Re Straightline Construction Co Pty Ltd
[2022] VSC 708
•18 November 2022
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2022 02382
IN THE MATTER of STRAIGHTLINE CONSTRUCTION CO PTY LTD (ACN 639 915 183)
BETWEEN:
| STRAIGHTLINE CONSTRUCTION CO PTY LTD (ACN 639 915 183) | Plaintiff |
| v | |
| THE OLD A & B PTY LTD (ACN 076 987 525) as trustee for A&B BROWN FAMILY TRUST (formerly known as BROWNS PILING PTY LTD (ACN 076 987 525)) | Defendant |
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JUDGE: | Gardiner AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 20 October 2022 |
DATE OF JUDGMENT: | 18 November 2022 |
CASE MAY BE CITED AS: | Re Straightline Construction Co Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2022] VSC 708 |
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CORPORATIONS – Application to set aside a statutory demand pursuant to s 459G of the Corporations Act 2001 (Cth) on grounds of genuine dispute – Plaintiff contends that there is a genuine dispute as to the identity of the contracting parties – Consideration of authorities dealing with what constitutes a genuine dispute – Dispute contended for by plaintiff found to be spurious and inconsistent with contemporaneously generated documentation and communications – Application dismissed.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms C Darby, solicitor | Robert James Lawyers |
| For the Defendant | Mr C Hibbard of counsel | Belleli King & Associates |
TABLE OF CONTENTS
Introduction........................................................................................................................................ 1
The evidence....................................................................................................................................... 1
Straightline Construction’s jurisdictional affidavit.................................................................... 2
Browns’ affidavit evidence in opposition to the application.................................................... 3
Straightline Construction’s affidavit in reply.............................................................................. 7
Brown’s affidavit in response to Straightline Construction’s affidavit in reply................ 11
Straightline Construction’s submissions.................................................................................... 14
Brown’s submissions....................................................................................................................... 16
Legal principles................................................................................................................................ 20
Consideration.................................................................................................................................... 26
HIS HONOUR:
Introduction
By an originating process filed on 27 June 2022, the plaintiff, Straightline Construction Co Pty Ltd (‘Straightline Construction‘), makes application under ss 459G, 459H, and 459J of the Corporations Act 2001 (Cth) (‘the Act’) to set aside a statutory demand dated 7 June 2022 (‘the Demand’) served on it by the defendant, Browns Piling Pty Ltd (now named The Old A & B Pty Ltd) (‘Browns’).[1] Straightline Construction contends that it has a genuine dispute in respect of the debt claimed in the Demand.
[1]The defendant was formerly named Browns Piling Pty Ltd (ACN 076 987 525). On 16 August 2020, after service of the statutory demand, it changed its name to The Old A & B Pty Ltd and retained the same ACN.
The Demand claims that Straightline Construction owes Browns $1,073,160.00 in respect of two invoices. The schedule to the Demand describes the debt as follows:
Unpaid invoices for supply and construction work rendered as shown below:
Invoice no. P2202-1 dated 20 March 2022 $605,044.00
Invoice no. P2202-2 dated 20 April 2022 $498,116.00
Total Amount: $1,073,160.00
The Demand was accompanied by an affidavit of Alan George Brown sworn 7 June 2022, which is in compliance with s 459E(3) of the Act.
Straightline Construction’s application has been made within the time prescribed by s 459G(2) of the Act.
Since the service of the Demand, the amount claimed in the Demand has been reduced to $866,078.51 for reasons that are explained below.
The evidence
Straightline Construction’s application is supported by the affidavits of George Parissis affirmed on 27 June 2022 and 29 September 2022.
Straightline Construction also filed an affidavit of Christine Evelyn Darby, affirmed on 19 October 2022. Ms Darby’s affidavit related to Browns’ change of name, to which reference has been made.
Browns relies on the two affidavits of Alan George Brown affirmed on 25 July 2022 and 11 October 2022.
On 9 December 2021, Hansen Yuncken Pty Ltd (‘Hansen Yuncken’), as head contractor, engaged Straightline Civil Pty Ltd (‘Straightline Civil’), as subcontractor, (‘the Hansen Yuncken Contract’) to carry out retention and foundation piling works as part of a large residential construction project at Bills Street, Hawthorn (‘the Project’). Straightline Civil is a member of a corporate group involved in construction, which I shall refer to in these reasons as the Straightline Group.
Straightline Construction’s jurisdictional affidavit
Mr Parissis’ affidavit of 27 June 2022, the only affidavit Straightline Construction filed within the 21 day period after service of the Demand, identifies the dispute as follows:
[Straightline Construction] disputes that the debt claimed in the Statutory Demand is due and payable, by reason of there being a genuine dispute that the debt is owing as the Company is not the entity which contracted with [Browns] to perform the services detailed in the Invoices, and the debts have not been sufficiently particularised.
It will be seen that Straightline Construction complained in Mr Parissis’ affidavit that the Demand insufficiently particularised the debts and that this constituted a ground to set aside the demand under s 459J of the Act, but this ground was not pressed at the hearing of the proceeding.
Mr Parissis deposes that Straightline Construction was incorporated in March 2020 and performs civil construction works in metropolitan Melbourne. Straightline Construction is involved in several small construction projects in Brighton and Clayton that will be finished shortly, but is not contracted to perform any other works when those projects are completed. Mr Parissis states that Straightline Construction has never been contracted to perform subcontract work on any sites in Hawthorn.
The ASIC extract in respect of Straightline Construction reveals that Mr Parissis is its sole director. Tarkan Gulenc was previously a director, but he resigned on 4 August 2020. Correspondence from Straightline Construction in evidence describes Mr Gulenc as the General Manager of Straightline Construction.
The issue for determination is whether, on an application of the relevant legal principles, there is a genuine dispute concerning the identity of the party that contracted with Browns in respect of the piling works. Straightline Construction contends that Browns contracted with Straightline Civil, whereas Browns contends that it contracted with Straightline Construction.
Browns’ affidavit evidence in opposition to the application
In his affidavit affirmed on 25 July 2022, Mr Brown, who is the sole director of Browns, states that on 20 December 2021, Browns provided a quotation dated 17 December 2021 to a customer identified as ‘Straightline’[2] for piling works at the Project (‘the piling works’). Browns provided the quotation for the construction of retention piles and the design and construction of continuous flight auger foundation piles. The quotation was emailed to the address [REDACTED].
[2]At various points in their evidence, both parties adopt the generic name of ‘Straightline’ without specifying which member of the group it is intended to be a reference to.
In an email dated 20 December 2021, Oltan Yemez described in the email signature as ‘Project Manager’ of ‘Straightline’,[3] remarked to Craig Vickerman, the General Manager of Browns, ‘I hope this can work, if so let’s agree and lock this one in. It would be nice to see Browns on our job again.’
