Re LPD Corporation Pty Ltd
[2010] VSC 313
•15 July 2010
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
LIST E
No. 6819 of 2009
IN THE MATTER of LPD CORPORATION PTY LTD (ACN 115 443 813)
| LPD CORPORATION PTY LTD (ACN 115 443 813) | Plaintiff |
| v | |
| LACA NOMINEES PTY LTD (ACN 006 885 927) | Defendant |
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JUDGE: | Davies J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 24 June 2010 | |
DATE OF JUDGMENT: | 15 July 2010 | |
CASE MAY BE CITED AS: | Re LPD Corporation Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2010] VSC 313 | |
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CORPORATIONS – Statutory demand – Whether genuine dispute about existence of debt – Whether genuine offsetting claim – Corporations Act 2001 (Cth) ss 459G, 459H.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr. M Gronow | Chiodo Madafferi |
| For the Defendant | Mr. G Moffatt | Sica & Co |
HER HONOUR:
This is an appeal against an order of Gardiner AsJ dismissing the plaintiff’s application under s 459G of the Corporations Act 2001 (Cth) (“the Act”) to set aside a statutory demand served on it by the defendant. The appeal proceeds as a hearing de novo of the application to the Associate Judge.[1]
[1]Supreme Court (Corporations) Rules 2003 (Vic) r 16.5(1); Supreme Court (General Civil Procedure) Rules 2005 (Vic) r 77.06(7).
The plaintiff contended that the statutory demand should be set aside because:
(a) there is a genuine dispute between the plaintiff and the defendant about the existence of the debt to which the demand related;[2] and
(b) the plaintiff has an offsetting claim against the defendant.[3]
[2]Corporations Act 2001 (Cth) s 459H(1)(a).
[3]Corporations Act 2001 (Cth) s 459H(1)(b).
A. Relevant Legal Principles
The authorities make it clear that the company must put sufficient evidence before the Court to enable the Court to conclude that there is a dispute and that it is a genuine dispute.[4] In Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd[5] the Full Federal Court stated that a “genuine” dispute is one that truly exists in fact and is bona fide and that the grounds supporting the existence of the dispute must be real and not spurious, hypothetical, illusory or misconceived.[6]
[4]Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290.
[5](1997) 76 FCR 452.
[6]Ibid 464.
In TR Administration Pty Ltd v Marchetti and Sons Pty Ltd,[7] Dodds- Streeton JA (with whom Neave JA and Kellam JA agreed) said:
[The company] is required to evidence the assertions relevant to the alleged dispute … only to the extent necessary for that primary task. The dispute … should have a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion, and sufficient factual particularity to exclude the merely fanciful or futile. … it is not necessary for the company to advance, at this stage, a fully evidenced claim. Something “between mere assertion and the proof that would be necessary in a court of law” may suffice.[8]
There must be sufficient evidence before the Court for the Court to be satisfied that the alleged dispute has foundation.
[7](2008) 66 ACSR 67.
[8]Ibid [71].
Although the standard of satisfaction is “not a particularly high one”,[9] as Dodds- Streeton JA went on to say:
A rigorous curial approach is nevertheless essential to the effective operation of the statutory scheme.[10]
Thus the material before the Court must contain the basis for establishing that a genuine dispute exists and be of sufficient probative value that the Court is satisfied that there is a real dispute.
[9]Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37, 39 (Lockhart J).
[10]TR Administration Pty Ltd v Marchetti and Sons Pty Ltd (2008) 66 ACSR 67, 72. See also Eyoto Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, 787 (McLelland J).
As Dodds-Streeton JA observed in TR Administration Pty Ltd v Marchetti and Sons Pty Ltd, no in-depth examination or determination of the merits of the alleged dispute is necessary, or indeed appropriate, as the application is akin to one for an interlocutory injunction and, moreover, the determination of the “ultimate question” of the existence of the debt should not be compromised.[11] Nonetheless, the evidence must be of a quality and particularity sufficient to support a genuine dispute.[12]
[11](2008) 66 ACSR 67, [57].
