Re Wabbits Pty Ltd

[2018] NSWSC 532

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Wabbits Pty Ltd [2018] NSWSC 532
Hearing dates:	19 April 2018
Decision date:	27 April 2018
Before:	Gleeson JA
Decision:	(1)   The statutory demand dated 21 February 2018 forming part of annexure B to the affidavit of Francis Gary Kalyk sworn 26 March 2018 be set aside on condition that, if, within 28 days after the making of this order, the defendant serves on the plaintiff an originating process filed in a court of competent jurisdiction by which the defendant sues the plaintiff to recover the debts claimed in the schedule to the statutory demand, the plaintiff shall, within 14 days after such service, pay into court in the proceedings initiated by that originating process the amount of $2,000, such payment into court being on the footing that the sum paid in shall remain in court to abide the outcome of those proceedings.  (2)   Costs reserved.
Catchwords:	CORPORATIONS – statutory demand – application to set aside creditor’s statutory demand under Corporations Act 2001 (Cth), s 459G – whether genuine dispute about the existence or amount of debt under Corporations Act, s 459H(1)(a) – whether plausible contention requiring investigation that toll notices were invalid – Corporations Act, s 459M – whether appropriate to set aside demand conditional upon payment into court of substantial amount of the alleged debt.
Legislation Cited:	Corporations Act 2001 (Cth), ss 459G, 459H(1)(a), 459J, 459M
Cases Cited:	Asia Pacific Glass Pty Ltd v Sindea Trading Co Pty Ltd (No 2) [2003] NSWSC 845; (2003) 47 ACSR 737 Creata (Aust) Pty Ltd v Faull [2017] NSWCA 300 Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 Get’m Pty Ltd v Triulcio [2004] NSWSC 291 Ligon 158 Pty Ltd v Huber [2016] NSWCA 330 Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290; (1993) 11 ACSR 362 Natcraft Pty Ltd v WIN Television Pty Ltd [2003] 1 Qd R 196 Panel Tech Industries (Aust) Pty Ltd v Australian Skyreach Equipment Pty Ltd (No 2) [2003] NSWSC 896 Re Morris Catering (Aust) Pty Ltd (1993) 11 ACSR 601 Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452
Category:	Principal judgment
Parties:	Wabbits Pty Ltd ACN 002 967 688 (Plaintiff) Tollaust Pty Limited t/as Transurban Linkt ACN 050 538 693 (Defendant)
Representation:	Counsel: Mr C P O’Neill (Plaintiff) Ms K Paton (Sol) (Defendant)   Solicitors: Bartier Perry (Plaintiff) Milton Graham Lawyers (Defendant)
File Number(s):	2018/95682

Judgment

1. GLEESON JA: The plaintiff, Wabbits Pty Ltd (the company), seeks an order under s 459G of the Corporations Act 2001 (Cth) setting aside a creditor’s statutory demand dated 21 February 2018 served by the defendant, Tollaust Pty Limited t/as Transurban Linkt (Transurban). The debt to which the statutory demand relates is described in the schedule to the demand as follows:

Description of the Debt   Amount of the Debt

Amount due and payable by the company to the creditor for unpaid tolls and fees for the issuing of Toll Notices for use of the:

(a) Cross City Tunnel in respect of motor vehicles with registration numbers:

BDS39Z for the period 16 July 2016 to 7 August 2017   $593.46

BLQ39E for the period 24 November 2016 to 6 August 2017   $931.73

BS61VA for the period 24 December 2015 to 30 July 2016   $503.47

(b)   Eastern Distributor in respect of a motor vehicle with registration number:

BLQ39E for the period 11 February 2016 to 19 January 2017   $374.86

Total:   $2,403.52

2. The affidavit accompanying the statutory demand was sworn by Ms Nedeljka Canak, senior credit officer of Transurban. She deposed to her belief that there is no genuine dispute about the existence or the amount of the debt “being for unpaid tolls and fees for the issuing of Toll Notices set out in the Schedule to the Statutory Demand”. The reference by the deponent to “Toll Notices” is circular. That expression is used in the statutory demand, but it is not otherwise explained, nor is any of the “Toll Notices” attached to the statutory demand, or annexed to the affidavit accompanying the demand.

