Resdal Corp Pty Ltd v Zest Accounting Group Pty Ltd
[2016] VSC 54
•24 February 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S CI 2015 1570
| RESDAL CORP PTY LTD (ACN 119 629 944) and VLADO NAUMOVSKI | Plaintiffs |
| v | |
| ZEST ACCOUNTING GROUP PTY LTD (ACN 113 203 937) | Defendant |
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JUDGE: | Gardiner AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 9 December 2015 |
DATE OF JUDGMENT: | 24 February 2016 |
CASE MAY BE CITED AS: | Resdal Corp Pty Ltd and Anor v Zest Accounting Group Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2016] VSC 54 |
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CORPORATIONS - Application to set aside statutory demand pursuant to sections 459G and 459H of Corporations Act 2001 (Cth) by reason of alleged genuine dispute – Directors of plaintiff involved in oppression proceedings relating to the firstnamed plaintiffs’ affairs –One director seeks leave to make application to set aside demand on firstnamed plaintiff’s behalf while other director contends there is no dispute in respect of the debts the subject of the demand - Leave granted to director pursuant to section 237 of Corporations Act 2001 (Cth) to bring application to set aside demand - Plaintiff fails to discharge onus as to the existence of genuine dispute or offsetting claim - Application dismissed.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr J Kohn | Frenkel Partners |
| For the Defendant | Mr P Booth | Behan Legal |
HIS HONOUR:
This is an application by the plaintiffs by originating process filed 9 April 2015 for relief under ss 237, s 459G and 459H of the Corporations Act2001 (Cth) (‘the Act’). An order is sought pursuant to ss 459G and 459H of the Act to set aside a statutory demand served on the first plaintiff (‘Resdal’) by the defendant, (‘Zest’) dated 19 March 2015 on the basis that there is a genuine dispute in relation to the debt the subject of the demand.
The application made under s 237 is for leave to be given to the second plaintiff, Vlado Naumovski, to intervene in this proceeding in the name of Resdal, to make application to set aside the demand. Mr Naumovski is a director of Resdal and has been involved in protracted oppression proceedings against the other director of Resdal, Robert Ugrinovski. At the hearing of this matter on 9 December 2015, Zest withdrew its opposition to the grant of such leave to Mr Naumovski. I consider that the criteria for the grant of leave under s 237(2) have been satisfied and that it is appropriate to grant such leave.
The plaintiffs rely on the affidavits of Mr Naumovski sworn 9 April 2015 and 25 June 2015 and an affidavit of 9 December 2015 of their solicitor, Bill Lambros. Zest relies on an affidavit of its director, Louie Kortesis, sworn 29 May 2015 and of Justine Marcus, Zest’s solicitor, sworn 8 December 2015.
Legal principles applicable to applications to set aside statutory demands
Sections 459G and 459H of the Act relevantly provide in the present context as follows:
459G Company may apply
(1) A company may apply to the Court for an order setting aside a statutory demand served on the company.
(2) An application may only be made within 21 days after the demand is so served.
(3) An application is made in accordance with this section only if, within those 21 days:
(a) an affidavit supporting the application is filed with the Court; and
(b)a copy of the application, and a copy of the supporting affidavit, are served on the person who served the demand on the company.
459H Determination of application where there is a dispute or offsetting claim
(1) This section applies where, on an application under section 459G, the Court is satisfied of either or both of the following:
(a) that there is a genuine dispute between the company and the respondent about the existence or amount of a debt to which the demand relates;
(b) that the company has an offsetting claim.
(2) The Court must calculate the substantiated amount of the demand in accordance with the formula:
Admitted total — Offsetting total
where:
“admitted total” means:
(a) the admitted amount of the debt; or
(b) the total of the respective admitted amounts of the debts;
as the case requires, to which the demand relates.
“offsetting total” means:
(a) if the Court is satisfied that the company has only one offsetting claim—the amount of that claim; or
(b) if the Court is satisfied that the company has 2 or more offsetting claims—the total of the amounts of those claims; or
(c) otherwise—a nil amount.
(3) If the substantiated amount is less than the statutory minimum, the Court must, by order, set aside the demand.
(4) If the substantiated amount is at least as great as the statutory minimum, the Court may make an order:
(a) varying the demand as specified in the order; and
(b) declaring the demand to have had effect, as so varied, as from when the demand was served on the company.
(5) In this section:
“admitted amount”, in relation to a debt, means:
(a)if the Court is satisfied that there is a genuine dispute between the company and the respondent about the existence of the debt—a nil amount; or
(b)if the Court is satisfied that there is a genuine dispute between the company and the respondent about the amount of the debt—so much of that amount as the Court is satisfied is not the subject of such a dispute; or
(c) otherwise—the amount of the debt.