[3]The email signature does not state which entity in the Straightline Group Oltan Yemez is writing in his capacity as Project Manager.
Mr Brown states that on 20 December 2021, Straightline and Browns agreed via email correspondence on the final quotation price in respect of the piling works and confirmed that Browns would undertake the works.
Browns commenced the piling works on the Project on or around 17 February 2022. On 12 April 2022, Browns completed all the works scheduled in the first stage of the Project and demobilised from the site.
Mr Brown states that Browns has had dealings with the Straightline Group for several years. On 31 March 2020, Browns received a letter on Straightline Construction’s letterhead, directing all future invoices and correspondence dating from 1 April 2020 be made out to Straightline Construction. The letter appears to be a circular letter to contractors. It states:
Please ensure all future invoices and correspondence dated from 1 April 2020 are made out to STRAIGHTLINE CONSTRUCTIONS CO Pty Ltd. If we are required to fill out a credit application for a 30-day account could you, please forward to: [REDACTED]. (emphasis in original)
The letter is signed by Leonie Darling, who is described as the Account Manager.
Mr Brown states that prior to the commencement of the work on the Project, Browns did not receive any further direction or requests from Straightline regarding the identity of the entity in the Straightline Group to whom invoices were to be issued. He states that based on the previous direction from Straightline, Browns issued its invoices to Straightline Construction for the works undertaken on the Project.
Three invoices were issued in respect of the Project:
(a) invoice P2202 dated 21 February 2022 (‘February Invoice’);
(b) invoice P2202-1 dated 20 March 2022 (‘March Invoice’); and
(c) invoice P2202-2 dated 20 April 2022 (‘April Invoice’).
Mr Brown states that the February Invoice was paid on 14 April 2022, but the March and April Invoices have not yet been paid. These two unpaid invoices are the debts that are the subject of the claim made in the Demand.
Because no payment had been received in respect of the March and April Invoices, Browns followed up with Straightline for payment.
On 16 May 2022, an email was sent by Vicki Limnios from the accounts department of Browns to Tarkan Gulenc, stating:
I spoke with Leonie[4] on Thursday last week and she advised we would see payment of [the March Invoice] by Friday 13/05 but it has yet to hit our account. She has advised me today to come directly to you for confirmation.
Can you please advise a confirmed date for payment date for this invoice? (attached for your reference.)
Could you also advise your scheduled payment date for [the April invoice]? (also attached for your reference)
[4]This is apparently a reference to the office and account manager, Leonie Darling.
On 17 May 2022, Mr Gulenc responded by email from the address [REDACTED] to Ms Limnios (copied to Mr Craig Vickerman, the General Manager of Browns) and confirmed that:
we will be in a position to pay the [March] invoice end of this month on 31/1 June.
As to the April Invoice, Mr Gulenc stated:
I will need to get back to you next week in regards to the second invoice to confirm an exact payment date that I can honour.
Mr Gulenc’s email went on to state:
Other than that we are fine Craig so please relax and dispell [sic] any negative thoughts from your mind. We are not HWM.
HWM is a reference to a construction company that had gone into liquidation in or around 2019. As a result of that company’s collapse, Browns suffered a loss of approximately $800,000.00.
Mr Brown states that on 19 May 2022, the director of Straightline Construction, Mr Parissis, sent a text message to Mr Vickerman, stating:
Sorry Craig we tried our best yesterday trying to collect late payments so we can pass them on. Unfortunately with not much luck. You will be paid as per Tarkan’s email.
The March Invoice was not paid on 1 June 2020. On 6 June 2020, Mr Gulenc sent an email to Mr Vickerman with the subject line ‘Bills St Hawthorn’, in which Mr Gulenc stated:
Craig,
I’m working on the payment of the invoices for this project.
Unfortunately we’ve had a setback with cash flow and I’m unable to provide a firm payment date at the moment.
It’s however unlikely to be before the end of June with the way circumstances are looking. As soon as I am able to forecast a payment date I will let you [know].
Mr Brown states that the Construction Director of Hansen Yuncken, Matthew Beveridge, has informed him that Hansen Yuncken has paid ‘Straightline’ for all the piling works undertaken on the Project. This is confirmed in an email from Mr Beveridge to Mr Vickerman and circulated to Mr Brown, which is exhibited to Mr Brown’s affidavit.
Mr Brown states that on 7 June 2022, he instructed his solicitors to serve a statutory demand on Straightline Construction in respect of the unpaid invoices. On the same day, a copy of the Demand was emailed by his solicitors to Mr Parissis and Mr Gulenc.
Mr Brown states it was only after the Demand was issued that Straightline Construction and the Straightline Group allege the invoices for the Project were issued to the wrong entity in the Group. He states that no issues in respect of the form, substance or the identity of recipient of the invoices for the Project had been raised by Straightline Construction or the Straightline Group prior to the serving of the Demand. Mr Brown asserts that in light of Straightline Construction and the Group’s conduct to date, he believes this is an avoidance and delay tactic on their behalf.
On 1 July 2022, Mr Brown instructed his solicitors to send a letter to Straightline Construction’s solicitors in response to its application to set aside the Demand. In that letter, Straightline Construction’s solicitors noted, amongst other things:
(a)your client expressly instructed Browns Piling to issue its Invoices to Straightline Construction Co;
(b)your client then proceeded to pay the first invoice for the work undertaken by Browns Piling on the site (invoice dated 21 February 2022, number P2202);
(c)your client (including its director) agreed that the Invoices were due and payable to Browns and committed to paying the Invoices; and
(d)your client has failed to pay the Invoices and has since engaged in avoidance and delay tactics.
Mr Brown states that on 8 July 2022, Mr Parissis called him on his mobile telephone but he did not answer. Mr Parissis subsequently sent him a text message that day stating:
Hi Allen, it’s George from Straightline when you can give me a call back.
Mr Brown responded to this text message by explaining that his solicitor had told him that under the circumstances, there should be no communication between them. Mr Parissis sent a further text message stating:
Solicitor’s [sic] would say something like that. I wanted to talk to you about a proposal. Allen we intend to pay you, it would be good if we can catch up face to face.
Straightline Construction’s affidavit in reply
In his affidavit in reply affirmed 29 September 2022, Mr Parissis states that there are various ‘Straightline’ entities with different controllers, each having its own role in different projects. He states that the Hansen Yuncken contract between Hansen Yuncken, as the main contractor, and Straightline Civil (i.e. not Straightline Construction), as the subcontractor, lists Browns as the ‘selected secondary subcontractor’ for the Project. Mr Parissis says that Straightline Construction is not involved in the Hansen Yuncken contract at all. Further, he says that after service of the Demand, Hansen Yuncken issued a security of payment schedule on or around 20 August 2022, identifying Straightline Civil as the subcontractor.