3. The company seeks to set aside the statutory demand on the ground that there is a genuine dispute about the existence or amount of the debt (s 459H(1)(a), Corporations Act). The company does not assert that it has an off-setting claim against Transurban.

Evidence on the application

4. The company relied upon an affidavit sworn by Mr Francis Kalyk on 26 March 2018. No evidence was read or tendered by Transurban.

5. The unchallenged evidence of Mr Kalyk can be summarised as follows. The company had an e-toll account with Roads and Maritime Services (RMS) (the account) for the purpose of the payment of all tolls charged for tolled roads in New South Wales. (Although the relevant account statement from the RMS which was in evidence was addressed to Ms Glenda Kalyk, not the company, I put this aside in view of the unchallenged evidence of Mr Kalyk that this statement related to the company’s account with the RMS.)

6. Until about early to mid-2016, the company operated three motor vehicles in respect of which e-tags were issued under the account. Thereafter, the company only operated two motor vehicles and only had e-tags for those vehicles attached to the account. The company provided an authority to RMS to debit a nominated credit card for tolls debited to the account. RMS issued quarterly statements to the company in relation to the account. Prior to September 2015, Mr Kalyk left the administrative aspects in relation to the account to his secretary, who ceased working for him at that time.

7. In about October 2015, Mr Kalyk reviewed a statement from RMS in respect of the period 1 July 2015 to September 2015. He observed that the statement was in respect of six e-tags, three more than was held by the company at that time. In respect of one of those disputed e-tags, the amount charged by the RMS to the company’s account was $109.83 for the previous three-month period. Mr Kalyk attempted to obtain a reconciliation of the account from the RMS; he sought a credit from the RMS for what he considered to be overcharging to the account in respect of that period and earlier periods; and he also attempted to obtain a reconciliation from various private road toll operators (including Transurban from as early as 25 April 2016). Those attempts continued unsuccessfully at least, on the evidence, up until August 2017.

8. It is not necessary to refer to all of the detail of the attempts to obtain a reconciliation of the account from RMS and, relevantly, Transurban. It is sufficient to record that the e-tags associated with three vehicles attached to the account were apparently suspended by RMS between 3 February and 10 February 2016. The e-tags were again suspended by the RMS in about April 2016; on this occasion it seems on the ground that there were insufficient funds in the account. Mr Kalyk disputed that the credit cards had insufficient funds in an email to the operator of the M5 Motorway dated 26 April 2016. On the following day, 27 April 2016, in an email to the RMS’s customer complaints unit, Mr Kalyk requested that the suspended tags be reinstated immediately. It seems that this did not occur.

9. Mr Kalyk complained to the NSW Ombudsman, who replied in a letter to Mr and Mrs Kalyk dated 17 June 2016 that he had been told by the RMS that the account had been suspended because the credit card had expired and there were insufficient funds in the account.

10. Separately Mr Kalyk sent an email to Transurban dated 6 June 2016, seeking to resolve the company’s dispute with Transurban and a reconciliation in relation to charges for use of the Cross City Tunnel from the time that the “unauthorised/incorrect tags” were first charged to the account with the RMS. Mr Kalyk says that he cannot find a response to this notice of dispute. (Although not the subject of direct evidence, an inference can be drawn from the relevant emails that Transurban operated the Cross City Tunnel and the Eastern Distributor, which were used by the company’s vehicles.)

11. In an email from Mr Kalyk to Ms Kara McEwen at RMS dated 4 July 2016, Mr Kalyk acknowledged that “… our credit card has expired” and “offered to reinstate a credit card, provided RMS would not seek to charge for the amounts in dispute, but only for the charges going forward”. This attempt at resolution of the dispute was also unsuccessful.

