that the offsetting claim would substantially exceed the amount claimed in the statutory demand, whereas the offsetting claim resulting from the first transaction would have the effect of significantly reducing the amount claimed in the statutory demand.
In respect of the first transaction, Mr Tesoriero produces a National Australia Bank statement for 286 Carlisle Street which supposedly records a credit of $100,000 for the Family Trust in respect of ‘the [286] Carlisle Street Investment.’ The bank statement shows the payment into the account on 25 February 2021 which is recorded as ‘Giovanni Tesoriero Loan’. As to the second transaction, Mr Tesoriero simply exhibits a copy of a Loan Approval and Acceptance of Offer from La Trobe Financial Services Pty Ltd dated 16 April 2020 (‘La Trobe Financial loan’).
In his affidavit of 6 September 2023, Mr Stefanetti confirms Mr Tesoriero’s evidence in relation to the two offsetting claims. He notes the financial statements and accounts of the Family Trust have not been updated since 30 June 2020 because the defendant is now in liquidation (although it is unclear why that would necessarily follow). However, he says that the application of the two offsetting claims against the debt claimed by the plaintiff would result in a credit in favour of the Family Trust in the amount of $846,355.99.
In his affidavit dated 17 October 2023, Mr Ireland considers the two offsetting claims against contemporaneous financial documents he has obtained pertaining to TIG, the Investment Trust, 286 Carlisle Street and 23 Margaret Street.
In relation to the first transaction, Mr Ireland produces a Xero account transaction statement for 286 Carlisle Street which shows that on 25 February 2021, $100,000 was received by 286 Carlisle Street from Mr Tesoriero, resulting in an increase to the cash balance and a corresponding increase to the current liability account titled ‘Transactions In’. The balance sheet for 286 Carlisle Street records a non-current liability of $90,000, described as ‘Transactions In’, which corresponds to the closing balance of the ’Transactions In’ account in the Xero account transaction statement. Also exhibited to Mr Ireland’s affidavit is a Report on Company Activities and Property (‘ROCAP’) dated 7 December 2022 and submitted by Mr Vincenzo Tesoriero, who is understood to be Mr Giovanni Tesoriero's son. The only listed creditor for 286 Carlisle Street in the ROCAP is the Commonwealth Bank. Mr Ireland deposes that following his review of the books and records of 286 Carlisle Street, TIG and the Investment Trust, he has been unable to identify any connection between the first transaction and either the plaintiff or the defendant. He has also been unable to locate any record of the defendant and/or the Investment Trust having any obligation to pay an amount to the plaintiff or the Family Trust in relation to the first transaction.
As regards the second transaction, Mr Ireland exhibits a balance sheet for 23 Margaret Street which records the La Trobe Financial loan as a non-current liability of $1,141,809.87 and $1,109,782.44 as at 30 June 2020 and 30 June 2022, respectively. A Xero account transaction statement for 23 Margaret Street for the period 1 January 2012 to 2 November 2022, together with bank statements for that entity, show 23 Margaret Street was regularly servicing the La Trobe Financial loan by way of monthly repayments of $6,963.39. The account transaction statement also reveals the La Trobe Financial loan was predominantly utilised to effect a repayment of $1,005,092.25 to ‘AFSH Nominees 2’ on 30 June 2020. Emails from late April 2020 passing between Brandon Chin, Tony Bouchahine (Chief Financial Officer of the ‘Forum Group’), Vincenzo Tesoriero and Harry Tsouskas, suggest the La Trobe Financial loan was utilised to refinance AFSH Nominees, although that entity was referred to in the correspondence as ‘Ascent’. Again, based on a review of the books and records of the defendant and 23 Margaret Street carried out in Mr Ireland’s capacity as liquidator of both of those entities, Mr Ireland has been unable to identify any connection between the second transaction and either the plaintiff or the defendant. Nor has he been able to find any record of the defendant and/or the Investment Trust having any obligation to the plaintiff or the Family Trust in relation to the second transaction.
In his responsive affidavit of 3 November 2023, Mr Stefanetti exhibits a copy of an unsigned affidavit prepared by him for the purpose of a proceeding in the Federal Court of Australia.[46] He says the affidavit concerns the incorrect nature of financial information provided by Mr Bouchahine and Mr Chin of the ‘Forum Group’,[47] which he had no ability to check or verify at the relevant time. He further states it is evident that Mr Vincenzo Tesoriero relied on incorrect financial information, prepared by Mr Bouchahine and Mr Chin, when completing the ROCAP.
[46]Proceeding VID 778 of 2021. By his further affidavit of 21 November 2023, Mr Stefanetti exhibits a sworn copy of the Federal Court affidavit, which is dated 18 March 2022.
[47]The ‘Forum Group’ is not defined in the plaintiff’s material.
In relation to the first transaction, Mr Stefanetti says:
Every dollar the Tesoriero family made in the Forum Group and related Companies, were [sic] made from personal Tesoriero funds on behalf of Tesoriero entities. For Mr Ireland now to dispute this treatment runs contrary to every other treatment in the past. $100.000 deposited into the 286 Carlisle Street Pty Ltd bank account on 25/2/21 is clearly evident.