I observe that Mr Parissis does not contend that Browns was provided with a copy of the Hansen Yuncken contract or was otherwise made aware of the identity of the parties to that contract.
Mr Parissis states that where it is said that Browns had dealings with ‘Straightline’ for several years, it was in fact engaged by four separate Straightline entities depending on the project. He states that the entity involved in the Project was Straightline Civil, not Straightline Construction.
As to the directions made on 31 March 2020 by Ms Darling, the account manager of Straightline Construction, to issue invoices to Straightline Construction, to which reference has been made, Mr Parissis states that he does not know why a further direction was not issued in relation to the Project to issue invoices to Straightline Civil. He says such a direction should have been issued to make it clear that invoices were to be issued to Straightline Civil and not Straightline Construction. He says that this was a ‘mistake’ and the invoices addressed to Straightline Construction should have been requested to be reissued to Straightline Civil. He states that this request for reissuing invoices has happened previously in relation to projects that Straightline Construction worked on for other Straightline entities. He cites an example of this, which was referred to by Mr Brown in his evidence, when, in June 2020, an invoice that was directed to Straightline Contractors was requested by Ms Darling, the account manager who had sent out the circular to subcontractors on 31 March 2021, to be reissued to Straightline Construction.
Mr Parissis states that on 20 September 2022, Peter Greenstreet, an Operations Manager of Browns, sent an email enquiring as to whom the invoices for the remaining works on the Project should be issued to. Oltan Yemez, representing Straightline Civil, responded, stating that all invoices should be issued to Straightline Civil. I observe that, of course, this was three months after service of the Demand and after the events giving rise to the issue, which is the subject of this proceeding. Mr Yemez’s direction from the context clearly related to the remaining works.
Mr Parissis exhibits an ASIC search of Straightline Civil, which records Tarkan Gulenc as the sole director. Mr Parissis asserts that the correspondence referred to in Mr Brown’s affidavit between Mr Gulenc and representatives of Browns confirms that Straightline Civil admits it owes the debt.
Mr Parissis states that he and Mr Gulenc are 50% shareholders in Straightline Civil and Straightline Construction through their respective corporate entities, Otto Properties Pty Ltd and Double Tier Pty Ltd. He confirms that Mr Gulenc is also the General Manager of both entities. Mr Parissis states that if Mr Gulenc is unavailable, due to being overseas and unable to communicate effectively, Mr Gulenc had instructed him to respond on his behalf in relation to matters involving Straightline Civil.
I note that despite Mr Gulenc’s significant involvement in this matter, he has not sworn an affidavit in this proceeding to support the position contended for by Mr Parissis, i.e. Straightline Civil is liable for the debt the subject of the Demand. This is unexplained.
Mr Parissis asserts that in regard to Mr Brown’s observations relating to the correspondence between Mr Parissis and representatives of Straightline Construction to support their proposition that Straightline Construction owes the debt, the reference to intentions to pay and Mr Parissis’ correspondence regarding payment does not refer to Straightline Construction being liable to pay the debt. Rather, he says, he was referring to the debt owed by Straightline Civil.
I note that the communications containing promises to pay by Mr Parissis in the text message exchanges that occurred on 8 July 2022[5] were in the context of a statutory demand having been served by Browns approximately one month before claiming the monies were owed by Straightline Construction under the two invoices issued to it. There was no advertence or reference to the identity of the contracting party as Straightline Civil in such communications or in the communications from Mr Gulenc on 17 May 2022[6] and 6 June 2022.[7]
[5]Exhibit AGB-11 to Mr Brown’s affidavit of 25 July 2022.
[6]Exhibit AGB-6 to Mr Brown’s affidavit of 25 July 2022.
[7]Exhibit AGB-8 to Mr Brown’s affidavit of 25 July 2022.
Mr Parissis states, in regard to the evidence of Mr Brown that a representative of Hansen Yuncken has informed him that Hansen Yuncken have paid ‘Straightline’ for the piling works undertaken for the Project, that Hansen Yuncken have paid Straightline Civil, not Straightline Construction. Mr Parissis contends that the reference by Hansen Yuncken’s representative to ‘Straightline’ having been paid all monies payable for works completed on the Project is a reference to Straightline Civil. I observe that one would expect that to be the case given the identity of the parties to the Hansen Yuncken contract.
Mr Parissis denies the application to set aside the Demand is a stalling tactic as Mr Brown alleges. He states that Straightline Construction did not realise the error in the entity listed on the invoices issued by Browns until the Demand had been issued.[8]
[8]Paragraph 4(j) of Mr Parissis’ affidavit of 29 September 2022 speaks of ‘the defendant’, not realising the error, whereas the context makes it clear that this was meant to be a reference to the Plaintiff in the application, i.e. Straightline Construction.
Mr Parissis says that Browns was then informed they had the wrong entity, but it refused to withdraw the Demand, necessitating this application.
Mr Parissis states he has been informed by Mr Gulenc and believes that an agreement has been reached (which he refers to as the ‘Tri-Partite Deed’) between representatives of Hansen Yuncken, Straightline Civil, and Browns in relation to the payment of outstanding amounts, whereby Hansen Yuncken agrees to pay progress payments due to Straightline Civil in respect of the Project directly to Browns, in satisfaction of outstanding invoices rendered by Browns in relation to the Project (including those the subject of the Demand). Mr Parissis has been informed and believes the Tri-Partite Deed has been circulated between the parties and that Browns has signed this agreement and provided the signed agreement to Hansen Yuncken. Mr Gulenc has provided Mr Parissis with a copy of the correspondence between himself and Mr Beveridge, a representative of Hansen Yuncken, detailing their discussions.
Mr Parissis states that he has also been informed by Mr Gulenc that progress payments owing by Hansen Yuncken to Straightline Civil have been paid directly to Browns in relation to the Project, in accordance with the Tri-Partite Deed. He states that the effect of these payments is to part pay the amounts claimed in the Demand. Mr Gulenc has also informed him that further payments are to be made by Hansen Yuncken to Browns, which will further reduce the amounts claimed in the demand. Mr Gulenc informs him that a total of $193,775.56 has been paid to date, being the payment of $105,739.93 (including GST) in relation to the July Payment Schedule and $88,035.63 (including GST) in relation to the August Payment Schedule.
The reference to payment schedules are to payment schedules issued by Straightline Civil under the Building and Construction Security of Payment Act 2002 (Vic); that is to say, Straightline Civil issued security of payment schedules to Hansen Yuncken, who, rather than remit the payments to Straightline Civil, paid Browns under the terms of the Tri-Partite Deed.