“offsetting claim” means a genuine claim that the company has against the respondent by way of counterclaim, set-off or cross-demand (even if it does not arise out of the same transaction or circumstances as a debt to which the demand relates).
“respondent” means the person who served the demand on the company.
(6) This section has effect subject to section 459J.[1]
[1]Section 459J provides additional grounds for setting aside a statutory demand which are not presently relevant.
In the recent decision of the Court of Appeal in this State in Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (in liquidation),[2] the principles applicable in applications to set aside statutory demands were succinctly summarised as follows (citations omitted):
[2][2015] VSCA 330.
47.The terms of s 459H of the Corporations Act and the authorities make clear that, on an application to set aside a statutory demand, the applicant is required only to establish a genuine dispute or offsetting claim. The applicant is required to evidence the assertions relevant to the alleged dispute or offsetting claim only to the extent necessary for that primary task. It is not necessary for the applicant to advance a fully evidenced claim. Therefore, the task faced by an applicant is by no means at all a difficult or demanding one.
48.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.
49.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.
50.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.
51.Solarite Air Conditioning Pty Ltd v York International Australia Pty Ltd[3] involved a demand for payment of a debt alleged to be due under a contract for the supply of goods. The applicant relied on four matters, each of which had the potential to affect the respondent’s entitlement to be paid the entire amount of the debt. Barrett J held that all four matters were sufficiently plausible to raise a genuine dispute. He relevantly stated:
The [applicant] will fail in [the] task [of establishing a genuine dispute] only if … the contentions upon which it seeks to rely … are so devoid of substance that no further investigation is warranted. Once the [applicant] shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow. The court does not engage in any form of balancing exercise between the strengths of competing contentions. If it sees any factor that, on rational grounds, indicates an arguable case on the part of the [applicant], it must find that a genuine dispute exists, even where any case apparently available to be advanced against the [applicant] seems stronger.
In Powerhouse Australasia Pty Ltd v Viarc Pty Ltd [2006] VSC 508, Dodds‑Streeton J (as she then was) considered the approach and standard to be applied when dealing with applications of this type:
While there is not a very exacting standard, on the other hand, mere assertion of a dispute or offsetting claim, mere bluster or advance in 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 offsetting claim is genuine’. Indeed that is its necessary function.[4]
[4]Powerhouse Australasia Pty Ltd v Viarc Pty Ltd [2006] VSC 508 at [48].
(emphasis added)
The Evidence of the plaintiffs
In his affidavit of 9 April 2015, Mr Naumovski deposes that Resdal carries on business as a member of a group of companies involved in property development and other associated enterprises. Zest has been the accountant for Resdal and the other members of the group since 2005.
On 19 March 2015, a statutory demand accompanied by an affidavit of a director of Zest, Mr Kortesis, of 19 March 2015, was served on Resdal. The schedule to the demand describes the debt as being for professional services rendered to Resdal by Zest from March 2014 to September 2014. The demand claims that $32,656.25 is due and payable.
The affidavit of Mr Kortesis, which accompanied the statutory demand, exhibits several invoices. The largest of them, number 3710, is for $25,575. The narrative to that invoice describes the work performed as follows:
· Meetings and discussions in relation to the tenant vacancy of former IGA at Central Shopping Centre, Caroline Springs.
· Analysis of an impact of loss of rent and review of costings to redevelop tenancy.
· Preparation of cash flow projections in relation to potential new tenancy.
· Preparation of breakeven analysis on construction costs.
· Preparation of interim draft financial statements for the periods ending 30 June 2012, 30 September 2012, 31 December 2012, 31 March 2013, 30 June 2013, 30 September 2013 and 31 December 2013.
· Review of all replacement tenant financial statements for tenancy 14C, 15A, 15B, 15C, 15E, 30 and 31.
· Attendance of all telephone calls, emails, disbursements and correspondence for the period ending 28 February 2014.
Total fees/costs based on time involved $23,250.00
Plus GST $2,325.00
TOTAL DUE: $25,575.00
Resdal is the registered proprietor of the premises at Caroline Springs referred to in the invoice. Those premises were the subject of proceedings in VCAT brought by a related entity, Geopec Pty Ltd, (‘Geopec’) against the grocery group IGA and BMS Retail Group Pty Ltd. Those proceedings were struck out in January 2015, apparently because of non-compliance by Geopec with procedural orders requiring discovery and provision of particulars of loss and damage.
The second invoice is for $4,262.50. The narrative to that invoice describes the work performed as follows:
· Preparation of financial statements for the entity, Resdal Corp Pty Ltd as trustee for Resdal Corp Unit Trust, for the year ended 30 June 2013.