12. Mr Kalyk says that the company continued to receive toll notices when it used road tolls and adopted the practice of objecting to them on the basis of the current dispute. On 14 June 2017, Transurban sent an email to Mr Kalyk informing him that the toll notices had been sent to a debt collection agency and that he would need to contact the debt collection agency directly regarding any dispute or payment arrangement.

13. There is evidence that at least on one occasion, on about 14 June 2017, the company paid an amount of $34.75 to Transurban as the operator of the Eastern Distributor.

14. There is also evidence of a letter from Mr Kalyk on behalf of the company to Transurban dated 4 August 2017 with the subject heading “Toll Notices – Cross City Tunnel” for various dates in May, June and July 2017, which Mr Kalyk describes as forming “part of the continuing dispute concerning the company’s electronic tags”. The letter continued:

I have been attempting to resolve this dispute for a number of years.

I dispute a number of the charges made and have asked for a reconciliation of my account. For reasons which I do not know, you refuse to provide such reconciliation.

Can this matter not be resolved?

15. The company’s letter also repeated the earlier offer to establish a new account or to provide a new credit card authority for future tolls, provided it was not used to charge for amounts still in dispute. Mr Kalyk says that he did not receive a reply to this letter.

16. Mr Kalyk says that the company closed the account (with the RMS) on about 7 September 2017.

Submissions

17. Mr O’Neill of counsel submitted that the company had a valid e-toll arrangement with the RMS; that in February 2016 the e-tags for three vehicles on the account were wrongly suspended by the RMS but then reinstated, only to be wrongly suspended again in about April 2016; that notwithstanding the overcharging to the account first detected by Mr Kalyk in about October 2015, the RMS failed to provide a reconciliation of the company’s account; and that Transurban also failed to provide a reconciliation of its charges.

18. Ms Paton, the solicitor for Transurban, provided an explanation from the bar table of the system of toll charges. She said that that when a road user has a valid e-tag arrangement with the RMS, payment is made to the RMS via the e-toll account, not direct to the relevant operator of the toll road. However if the road user does not have a valid credit card arrangement with the RMS, and the applicable toll is not paid within three days of use of the toll road, a Toll Notice is issued to the road user by RMS at the request of Transurban, directing payment of the toll charges to Transurban.

19. In this case, according to the submission, the company elected to travel on toll roads operated by Transurban on 97 separate occasions, notwithstanding that the company was aware (in 2015 and 2016) that it did not have a valid credit card attached to its e-toll account with the RMS. Accordingly, when the company did not pay the applicable toll within three days of use of the road, Toll Notices were issued to the company by RMS at the request of Transurban, which remain unpaid.

20. The solicitor for Transurban acknowledged that there is no evidence on this application of the relevant Toll Notices referred to in the statutory demand, or the 97 occasions, referred to in submissions, that the company’s vehicles are said to have travelled on the toll roads operated by Transurban. Nor is there any evidence of the arrangements between RMS and Transurban in relation to an e-toll account maintained by road users, such as the company, or the issue of Toll Notices.

Decision

21. The approach which the court should take to the assessment of a genuine dispute is well-established. It is for an applicant to prove the existence of such a dispute, but the burden of proof is analogous to that which confronts a party on an application for an interlocutory injunction or summary judgment.

22. The function of the court is merely to determine the existence of a genuine dispute; it is not to determine whether the debt exists. The court does not weigh the merits of the dispute or engage in a balancing exercise in relation to competing contentions: Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290; (1993) 11 ACSR 362 at 366-367 (Hayne J); Panel Tech Industries (Aust) Pty Ltd v Australian Skyreach Equipment Pty Ltd (No 2) [2003] NSWSC 896 at [18] (Barrett J).