Brown’s affidavit in response to Straightline Construction’s affidavit in reply
Mr Brown affirmed a further affidavit regarding the matters raised by Mr Parissis in his second affidavit. He states that he did not receive a copy of the Hansen Yuncken contract until this proceeding was commenced.
As to the background of the Tri-Partite Deed, Mr Brown states that Browns refused to complete its scheduled works for the Project until the monies owing in respect of the unpaid invoices claimed in the Demand were paid in full. This was conveyed to Straightline through Browns’ solicitors and during several meetings in August 2022 attended by Mr Gulenc, Mr Parissis, representatives of the Construction, Forestry, Maritime, Mining and Energy Union (‘CFMEU’) and representatives of Hansen Yuncken.
Mr Brown states that during a meeting on 8 August 2022, Mr Beveridge, on behalf of Hansen Yuncken, requested that Browns complete its scheduled works for the Project directly for Hansen Yuncken rather than for Straightline. Browns has had a long standing professional relationship with Hansen Yuncken, which has included undertaking works on numerous joint projects over 10 years. Mr Brown states that given that background, and as a professional courtesy to Hansen Yuncken, he decided on behalf of Browns that Browns would agree to complete the additional works for Hansen Yuncken. Browns undertook the works on 29 August 2022 to 2 September 2022.
He states that in consideration for undertaking the additional works on the Project, Hansen Yuncken agreed to redirect payment to Browns of monies that were otherwise payable by Hansen Yuncken to Straightline under the July and August payment schedules issued by Straightline Civil to Hansen Yuncken. The monies paid to Browns by Hansen Yuncken were $105,739.93 including GST in relation to the July payment schedule and $101,341.56 in relation to the August payment schedule.
During a meeting on 8 August 2022 between Browns, Mr Beveridge, Mr Gulenc, and representatives of the CFMEU, it was agreed that the payments would be deducted from the monies owing to Browns in respect of the unpaid invoices the subject of the Demand. As a result of the payments made by Hansen Yuncken, the remaining debt owed to Browns in respect of the unpaid invoices is now $866,087.51 (‘the remaining statutory demand debt’).
Mr Brown states that Browns is still also owed the sum of $66,000.00 plus GST for the additional works completed at the request of Hansen Yuncken. However, it has not yet rendered an invoice for this sum and the amount does not form any part of the remaining statutory demand debt.
Mr Brown states that the agreement reached with Hansen Yuncken does not concern the remaining statutory demand debt and all monies agreed to be paid by Hansen Yuncken to Browns have been remitted. Hansen Yuncken has not undertaken to make any further payments to satisfy the balance owing on the remaining statutory demand debt.
As to the correspondence referred to in Mr Parissis’ second affidavit,[9] although Mr Gulenc confirmed that additional payments would be made to Browns on 9 September, October and November 2022 in full satisfaction of the remaining statutory demand debt, none of these payments have been received by Browns, nor did the promise of these payments form part of the agreement with Hansen Yuncken.
[9]Exhibit GP-3 to Mr Parissis’ affidavit of 29 September 2022, 34–8.
Mr Brown states that non-payment of the invoices claimed in the Demand had placed Browns in a challenging financial position. He considered that given the difficulty Browns had experienced recovering the monies, entering into the Tri-Partite Deed represented the only immediate prospect of recovering at least a portion of the monies owed to Browns.
As to the email sent by Mr Greenstreet on behalf of Browns, which is referred in Mr Parissis’ second affidavit, the invoicing query by Mr Greenstreet related to the additional works debt, for works performed between 29 August 2022 to 2 September 2022 only, and did not concern the remaining statutory demand debt. He states that he has been informed that Hansen Yuncken requested that Browns render an invoice in respect of the additional works debt for the purposes of its own internal accounting processes for the Project. He states that he will not issue an invoice on behalf of Browns for the additional works debt until the conclusion of this proceeding.
Mr Brown states that he maintains his belief that Straightline Construction’s application to set aside the Demand is an avoidance and delay tactic. Since issuing the Demand to Straightline Construction, representatives from the CFMEU have been attempting to assist Browns to obtain payment of the monies owed by Straightline Construction.
On 16 September 2022, Mr Gulenc sent a series of text messages, screenshots of which are exhibited to Mr Brown’s affidavit, to a representative of the CFMEU, Mr Derek Christopher, stating, amongst other things:
I’m under a lot of pressure man, you don’t even want to hear what I’ve got to say? 2 other parties have also commenced legation [sic] action. Its [sic] now more complicated. I need more time.
…
Derek I cant [sic] keep all 3 creditors happy at the same time. I need to make the 2 smaller ones go away first otherwise I’m not in control of who can wind up the company. That will be a disaster for Browns and me. I need more time [that] is all.
Mr Brown says that the copy of these text messages was provided by Mr Christopher to his wife, Belinda Brown, who is involved in running Brown’ business with him and who was also engaged in discussions with Hansen Yuncken in respect of the Tri-Partite Deed. Mr Brown states that the statement by Mr Gulenc to make other creditors ‘go away first otherwise I’m not in control of who can wind up the company’ reinforces his belief that Straightline Construction and its representatives are simply trying to delay payment and avoid the company being wound up.
Straightline Construction’s submissions
Straightline Construction’s submissions focused on the issue of the identity of the contracting party. Reference was made to the head contract between Hansen Yuncken and Straightline Civil, which was executed by the sole director of Straightline Civil, Mr Gulenc. The Hansen Yuncken contract specified selected sub-contractors in an annexure and identified Browns as a selected secondary sub-contractor for the performance of retention and foundation piling works. Straightline Construction is not listed in the annexure as a selected secondary sub-contractor.
Emphasis was placed on the quotation issued by Browns for the piling works at the Project being addressed to ‘Straightline’ without specifying which legal entity was being referred to. Browns then rendered three invoices in respect of the Project, addressing them to Straightline Construction. As to the direction issued by Straightline Construction on 31 March 2020 that all invoices were to be directed to it, it was submitted that this direction was one and a half years before the quotation. I understood this to be a contention that the direction was ‘stale’.
In this regard, reference was made to the statement by Mr Parissis that it was a mistake not correcting Browns as to the correct entity to be invoiced for the piling works when the three invoices were rendered to Straightline Constructions.
The submissions then moved to the Tri-Partite Deed between Hansen Yuncken, Straightline Civil and Browns whereby amounts which would have otherwise have been payable to Straightline Civil by Hansen Yuncken under the Hansen Yuncken contract were instead to be paid direct to Browns by Hansen Yuncken. Reference was made to the emails exchanged between Straightline Civil and Browns of 20 September 2022, directing that all future invoices for the Project are to be issued to Straightline Civil. I do not consider this to be relevant to the issue that I have to determine, which is the identity of the party who contracted with Browns in the piling works for the Project. It seems clear that these emails were generated in the context of an enquiry as to the issue of future invoices for works that remained to be performed and not those claimed in the Demand.