· Preparation and lodgement of your trust income tax return for Resdal Corp Unit Trust, for the year ended 30 June 2013, including all relevant schedules as required by the Australian Taxation Office.
Total fees/costs based on time involved $3,875.00
Plus GST $387.50
TOTAL DUE: $4,262.50
The third invoice, for $275.00, contained the following narrative:
· Calculation of your summaries in preparation of your Business Activity Statement for the months ended 31 March 2014 and 30 April 2014.
· Preparation and lodgement of Business Activity Statement for the months ended 31 March 2014 and 30 April 2014.
Total fees/costs based on time involved $250.00
Plus GST $25.00TOTAL DUE: $275.00
The final invoice is for $2,543.75. The narrative to that invoice stated as follows:
·Calculation of your summaries in preparation of your Business Activity Statement for the month ended 31 May 2014 and the quarter ended 30 June 2014.
·Preparation and lodgement of Business Activity Statement for the month ended 31 May 2014 and the quarter ended 30 June 2014, this includes reconciling bank accounts, data entry and any other matter required to reconcile the MYOB file.
·Meetings with Louie Kortesis for the period ended 10 September 2014, regarding preparation and completion of global balance sheet position of all entities.
·Attendance of all telephone calls, emails and correspondence for the period ending 10 September 2014.
Total fees/costs based on time involved $2,212.50
Plus GST $231.25
TOTAL DUE: $2,443.75
All of the invoices are directed to the Resdal Corp Unit Trust[5] and are marked for the attention of the directors, Mr Naumovski and Mr Ugrinovski.
[5] Resdal is the trustee of that trust.
Mr Ugrinovski and Mr Naumovski went into the business of property development together in about 1997. There are now eight members of the corporate group including Resdal and, save for one of those companies, Mr Naumovski and Mr Ugrinovski (or their respective associated entities) each hold an equal number of shares in each member of the group.
Since mid 2005, Zest has prepared all the financial statements and tax returns for the group, including the individual, company and various partnership financial statements and tax returns.
In September 2014, Mr Naumovski commenced a Supreme Court proceeding against Mr Ugrinovski, seeking relief in respect of alleged oppressive conduct in relation to the group’s affairs. Mr Naumovski states that some of the oppressive conduct which is alleged was pursued in conjunction with Zest and Mr Kortesis.
The originating process in the oppression proceeding is exhibited to Mr Naumovski’s affidavit. It descends to considerable detail in respect of the allegations constituting the alleged oppressive conduct. Neither Zest or Mr Kortesis are parties to that proceeding, no allegations are made against them nor are they mentioned in the factual narrative.
In the oppression proceeding, Mr Naumovski contends that Mr Ugrinovski has diverted a number of business opportunities away from companies in the group including one in relation to a property at City Road, South Melbourne (‘City Road’).
It is alleged that the opportunity to acquire City Road was diverted from the group, including Resdal to City Road Properties Pty Ltd. The directors of that company are Mr Ugrinovski and Mr Kortesis and between them they control the shareholding. Mr Naumovski states that this was concealed from him. He contends that the involvement of Mr Kortesis and Mr Ugrinovski in this venture identifies a breach of their duties and obligations to the group for which the group will suffer considerable loss and damage which is not quantified.
The allegations in respect of City Road are detailed in the statement of claim filed in the oppression proceeding. Again, I note no allegations are made against Zest or Mr Kortesis nor are they mentioned in the narrative of the detailed allegations concerning City Road. Mr Naumovski states that he has instructed his lawyers to pursue proceedings against Zest and Mr Kortesis for the loss and damage suffered and being suffered by the group, including Resdal, by reason of this conduct. Some eight months have passed since the affidavit was sworn yet no such proceedings have been commenced. In any event, it was not contended at the hearing of this matter that such allegations gave rise to any offsetting claim against Zest.
It is also asserted by Mr Naumovski that the work claimed to be carried out by Zest, which is the subject of invoice 3710, ‘has not been carried out properly and carefully in accordance with the standard required by a competent accountant’. These deficiencies are not specified. It is also said that any works described in the invoices issued to Resdal were not carried out by Zest for or on behalf of Resdal, or at the request of Resdal, and that the invoices have been improperly addressed to Resdal.
Mr Naumovski deposes that he has discovered anomalies within the group’s financial statements that Zest has prepared. He states that by about February 2014 or March 2014 he began to suspect that Mr Ugrinovski was borrowing money for his own purposes and using the group’s financials to facilitate this. In early June 2014, he telephoned Westpac and ANZ, who were the bankers for the group, and requested copies of the financial statements the companies had provided for the previous financial year, which the banks provided by email. He noticed that those financial statements differed from those that Mr Kortesis had provided to him.