[12]Ibid [73].
The same principles apply to whether the plaintiff has an offsetting claim.[13]
[13]Ozone Manufacturing Pty Ltd v Commissioner of Taxation (2006) 198 FLR 329, 343; TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd [2008] VSCA 70 (Unreported, Neave, Kellam and Dodds-Streeton JJA, 5 May 2008) [71]-[72]; Powerhouse Australasia Pty Ltd v Viarc Pty Ltd [2006] VSC 508 (Unreported, Dodds-Streeton J, 23 November 2006) [48]-[49].
B. No Genuine Dispute About the Existence of the Debt Shown
The plaintiff is the trustee of the LPD Unit Trust which was established by Deed of Trust on 25 July 2005 and, in that capacity, is in the business of developing property and is the owner of a large development site on which residential and commercial buildings are proposed (“the property”).
The statutory demand claimed the sum of $122,555.77 for a loan of $100,000 advanced to the plaintiff by the defendant on 25 August 2006 together with interest of $22,555.77. The demand was accompanied by an affidavit from a director of the defendant, Mr Lascaris, who deposed that the sum was owing pursuant to a “Deed of Agreement” dated 25 August 2006 which was exhibited to his affidavit. Clause 3 of that agreement relevantly required the plaintiff to repay the loan plus interest to the defendant within 30 days of approval of a town planning permit.
It was common ground that payment was not made in accordance with clause 3. However, the plaintiff contended that the time for repayment was extended by the parties by oral agreement until the plaintiff either sold the property or was able to obtain construction finance for the development of the property. The plaintiff contended that neither event had occurred and accordingly that the time for repayment had not expired.
The sole evidence in support of that contention was as follows – Mr Agosta, the sole director of the company deposed in his affidavit sworn 20 July 2009 that:
14. The Agreement is an oral agreement made between myself and Mr Lascaris on behalf of the Defendant Company. The Agreement is constituted by a number of conversations that occurred between myself and Mr Lascaris between April 2007 and March 2009, and is further evidenced by the conduct of the Defendant in allowing the refinance of the property to take place and continue to introduce prospective buyers without any request of the payment [of the principal and interest].
15. Mr Lascaris has been kept informed of my efforts (on behalf of the Plaintiff) in obtaining finance for construction in the sale of the Sunshine property. … The plaintiff company is confident it will have finance in place soon through a number of options including by sale of the project, addition of equity partners to the project or obtaining of mezzanine finance arrangements.
That evidence plainly amounted to no more than assertion and argument. It was in very general terms, lacking in specificity and in particularisation of the conversations claimed to have taken place. Although the onus to show a genuine dispute is a low hurdle, there must be some evidence before the Court to provide the foundation for the claim that there is a genuine dispute. In Eyota Pty Ltd v Hanave Pty Ltd,[14] McLelland J said that the low hurdle:
does not mean that the court must accept uncritically as giving rise to a genuine dispute, every statement in an affidavit “however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be” not having “sufficient prima facie plausibility to merit further investigation as to [its] truth” … or “a patently feeble legal argument or an assertion of facts unsupported by evidence”[15]
Assertion unsupported by evidence is not sufficient to demonstrate that the claim has substance.
[14](1994) 12 ASCR 785.
[15]Ibid 787.
The balance sheet for the LPD Unit Trust for the year ending 30 June 2008, which the defendant put into evidence, does not enable the Court to be satisfied that there is any genuine dispute about the plaintiff’s liability to pay the debt demanded. Although that balance sheet showed the loan as a non-current liability, the balance sheet was not verified by the plaintiff, there was no indication that the balance sheet had been audited or adopted by the plaintiff and there were no notes accompanying the accounts which explained the entry.
Accordingly I do not consider that the plaintiff has discharged the onus it carries of establishing that there is a genuine dispute in respect of the debt that is the subject of the demand.