The submissions contend that the communications between Mr Parissis and Browns in relation to the debt occurred because Mr Gulenc was ‘unavailable’ and instructed Mr Parissis to respond on Mr Gulenc’s behalf in relation to Straightline Civil. The submissions assert that this was not occurring in the context of Mr Parissis admitting that Straightline Construction owed the debt to Browns.
The submissions then address the relevant test to be applied in considering whether a genuine dispute has been established. The principles, which are well settled by case law, are summarised below. The submissions emphasise that the process does not require a court to go any further than to determine whether there is a genuine dispute or not , not to determine the merits or resolve the dispute, or to decide any issues of fact. The genuine dispute must be ‘bone fide’ and ‘truly exist in fact’ and ‘the grounds are real and not spurious, hypothetical, illusory or misconceived’[10]. Straightline Construction contends that the evidence demonstrates that there is substance to Straightline Construction’s position that it has an arguable case and that further investigation is warranted.
[10]Quoting Spencer Constructions v G&M Eldridge (1997) 76 FCR 452, [464] and referred to with approval in TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd [2008] VSCA 70.
It is also asserted that the acceptance of payments by Browns from Straightline Civil through Hansen Yuncken under the Tri-Partite Deed in satisfaction of monies owed in the invoices the subject of the Demand put it beyond doubt that Straightline Construction is not the correct entity to which the Demand should have been issued and that Browns is aware of this fact. A finding of genuine dispute, it is submitted, must follow.
Brown’s submissions
Brown’s submissions began by referring to the circular letter of 31 March 2020 requiring that ‘all future invoices and correspondence from 1 April 2020 … to be made out to Straightline Constructions Co Pty Ltd’. This circular appeared on Straightline Construction’s letterhead and was signed by its account manager. The significance of this direction to Straightline Construction was, it is said, highlighted by the fact that Browns was subsequently asked in mid-June 2020 to reissue an invoice incorrectly issued to another Straightline entity, Straightline Contractors, to Straightline Construction.
On 17 December 2021, Browns issued a quotation for the works the subject of Brown’s claims, identifying the customer as ‘Straightline’. The quotation was accepted and no indication was ever given that the situation described in the 31 March 2020 letter had changed or been superseded. There was no reference to the involvement of any other entity in the Straightline Group.
The submissions then referred to the three invoices issued in February, March and April to Straightline Construction. Straightline Construction did not object to the invoices being issued to it and the first invoice was paid in full. The invoices issued in March and April were not paid.
Browns then refers to several assurances that the invoices issued to Straightline Construction would be paid. The assurances were as follows:
(i) on 16 May 2022, an email was sent by Browns to Mr Gulenc, the General Manager of Straightline, stating that Straightline’s office and accounts manager had advised that payment of the March invoice would be received by 13 May 2022, but payment had not yet been received;
(ii) on 17 May 2022, Mr Gulenc sent an email to Mr Vickerman, Browns’ General Manager, stating that the March invoice would be paid ‘at the end of May/1 June 2022’ and the April invoice at some unspecified later date. In that email, he stated ‘other than that, we are fine … so please relax and dispel [sic] any negative thoughts from your mind’, stating that ‘we are not HWM’ [a company that had gone into liquidation in about 2019, owing debts to Browns];
(iii) on 19 May 2022, Mr Parissis, the director of Straightline Construction, sent a text message to Mr Vickerman, confirming the contents of Mr Gulenc’s email. He stated ‘sorry Craig, we tried our best yesterday trying to collect late payments so we can pass them on. Unfortunately with not much luck. You will be paid as per Tarkan’s email’, a reference to Mr Gulenc’s email of 17 May 2022; and
(iv) Browns was not paid on 1 June 2022 and on 6 June 2022, Mr Gulenc sent a text message to Mr Vickerman stating that payment was ‘unlikely to be before the end of June with the way the circumstances are looking. As soon as I am able to forecast a payment date, I will let you [know]’.
The following day, Browns issued the Demand seeking payment of the March and April invoices.
On 27 June 2022, Straightline Construction commenced this application to set aside the Demand with the affidavit in support stating that Straightline Construction ‘is not the entity which contracted with the defendant to perform the services detailed in the invoices’. Mr Parissis, the deponent to the affidavit in support, did not identify whom the contended entity was, which has since been revealed as Straightline Civil. Mr Brown’s evidence is that he had never heard of that entity until well after the contract was entered into and the invoices were issued.
Browns also draws attention to the fact that the first Parissis affidavit also asserted that the debt stated in the Demand — being the debts owned under the March invoice and the April invoice — were insufficiently particularised. It was submitted that that contention was untenable and is no longer maintained.
Browns’ submissions then moved to the statement of principle considered by the Court of Appeal in Sceam Construction Pty Ltd v Clyne (‘Sceam’)[11] that an affidavit in support of an application under s 459G of the Act necessarily requires that the material facts supporting the ground on which the application is made must have arisen before the expiry of the 21 day period. That is, it is not possible to rely on events that occurred after the statutory period to support the ground that there is a genuine dispute as to the existence of a debt.
[11](2021) 64 VR 404.
I understand the reference to Sceam and the passage extracted in Browns’ submissions to be made in response to the suggestion that the arrangement struck with Hansen Yuncken and Straightline Civil by Browns in the Tri-Partite Deed in some way gives rise to the existence of a genuine dispute. I shall return to this in my consideration at the conclusion to these reasons.
Browns says that in any event, the subsequent documents and communications relating to the negotiation of the agreement with Hansen Yuncken would not be admissible to construe the earlier contract under which the invoices were issued.
Mr Hibbard, counsel for Browns, contended that the material facts remaining to support Straightline Construction’s application are as follows:
(a) the fact that Straightline Civil, and not Straightline Construction, entered into the Hansen Yuncken contract. Mr Hibbard submitted that this is insufficient to establish a basis to set aside the Demand because:
(v) Browns was not a party to that contract;
(vi) Straightline Construction had not put on any evidence to suggest that Browns was aware of the terms of that contract, including whether Straightline Civil was a party. Mr Brown has deposed he never received a copy of the Hansen Yuncken contract until this proceeding was commenced[12] and had not heard of Straightline Civil until he saw Straightline Construction’s solicitors’ letter of 21 June 2022;[13] and
(vii) in those circumstances, bearing in mind the objective principles that guide contractual interpretation, the identity of the parties to the Hansen Yuncken contract can have no bearing on the terms of the contract by which Browns performed the piling works for the Project in light of the circumstances known to both parties.