23. The bar for establishing a genuine dispute is not set high; a “plausible contention requiring investigation” will suffice: Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 787 (McLelland CJ in Eq). Other expressions to similar effect can be found in the authorities including that the dispute is “real and not spurious, hypothetical, illusory or misconceived” and “perception of genuineness (or lack of it): Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452 at 464 (Northrop, Merkel and Goldberg JJ); and Re Morris Catering (Aust) Pty Ltd (1993) 11 ACSR 601 at 605 (Thomas J). The court’s state of mind concerning 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: Creata (Aust) Pty Ltd v Faull [2017] NSWCA 300 at [29] Barrett AJA (Gleeson and White JJA agreeing).

24. In Ligon 158 Pty Ltd v Huber [2016] NSWCA 330 at [9], Barrett AJA, (McColl and Meagher JJA agreeing), referred to the earlier decision in Britten-Norman Pty Ltd v Analysis and Technology Australia Pty Ltd (2013) 85 NSWLR 601; [2013] NSWCA 344 at [30]-[31] and [39]-[55]), a case concerning the allied ground of off-setting claim under s 459H(1)(b), and noted several important points about the forensic approach to be adopted in s 459G proceedings, including:

(1) While there must be evidence showing a serious question to be tried or an issue deserving of a hearing, that evidence cannot and need not conclusively prove the claim or otherwise be incontrovertible or substantially non-contestable.

(2) The short time allowed by s 459G(2) for the preparation of the affidavit supporting the claim for an order setting aside the demand militates against the presentation of the fullest and best evidence in some cases.

25. Accepting that the tests referred to above are applied in the context of a summary procedure where it is not expected that the court will embark on an extended inquiry, I have concluded that there is a genuine dispute in relation to the amount of the debt claimed by Transurban in the statutory demand.

26. The starting point is that although the Toll Notices are not in evidence, there is an admission in Mr Kalyk’s affidavit that the company’s vehicles travelled on toll roads operated by Transurban after May or June 2016 without a valid credit card arrangement in respect of its account with the RMS (because the credit card in respect of the account had expired). Nonetheless, there is a plausible contention requiring investigation that during the period December 2015 to about April or May 2016 (and for earlier periods), the company had a valid credit card arrangement with the RMS in relation to its three vehicles with e-tags, and the account was in credit, or at least should have been in credit during this period, but for the alleged earlier incorrect charges to the account by RMS. On the material before the court there is a genuine dispute in relation to the validity of Toll Notices issued by the RMS at the request of Transurban during this period. Of course I express no view on the merits of that dispute.

27. While it is not possible to identify with precision the amount of the charges in the statutory demand covering the period December 2015 to May 2016, it may be observed that the charges for vehicle BS61VA in respect of the period 24 December 2015 to 30 July 2016 are claimed to total $503.47 and for vehicle BLQ39E in respect of the period 11 February 2016 to 19 January 2017 are claimed to total $374.86. In addition, Transurban did not argue against the proposition that the validity of the toll charges the subject of the RMS statement for the July-September 2015 period was genuinely disputed by the company on the basis that it included charges for an e-tag not associated with any of the company’s vehicles. The amount of the credit claimed on the company’s account was a little over $109.00.

28. I am satisfied that, taken together, there is a genuine dispute in relation to an amount of at least $404.00, which means that the “substantiated amount” (being the amount of the alleged debt about which there is no genuine dispute) is less than the statutory minimum ($2,000). Accordingly, the Court must set aside the demand: Corporations Act, s 459H(3).