C. The Offsetting Claim
The plaintiff has claimed that it has an offsetting claim of $248,400 for an amount owed by the defendant to the plaintiff in respect of monies lent.
It was common ground that the defendant contributed $240,000 towards the deposit for the purchase of the property.
The plaintiff said that the funds were provided by the defendant by way of capital contribution to the Trust and that the contribution was lent back by the Trust to the defendant in March 2006 when the funds were not required.
The evidence of Mr Agosta was that the defendant, as a 5% unit holder in the Unit Trust, “had to pay [its] contribution towards ... the purchase price” of the property. As a 5% unit holder, the defendant’s contribution was $240,000. Mr Agosta deposed in his affidavit sworn 20 July 2009 that :
8. …When the property was refinanced and in order to assist the individual unit holders, it was agreed that as there was sufficient money from the refinance to move the project forward the unit holders would be loaned the money that they had paid for the purchase of their unit shares. In the case of the Defendant Company this was $248,400.
The defendant said it advanced this amount by way of loan to the Trust for the purpose of funding part of the deposit and that the plaintiff secured the balance of the deposit (the other 5% making up the total deposit of 10%) for the property by requesting two further loans each of $120,000 from Emma Paving Pty Ltd and Joseph Cavallaro. Mr Lascaris deposed that in consideration of the loan provided by the defendant and the commercial risk assumed in lending the deposit funds, the plaintiff offered the defendant a 5% holding in the Unit Trust. Mr Lascaris further deposed that the deposit money borrowed by the plaintiff from the defendant was repaid with interest in March 2006. Mr Lascaris exhibited a letter that the defendant received from the plaintiff’s then accountant on 12 March 2006 notifying the defendant of the repayment of the defendant’s loan with interest. The letter stated as follows [on the heading of John Page & Co Certified Practising Accountants]:
Dear John,
LPD Corporation Pty Ltd
We advise that the recent cheque forwarded to you [sic] company for the amount of $248,400.00 is represented as follows :-
Return of Loan 240,000.00
Interest Paid 8,400.00
Total $248400.00
Please retain this letter for your income tax purposes.
Should you have any queries, please do not hesitate to contact our office.
Yours Faithfully,
JOHN PAGE & CO
In response Mr Agosta asserted in paragraph 6 of his affidavit sworn 11 August 2009 that:
Subsequent to the purchase and refinance of the loans to purchase the property, it was determined that there was sufficient equity in the property to move the project forward. It was agreed between the various Unit Holders that sums equivalent to the amounts of the deposit monies plus interest would be advanced to the Unit Holders as a loan. It was further agreed that as it was a loan to the Unit Holders, in the event that funds were required by the plaintiff company or the unit trust to move the project forward, the loans could be recalled if necessary, and that the loans would be payable on demand. The Agreement between the various Unit Holders as referred to above occurred in a number of conversations and discussions between Joe Agosta of the Plaintiff, Mr. John Lascaris of the Defendant and Mr. Andrew Latella, one of the other Unit Holders. Discussions took place shortly after the purchase of the property and the funding to complete the purchase, and it occurred at various meetings which took place to discuss the project at the office of Jace Developments Pty Ltd in Richards Street, Maidstone.
Mr Agosta’s evidence amounted to no more than assertion which was contradicted by the accountant’s letter. Mr Agosta stated that the letter contained an error in that the words “Return of Loan” were incorrect and the letter should read “loan of $240,000” so as to reflect the true nature of the payment made. He stated that although Mr Page was the company accountant at the time of the correspondence his appointment as accountant for the plaintiff was terminated in about June 2009 and that the letter was not sent with his authority nor did it represent the true position either then or now. This assertion cannot be accepted without some evidence to support it. Such evidence was entirely missing. Although the plaintiff takes issue with the correctness of that letter, there was no evidence before the Court which demonstrated that there was some factual foundation for that assertion.
Accordingly the appeal is dismissed.
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