[12]Mr Brown’s affidavit of 25 July 2022, [6].
[13] Ibid [17].
Mr Hibbard also referred to what he described as the self-serving evidence of Mr Parissis that failure to give a ‘direction’ to Browns to issue the invoices to Straightline Civil and to request that invoices be reissued to it was a mistake. He submitted that this is no more than assertion and does not constitute a sufficient basis to set aside the Demand.
Mr Hibbard stated that weighed against this evidence are several material facts that make clear there is no plausible contention requiring further investigation that Straightline Construction was the correct entity to issue the invoices to. The first of these is the direction dated 31 March 2022, which was clear on its terms and referred to ‘all future invoices and correspondence’ without qualification. The obvious inference to be drawn from that direction was that Browns was to issue all invoices to Straightline Construction until directed otherwise and it was conceded by Straightline Construction that Browns was never told anything that altered the instruction until after Browns served the Demand.
Secondly, Browns issued three invoices addressed to Straightline Construction. Until the Demand was served, no issue was raised about the fact they were addressed to Straightline Construction, despite the obvious inference that arises from the correspondence that Straightline’s account manager, Ms Leonie Darling, is conscientious in checking that invoices are addressed to the correct Straightline entity, exemplified by the fact that some two and a half months after the direction, an invoice was required by Ms Darling to be reissued to Straightline Construction. I am also invited to infer that such a task is regarded as significant in the operations of the Straightline Group given the numerous entities that form the Group.
Thirdly, and related to the immediately previous factor, the February invoice that was addressed to Straightline Construction was paid without comment or objection.
Fourthly, it is said that the apparent liquidity issues referred to in Mr Brown’s affidavits[14] strongly support Mr Brown’s suspicion that the behaviour is a delay tactic by a group of similarly named companies.
[14]Ibid [17]–[21].
Fifthly, Browns was never provided with a copy of the Hansen Yuncken contract. In the absence of any evidence to suggest that Browns was aware of the terms of this contract, or indeed of the existence of an entity called Straightline Civil, the fact that Straightline Civil was a party to that contract can have no bearing on the construction of the agreement with Browns, under which the invoices were issued.
Further, Mr Brown has given a clear explanation as to why he entered into the direct payment arrangement in the Tri-Partite Deed to complete the works directly for Hansen Yuncken after the present proceeding was commenced, in circumstances where it represented the only immediate prospects Browns had of recovering any funds associated with the Project. It was submitted by Mr Hibbard that this is a readily understandable explanation in the circumstances and should not be seen as giving rise to a genuine dispute about the debt; it does not go to the issue of the identity of the parties to the contract under which the subject invoices were issued.
Legal principles
Straightline Construction contends that it has established a genuine dispute within the meaning of s 459G of the Act in respect of the identity of the party who contracted with Browns for the performance of the works at the Bills Street site. Before embarking on a consideration of the evidence in respect of this contention, it is appropriate to identify how the expression ‘genuine dispute’ has been interpreted by state Supreme Courts and the Federal Court of Australia. Consideration of what constitutes a genuine dispute and an offsetting claim feature prominently in the case law of courts exercising jurisdiction in corporations law.
In the decision of the Court of Appeal in this state in Troutfarms Australia Pty Ltd v Perpetual Nominees Ltd,[15] Osborne JA observed the phrase ‘a genuine dispute’ uses ordinary English words and its meaning in any particular set of circumstances must be a question of fact, although its application is illuminated by the authorities.[16]
[15][2013] VSCA 176, [5].
[16]See generally the discussion in Farid Assaf, Assaf’s Winding Up in Insolvency (LexisNexis, 3rd ed, 2021) [6.9] et seq.
Several authorities of courts of appeal and full courts have collected the principles for application.
In the decision of the Court of Appeal in this state in Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (in liq),[17] the Court summarised the approach as follows:
x 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.[18]
[17][2015] VSCA 330 (per Kyrou, Ferguson and Kaye JJA).
[18]Ibid [48]–[50] (emphasis added) (citations omitted).
In the decision of the New South Wales Court of Appeal in Ligon 158 Pty Ltd v Huber,[19] Barrett AJA stated:
The issue for the court is not whether the company would succeed on those grounds in defending a debt recovery action brought against it by the person who served the statutory demand. Rather, the court must decide whether the grounds of dispute delineated by the affidavit are grounds which, when viewed in the whole of the circumstances emerging from the evidence, indicate a plausible defence propounded in good faith and not one merely constructed in response to the pressure represented by the statutory demand. Issues of credibility will generally be confined to the question whether the asserted grounds are of that quality, as distinct from questions going to the ultimate merits of the postulated defence itself. …
The restraint that a court should exercise in considering the ultimate question of the indebtedness of a company served with a statutory demand was emphasised by Brooking and Charles JJA in Spacorp Australia Pty Ltd v Myer Stores Ltd [2001] VSCA 89; (2001) 19 ACLC 1270. They said (at [3]–[4]):
“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.”
[19](2016) 117 ACSR 495, [10]–[11] (Barrett AJA, McColl and Meagher JJA agreeing).
The Court of Appeal in this state in Bendigo and Adelaide Bank Ltd v Pekell Delaire Holdings Ptd Ltd observed:[20]
In determining an application under s 459G, the Court’s function is to identify whether a genuine dispute or offsetting claim exists, not to determine any such dispute or claim. This means that the applicant under s 459G is required only to establish a ‘plausible contention requiring investigation’ of the existence of a genuine dispute or claim. The application will fail only if the contended dispute or claim is ‘so devoid of substance that no further investigation is warranted’. The resolution of the application should generally not involve the deciding of disputed questions of fact, but might require determination of short points of law.
In one sense, the question in the present matter is not so much whether there are genuine disputes or offsetting claims, as whether the respondent is precluded from advancing those disputes and claims by virtue of the deed of settlement. However, that issue in itself is germane to whether the disputes and offsetting claims are genuine — indeed, having regard to the applicant’s concession, it is determinative of that question.
[20](2017) 118 ACSR 592, [47]–[48] (Santamaria, Ferguson and McLeish JJA) (citations omitted).
Numerous authorities have observed that the threshold for establishing a genuine dispute is a low and by no means difficult or demanding one.[21] As Brooking JA observed in Spacorp Australia Pty Ltd v Myer Stores Ltd, the existence of a genuine dispute may range from a clear conviction that the debt does not exist to an opinion that the genuine dispute hurdle has only just been cleared.[22] In that regard, the Court’s approach in determining whether a genuine dispute exists may be likened to its approach in determining a summary judgment application.
[21]See Assaf’s Winding Up in Insolvency, [6.18] and the cases cited at n 86.