29. However that is not the end of the matter. Section 459M of the Corporations Act provides that an order under s 459H or s 459J (setting aside a demand) may be made subject to conditions. The Court has the power to impose conditions even if the statutory demand is set aside: Natcraft Pty Ltd v WIN Television Pty Ltd [2003] 1 Qd R 196 at 197 (Williams JA). Such conditions may include that the recipient pay into court the amount of the alleged debt, although the view has been expressed that the court should not adopt a practice of imposing such a condition. In Get’m Pty Ltd v Triulcio [2004] NSWSC 291 Palmer J said at [30]:

If this became the practice, then this Court, in the process of exercising its jurisdiction under the Corporations Act would, in effect, become a small claims court because creditors would routinely serve statutory demands intending to seek an order that, even if the demand is set aside because of the existence of a genuine dispute, the debtor nevertheless pay into Court a substantial amount. If such applications were routinely entertained, this Court would frequently have to embark on the question of “degree of genuineness” of disputes and would be compelled to investigate the merits of the dispute to a depth which it refuses to do, as the law presently stands.

30. In Panel Tech Industries Pty Ltd v Australian Skyreach (No 2), Barrett J concluded that there was a genuine dispute, but expressed significant doubt, based on the quality of the plaintiff’s evidence, whether the contest between the parties would eventually be resolved in favour of the plaintiff. That made it appropriate, in his Honour’s view, that the order setting aside the statutory demand not be unconditional. Barrett J continued at [30]:

… Because a genuine dispute has been established, action by the defendant to vindicate the rights it considers itself to have as a creditor of the plaintiff must be by way of debt proceedings at common law. In the particular circumstances to which I have referred, however, the defendant should not have to pursue those proceedings on an entirely speculative basis, assuming it chooses to pursue them at all. It is appropriate that they be pursued in a context where the plaintiff causes funds sufficient to meet the claim to be set aside and held pending its resolution. This should be achieved by making the s.459H order subject to an appropriate condition under s.459M.

31. The present case bears some analogy with Panel Tech. As indicated, Mr Kalyk accepted in his email to the RMS dated 4 July 2016 that the company did not have a valid credit card arrangement, at least from that date, since its credit card attached to the account had expired. Although I have concluded that there is a genuine dispute in relation to so much of the debt the subject of Toll Notices issued in the period December 2015 to about April or May 2016, I have significant doubt, based on the quality of the company’s evidence, whether the matter will eventually be resolved in favour of the company, or at least in an amount much greater than about $404.00. It is appropriate, if Transurban commences proceedings to recover the alleged debt, that the company cause funds sufficient to meet the claim at least in the amount of $2,000 to be made available and held pending its resolution.

31. It should be borne in mind that a condition of the kind which I intend to impose is not a source of obligation. As Barrett J explained in Asia Pacific Glass Pty Ltd v Sindea Trading Co Pty Ltd (No 2) [2003] NSWSC 845; (2003) 47 ACSR 737 at [13], “[t]he concept underlying a conditional order is that the Court, by the condition, specifies what the successful party must do in order to have the benefit of the order; and it is then for that party to decide whether he or she will take the specified steps and secure that benefit or not take them and thereby forego it”.

32. It follows that if Transurban commences debt recovery proceedings and the company fails to comply with the condition I propose to impose, the beneficial effect of the order in favour of the company will cease, so that the statutory demand may no longer be regarded as “set aside” and “will continue to stand”: Asia Pacific Glass at [16], citing Australian Vineyard Management Ltd v Madden (SC (NSW) Young J, 30 March 1998, unreported, BC 9801170).

33. Accordingly, the Court makes the following orders:

1. The statutory demand dated 21 February 2018 forming part of annexure B to the affidavit of Francis Gary Kalyk sworn 26 March 2018 be set aside on condition that, if, within 28 days after the making of this order, the defendant serves on the plaintiff an originating process filed in a court of competent jurisdiction by which the defendant sues the plaintiff to recover the debts claimed in the schedule to the statutory demand, the plaintiff shall, within 14 days after such service, pay into court in the proceedings initiated by that originating process the amount of $2,000, such payment into court being on the footing that the sum paid in shall remain in court to abide the outcome of those proceedings.

2. Costs reserved.

**********

Decision last updated: 27 April 2018