As regards the second transaction, Mr Stefanetti says Mr Ireland has ‘failed to comprehend or understand the loan Tesoriero obtained for the benefit of 23 Margaret Street Trust’. By way of additional context, he confirms that ‘AFSH Nominees (Ascent) originally assisted with some finance to acquire a property at 23 Margaret Street Rozelle [New South Wales] in the name of [the] 23 Margaret Street Trust.’ He deposes that Mr John Tesoriero (who I take to be Giovanni Tesoriero) pledged personal assets, and obtained the La Trobe Financial loan, to pay out the ‘Ascent debt’, which was done on behalf of the Investment Trust. Mr Stefanetti states that Mr Ireland has failed to acknowledge that whilst Mr Tesoriero’s personal assets have since been sold, he has received no funds whatsoever and there remains a debt to La Trobe Financial. Further, Mr Stefanetti rejects Mr Ireland’s suggestions that, firstly, there is no connection between the second transaction and either of the parties to the proceeding and secondly, that there is no record of the defendant or the Investment Trust having any obligation to the plaintiff or the Family trust in relation to the second transaction. He repeats that ‘every dollar the Tesoriero family made in the Forum Group’ (which is undefined) and related companies was made from ‘personal Tesoriero funds’ on behalf of Tesoriero entities. He says that for Mr Ireland to dispute ‘this treatment runs contrary to every other treatment in the past’.
Consideration of offsetting claim grounds
Having regard to the evidentiary material and submissions relied upon by the parties, I do not consider the first and second transactions represent genuine offsetting claims advanced in good faith.
In relation to the first transaction, despite Mr Tesoriero’s assertion that it results in an offsetting claim, the contemporaneous books and records of 286 Carlisle Street (namely its bank statements, Xero account transaction statement and balance sheet), do not reveal any payment by the plaintiff or the Family Trust to, or investment in, 286 Carlisle Street, on behalf of either TIG or the Investment Trust. Instead, the bank statement for 286 Carlisle Street suggests Mr Tesoriero made a $100,000 payment to 286 Carlisle Street with the descriptor ‘Giovanni Tesoriero Loan’. Further, the ROCAP for 286 Carlisle Street makes no mention of any liability to the plaintiff or the Family Trust, in respect of the first transaction. The suggestion that Mr Vincenzo Tesoriero relied upon incorrect financial information when completing the ROCAP is unsubstantiated, as the plaintiff has not explained the nature of the incorrect information or how it relates to the first transaction. It follows that the alleged offsetting claim concerning the first transaction lacks a sufficient objective existence and prima facie plausibility.
As regards to the second transaction, the contemporaneous books and records of 23 Margaret Street (namely the La Trobe Financial loan documentation, 23 Margaret Street’s bank statements and its Xero account transaction statement and balance sheet) similarly do not reveal any payment by the plaintiff or the Family Trust to, or investment in, 23 Margaret Street on behalf of either TIG or the Investment Trust. The documentation makes no mention of the parties to the proceeding or their respective trusts. Instead, the documentation reveals the La Trobe Financial loan was procured for another entity, San Toro Balaclava Pty Ltd, and that Mr Giovanni Tesoriero personally guaranteed the amount borrowed. As previously noted, the financial records and internal emails of 23 Margaret Street reveal the La Trobe Financial Loan was substantially utilised by 23 Margaret Street to refinance its debt of $1,005,092.25 owed to AFSH Nominees and that 23 Margaret Street serviced the loan. The absence of any relevant objective evidence to support the characterisation of the second transaction as a genuine offsetting claim means it is impossible to distinguish it from mere bluster or assertion.
In the case of both alleged offsetting claims, there is an absence of mutuality in the identity or capacity of the defendant creditor who served the demand, and the plaintiff who asserts the alleged offsetting claim. The plaintiff has not identified any nexus between itself and the defendant in respect of the first or second transaction. Further, Mr Stefanetti’s repeated statement in support of the offsetting claims that ‘every dollar the Tesoriero family made in the [undefined] Forum Group and related Companies were [sic] made from personal Tesoriero funds on behalf of Tesoriero entities’ is unhelpful in its level of generality. It seems the equivalent of saying: ‘everything in the corporate group is connected through the Tesoriero family and so it follows there are genuine offsetting claims’. This does not meet the relatively low evidentiary hurdle required by s 459H(1)(b) of the Act.
Moreover, both offsetting claims lack sufficient particularity to enable the Court to determine they are not fanciful. The defendant has not given any evidence to explain how the first and second transactions were payments or investments by the plaintiff and/or the Family Trust on behalf of the defendant and/or the Investment Trust. For example, in the case of the second transaction, Mr Stefanetti’s statement that Mr Tesoriero procured the La Trobe Financial loan on behalf of the Investment Trust is vague and lacking in precision. Further, the plaintiff has not clearly articulated how either transaction gives rise to an offsetting claim by the plaintiff against the defendant and its legal basis. I accept the defendant’s submission that the alleged offsetting claims are misconceived and essentially incoherent.