[22][2001] VSCA 89, [3].
While the Court will not embark upon any extended enquiry and will not attempt to weigh or assess the merits of the dispute, it does not preclude the Court from investigating the factual basis of a claim. As observed in an oft-quoted passage of one of the earlier cases dealing with the notion of genuine dispute, Eyota Pty Ltd v Hanave Pty Ltd, the Court is not required to accept uncritically every piece of evidence put forward by a company attempting to establish that there is a genuine dispute.[23] The Court is entitled and obliged to examine whether the ‘grounds for alleging the existence of a dispute are real and not spurious, hypothetical, illusory or misconceived’.[24]
[23](1994) 12 ACSR 785, 787.
[24]Spencer Constructions v G&M Aldridge (1997) 76 FCR 452, 464.
Similarly, in Powerhouse Australasia Pty Ltd v Viarc Pty Ltd,[25] Dodds-Streeton J observed (at [48]–[49]):
While it is not a very exacting standard, on the other hand mere, assertion of a dispute or off-setting claim, mere bluster or advancing grounds which are illusory or spurious or insufficiently particularised will not suffice. 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.
The dispute or off-setting claim should, as has been recognised, have some objective existence, and the plaintiff bears the onus of establishing the genuineness of the dispute or off-setting claim. The plaintiff has not discharged that onus in the present application …
[25][2006] VSC 508.
In Britten-Norman Pty Ltd v Analysis and Technology Pty Ltd,[26] the New South Wales Court of Appeal observed that contemporaneous documents are not necessarily sufficient to displace the existence of a genuine dispute or offsetting claim, notwithstanding that they might pose difficulties for the ultimate proof of the claim. In the same way, there is no rule that requires that a dispute upon which the applicant relies must have been communicated before the s 459G application is made.
[26](2013) 85 NSWLR 601, [70].
In Re Wollongong Coal Ltd,[27] Black J observed:
[27](2015) 110 ACSR 134, [21]–[22].
The Court of Appeal also in [in Britten-Norman] did not accept that inconsistent contemporaneous documents were sufficient, or were necessarily sufficient, to displace an offsetting claim notwithstanding that they might pose “difficulties for the ultimate proof of the claim” (at [70]). I do not understand that observation to amount to a proposition of law that such matters may not be relevant to whether a genuine dispute is established. Whether such inconsistencies exclude a genuine dispute must be partly a question of fact to be determined in the particular case, as is illustrated by the approach adopted by Osborn JA (with whom Ashley JA agreed) in Troutfarms Australia Pty Ltd v Perpetual Nominees Ltd [2013] VSCA 176 at [28]ff. In Re Diveva Pty Ltd [2015] NSWSC 509 at [26], I noted that:
“I do not understand the Court of Appeal’s approach in Britten-Norman above to require the Court to eschew any evaluative exercise as to whether there is a plausible basis for an offsetting claim, where such an evaluation is contemplated by the earlier cases to which they refer, and seems to me to be necessarily required by any determination of whether there is a serious question to be tried, an issue deserving of a hearing, or a plausible contention requiring investigation.”
I take the same view in respect of a genuine dispute. That is a matter of some importance to the findings that I reach below.
I proceed, following Britten-Norman, on the basis that it is not necessary for a party seeking to set aside a demand to lead admissible evidence to establish a “genuine dispute” and that the absence of contemporaneous documentation to support the existence of the dispute, or the existence of contemporaneous documentation inconsistent with a dispute, will not necessarily deprive it of a genuine character. Having said that, it seems to me that there must be a point at which the Court can conclude that a dispute is in fact not “genuine” – or, in the language of the earlier case law, that it amounts to a spurious claim, mere bluster or assertion or does not raise a plausible contention requiring investigation – by reason of a combination of those matters. Otherwise it is difficult to see any circumstance in which any dispute asserted to exist would not be treated as a genuine dispute, and a creditor’s statutory demand would not be set aside, as long as a deponent of an affidavit in support of an application to set aside a demand was prepared to assert and verify its existence…
In Creata Aust Pty Ltd v Faull, Barrett AJA drew a distinction between a genuine dispute concerned with the identification of a serious question to be tried or a plausible contention requiring investigation, and:
Another aspect, no less important, [which] requires that the serious question or plausible contention not be something merely created or constructed in response to the pressure represented by the service of the statutory demand. If the dispute is of that quality and is accordingly not advanced in good faith, it is not ‘genuine’.[28]
[28](2017) 125 ACSR 212, [47] (‘Creata’).
I understand Barrett AJA to state that there can be arguably a genuine dispute as to the identity by reason that an argument can be put to the contrary of the position for which Browns contends, but that dispute is not genuine on the second basis identified by Barrett AJA in Creata, by reason that it is ‘merely created or constructed in response to the pressure represented by the service of the statutory demand’. Creata is authority that a dispute which has that character, even if it is arguable, is not a ‘genuine dispute’.[29]
[29]See the recent consideration of this principle in the decision of Black J in Re Showground Corporation Pty Ltd [2022] NSWSC 1491.
Consideration
In my opinion, Straightline Construction, which bears the onus of establishing that the dispute it relies upon in this application is genuine, has failed to discharge that onus. That opinion is based on an analysis of the facts evidenced by contemporaneously generated communications and documentation passing between the parties during (and indeed after) the formation of the contract for the work by Browns for the Project, which, for the main part, are not contentious.
Browns has apparently had a trading relationship with the Straightline Group for some years. On 31 March 2020, Leonie Darling, the accounts manager of Straightline Construction, sent a circular letter on Straightline Construction’s letterhead, directing all future invoices and correspondence from 1 April 2020 be made out to Straightline Construction. That direction was never countermanded.
It seems clear that the identity of the party to whom invoices should be directed was of considerable significance to Straightline Construction. This is illustrated by the fact that on 10 June 2020, Browns sent an invoice directed to Straightline Contractors, one of the Straightline Group, but shortly afterwards, on 16 June 2020, Ms Darling emailed Ms Gillies at Browns, asking for a copy of the invoice because the original was unable to be located. Ms Gillies provided another copy of the invoice the following day. Within the hour, Ms Darling emailed Ms Gillies back thanking her for the invoice, but requested that it be issued to Straightline Construction rather than Straightline Contractors.
On 20 December 2021, Mr Yemez, representing the Straightline Group, requested Mr Vickerman of Browns to provide a quotation in respect of the Bill Street works. He did not request that such a quotation be provided to one or other of the Straightline Group. On 20 December 2021, after some negotiation, an agreement was reached in respect of the pricing of the works.
Browns attended at the Bill Street site and over the period of February, March and April 2022, carried out the works the subject of the quotation. It generated three invoices, all issued to Straightline Construction. The first of those invoices, dated 21 February 2022, was paid in mid-April 2022 without comment. Browns issued two further invoices on 20 March and 20 April 2022 respectively and it is these invoices that are the subject of the Demand.
On 16 May 2022, Ms Limnios of Browns emailed Mr Gulenc. In that email, she indicated that she had spoken with a person described as Leonie on the Thursday of the previous week (a reference it seems to Ms Leonie Darling, the Accounts Manager) and was advised that the invoice of 20 April 2022 would be paid on Friday 13 May 2022, but it had not been paid. She indicated that Leonie had advised her to deal directly with Mr Gulenc for confirmation. She requested Mr Gulenc to provide a confirmed date for payment, together with the scheduled payment date for the April invoice.
On 17 May, Mr Gulenc responded to Ms Limnios, (circulated to Mr Vickerman of Browns), stating:
Hi Vicki/Craig,
I can confirm we will be in a position to pay the first invoice end of this month on 31/1 June.
I will need to get back to you next week in regards to the second invoice to confirm an exact payment date that I can honour.
The email concluded with the statement that Browns should not be concerned about the matter. The email is signed by Mr Gulenc in his capacity as General Manager.
At that point, the debt owing to Browns in respect of the piling works at the Project was of the order of $1,000,000.00. Straightline Construction raised no issue about the identity of the party to whom the invoices had been issued and instead, was communicating with Browns as to when Browns would be paid.
The following day, Mr Parissis, the director of Straightline Construction (but not of Straightline Civil), texted Mr Vickerman and indicated that he was meeting with Mr Gulenc and Mr Yemez that afternoon and would get back to him before the day ended. Given the position that Straightline Construction adopts — that Straightline Civil is the party liable for the debt to Browns — it is not said why Mr Parissis was involved in that meeting or indeed the other communications with Browns to which reference has been made as he had no executive role either as a director or manager in Straightline Civil.
Mr Vickerman texted Mr Parissis that evening, stating he was trying to telephone Mr Parissis. The following morning, Mr Parissis texted Mr Vickerman, apologising and stating that:
Sorry Craig we tried our best yesterday trying to collect late payments so we can pass them on. Unfortunately with not much luck. You will be paid as per Tarkan’s email.
On 2 June 2022, Mr Vickerman sent two texts to Mr Parissis, complaining about the failure to make the payments, but there was apparently no response.
On 6 June 2022, Mr Gulenc emailed Mr Vickerman stating:
Craig,
I’m working on the payment of the invoices for this project.
Unfortunately we’ve had a setback with cash flow and I’m unable to provide a firm payment date at the moment.
It’s however unlikely to be before the end of June with the way circumstances are looking. As soon as I am able to forecast a payment date, I will let you [know].
Mr Gulenc signed off the email in his capacity as General Manager. Again, no issue was taken by Straightline Construction as to the identity of the parties to whom the invoices were issued, rather its approach was to assuage Browns about non-payment.
On 7 June 2022, Browns issued the Demand and served it on Straightline Construction shortly afterwards. On 27 June 2022, Straightline Construction commenced this application.
On 1 July 2022, Browns’ solicitors, Belleli King & Associates, wrote to Straightline Construction’s solicitors, Robert James Lawyers, detailing what were regarded to be the shortcomings in the position being taken by Straightline Construction in its application to set aside the Demand.
On 8 July 2022, Mr Parissis attempted to contact the director of Browns, Mr Brown, but Mr Brown responded that his solicitor had told him under no circumstances was there to be any communication at all from Browns. In response, Mr Parissis stated that he wanted to talk to Mr Brown about a proposal. He stated:
Allen we intend to pay you, it would be good if we can catch up face to face.
Because Browns had not been paid by Straightline Construction, Browns indicated that it would not perform any further works at the Bill Street site. As Hansen Yuncken, the head contractor, was anxious to press on with the Project, it entered into with the agreement embodied in the Tri-Partite Deed with Browns and the party with whom Hansen Yuncken had subcontracted, Straightline Civil. In my opinion, the only relevance of the Tri-Partite Deed is that, by reason that Hansen Yuncken directed payments that were otherwise payable to Straightline Civil under the Hansen Yuncken contract to Browns, this reduced the amount claimed under the Demand.
In its evidence and submissions, Straightline Construction sought to make much of the fact the Hansen Yuncken contract was with Straightline Civil in some way bears on the dispute it seeks to raise in this application concerning the sub-contract in respect of the works that Browns performed. There is no evidence that Browns was aware of the identity of the party with whom Hansen Yuncken had contracted with and Mr Brown in his evidence stated that the first he ever knew of that contract and the contracting parties’ identity was when he saw the evidence filed in this application. Mr Brown’s evidence that the reason for entering into the Tri-Partite Deed was a means by which Browns could be paid at least part of the amount owing to it is plausible and consistent with the terms of the Tri-Partite Deed and I accept it. There is nothing inconsistent with the contract that Browns (and not Straightline Construction) had to perform the piling works for the Project and the entry by Browns into the Tri-Partite Deed with Straightline Civil and Hansen Yuncken.
I consider that one of the most telling pieces of the evidence, which dispels the contention by Straightline Construction that there is a genuine dispute here, is the text messages sent by Mr Gulenc on 16 September 2022 to Mr Christopher of the CFMEU. Mr Gulenc indicated to Mr Christopher:
I cant [sic] keep all 3 creditors happy at the same time. I need to make the 2 smaller ones go away first otherwise I’m not in control of who can wind up the company. That will be a disaster for Browns and me. I need more time is all.
The Demand directed to Straightline Construction had been served some three and a half months before the hearing date for this application had been fixed. The only company in prospect of being wound up at the time of that communication was Straightline Construction by reason of the service of the Demand.
Mr Gulenc, the director of Straightline Civil, the entity said by Mr Parissis to be liable for the debt, who is also the General Manager of Straightline Construction, has not gone on affidavit in this application to explain his involvement in the matter. There is no evidence that he is unavailable by reason of illness or otherwise indisposed.
I cannot accept that a party that has received invoices for over $1,000,000.00 would not have immediately taken issue with the identity to whom the invoices were directed to if its position was that another entity was liable for their payment. No mention at all was made of this alleged dispute until after service of the Demand and prior to this, the position taken by Straightline Construction was to promise that payment would be made.
Even if the dispute that Straightline Construction contends exists was arguable (and, on the evidence I do not view this to be the case), I agree with the submission made by Browns that the dispute that Straightline Construction contends for is spurious and not genuine and is, in the words of Barrett AJA in Creata, which are extracted above in describing the second basis identified, ‘something merely created or constructed in response to the pressure represented by the service of the statutory demand’.
I consider that the application should be dismissed with costs, including reserved costs.
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