During the hearing, the plaintiff’s counsel was provided with various instructions about the apparent purpose of the first and second transactions. She was informed that the first transaction was intended to extinguish intercompany debt owed by the defendant to the plaintiff. As regards to the second transaction, the plaintiff’s counsel was instructed that the La Trobe Financial loan was made for the benefit of the Investment Trust because the Investment Trust would share in the profits of the sale of the property owned by 23 Margaret Street and it would secure payment of the UPEs (which of course, has not occurred). There was no evidentiary basis to support those instructions and the Court cannot accept submissions as evidence. Such as it is, the additional detail does not make either of the transactions more comprehensible or the alleged offsetting claims any less incoherent.
Considering the material relied upon by the plaintiff in its totality, the Court is left with the distinct impression that the purported offsetting claims have only been put forward by the plaintiff in response to the pressure associated with receiving the statutory demand.
Section 459J(1)(b) ground
I will now deal with the plaintiff’s last contention that the statutory demand should be set aside for ‘some other reason’ under s 459J(1)(b) of the Act. As best I understand it, the plaintiff argues the statutory demand should be set aside for ‘some other reason’ because:
(a) the statutory demand has been issued on an incorrect basis where the sum claimed is not supported by a complete set of books and records;
(b) the defendant made a ‘strategic choice’ to utilise the statutory demand procedure instead of issuing a conventional proceeding ‘to prove’ the debt;
(c) the debt claimed in the demand is overstated;
(d) a statutory demand is not a debt collection tool. The use by the defendant of the statutory demand procedure constitutes an abuse of process; and
(e) the defendant was invited by the plaintiff to withdraw the demand but has refused to do so. This has necessitated the plaintiff making the application to set aside the demand.
I have already dealt with the plaintiff’s complaint about the reliability of the financial documents supporting the debt claimed in the demand. I have also explained that the schedule to the demand references the plaintiff’s own ledger account (which is the ledger account of the Family Trust). Further, the demand is supported by the affidavit of Mr Ireland affirmed on 18 August 2023, in which he identifies the source of his knowledge about the debt to be the books and records of the defendant company. Moreover, none of the specific financial documents sighted by Mr Ireland – which record the UPEs the subject of the demand, and are exhibited to his 17 October 2023 affidavit – are directly challenged by the plaintiff. I have also explained that obtaining a judgment debt from a court of competent jurisdiction is not a precondition for the issuing of a statutory demand.
In relation to the contention that the demand is overstated, it is assumed this is a reference to the perceived failure of the defendant’s liquidators to account for the offsetting claims. I have already addressed those grounds. In the event the overstatement relates to something else, the amount of the overstatement was not made clear and the point was not developed. To the extent the alleged overstatement is said to constitute an abuse of process, I deal with that below.
As to the last two assertions (abuse of process and failure to withdraw the demand), I accept the defendant’s submission that the plaintiff is prevented from raising these matters as they were not identified expressly, or by reasonable inference, in the s 459G affidavits[48] filed in support of the application within the 21 day statutory period[49]. I note that the plaintiff’s counsel conceded in reply submissions that the relevant letter, by which the plaintiff’s lawyers invited the defendant to withdraw the demand, was sent after the expiry of the 21 day period.
[48]Being the affidavits of Mr Tesoriero and Mr Stefanetti, each affirmed on 6 September 2023.
[49]Sceam Construction Pty Ltd v Clyne (2021) 64 VR 404, 415 [38], 417 [42] (Ferguson CJ, Sifris and Walker JJA).
However, even if I am wrong, and the allegation of abuse of process can be reasonably inferred from the s 459G affidavits, there is no evidence before the Court that the defendant’s liquidators sought to invoke the statutory demand procedure as a means of obtaining an advantage for which it is not designed or some collateral advantage beyond what the law offers, such as the application of pressure to compel payment of a disputed debt that ought to have been pursued through ordinary court proceedings.[50] The evidence fails to establish any impropriety of purpose or attempted subversion of the legislative scheme in Pt 5.4 of the Act.
[50]See Createc Pty Ltd v Design Signs Pty Ltd (2009) 71 ACSR 602, 611 [50] (Martin CJ), adopting the criterion from Williams v Spautz (1992) 174 CLR 509; Reschke Pty Ltd v DiGiorgio Family Wines Pty Ltd [2017] SASC 187, [66] (Doyle J).
Conclusion
In light of the above matters, none of the grounds relied upon by the plaintiff to set aside the statutory demand can succeed. I will therefore dismiss the plaintiff’s originating process and will hear the parties on the formulation of appropriate orders, including as to costs.
SCHEDULE OF PARTIES
| S ECI 2023 04112 | |
| BETWEEN: | |
| HAIDI HOLDINGS PTY LTD (ACN 005 058 999) | Plaintiff |
| - v - | |
| TESORIERO INVESTMENT GROUP PTY LTD (IN LIQUIDATION) (ACN 161 088 115) | Defendant |
3
20
0