On 19 March 2014 he received an email from the ANZ Bank attaching financial statements, including profit and loss statements for a member of the group, Geopec, in its capacity as trustee for the Naumovski Investment Trust and the Ugrinovski Investment Trust Partnership, for the financial year ending 30 June 2013. These statements show the following:
(a) In the financial year ending 30 June 2012 Geopec had cash assets in the sum of $205,644 and received income by way of interest on investments, presumably from those cash assets, in the sum of $527.00. In the following financial year the accounts state that Geopec had cash assets in the sum of $832,253 and received income by way of interest from investments, again presumably from the cash assets, in the sum of $91,135.
(b) On 30 April 2014, Mr Naumovski received an email from Mr Kortesis attaching the financial statements including profit and loss statements for that trust and partnership for the financial year ended 30 June 2013. The financial statements attached to that email differed from those submitted to the ANZ Bank in the previous month in that whilst it showed that Geopec had cash assets in the sum of $832,253, it showed that it received income by way of interest from investments on that sum of $11,135, some $80,000 less than the income from the investments shown in the March statement.
Mr Naumovski says that the financial statements in question were submitted to the bank without his knowledge, authority or consent. He has not yet signed off on the financial statements for Geopec for the financial year ended 30 June 2013. He states that he does not believe that Geopec has cash assets in the sum of $832,253 or that it has received income by way of interest on investments at the level stated in either of those financial statements.
Mr Naumovski states that in Mr Ugrinovski’s affidavit in opposition, filed in the oppression proceeding, he deposes, among other things, that these financial documents are likely to have been prepared by Zest, that he is unable to explain this anomaly and believes that Mr Kortesis is the best person to explain it.
In addition to these matters, Mr Naumovski asserts that there are considerable irregularities and anomalies associated with invoice number 3710. He states that the work the subject of this invoice has not been performed for Resdal, nor has the work alleged been performed at Resdal’s request. Further, he states that while the invoice was given to his wife, Annette Naumovski, by Mr Ugrinovski in March 2014, he gave her instructions that the invoice was not to be paid and that Mr Kortesis had only made demand for its payment very recently.
Mr Naumovski states that between mid 2009 and September 2014, his wife worked for the group as the accounts office manager. She had various roles and responsibilities in the group in connection with that role. He states that during this period, Mr Ugrinovski’s wife, Maria, Mr Kortesis, Annette Naumovski and himself had access to the server and the MYOB file. Any invoices received by the group whether in person, by email or my ordinary mail were to come to his wife for processing and payment and once she received an invoice she would process it in the MYOB system. She would then seek to match the invoice with a purchase order or quote. When an invoice was due for payment, she would seek approval for payment from the person who approved the order, being Mr Ugrinovski, an employee (a Mr Brelis) or Mr Naumovski himself.
On 27 March 2014 Mr Ugrinovski sent Annette Naumovski invoice 3710 saying as follows:
Stamp this as entered but do not pay. Don’t add it to the list just leave a copy in my in tray so I can give it to HWL.[6]
[6]HWL are the firm of lawyers engaged by Geopec in the VCAT proceeding involving premises at Caroline Springs Shopping Centre which are owned by Resdal.
In addition to these matters, Mr Naumovski contends that invoice 3710 has been ignored by Zest and that Zest has not made any demand for payment until very recently. He details various communications in this regard. In an email dated 30 July 2014 listing all of the invoices that are over 120 days old at that time, there is no reference to invoice 3710 and it is not attached. In an affidavit sworn by Mr Kortesis on 3 February 2015 and filed in the oppression proceeding in opposition to a subpoena that was issued to Zest, Mr Kortesis testifies to the fact that Zest is owed approximately $40,000 by the group and exhibits a copy of all the outstanding invoices yet does not make any reference to or include invoice 3710.
In a letter of 18 February 2015 sent to Mr Naumovski’s lawyers by Mr Ugrinovski’s lawyers in the oppression proceeding, the lawyers state that about $35,000 is owed by the group to Zest. Under cover of a letter dated 25 February 2015, Mr Naumovski’s lawyers wrote to Mr Ugrinovski’s lawyers in relation to the oppression proceeding and requested an explanation about invoice 3710. In an affidavit sworn 2 March 2015 by Mr Ugrinovski’s lawyer and filed in the oppression proceeding, Mr Ugrinovski’s lawyer states that she is informed by Mr Kortesis that the amount that is owed by the group to Zest is approximately $67,000 and exhibits invoice 3710 to that affidavit.
Mr Naumovski states that in early 2014, he and Mr Ugrinovski discussed moving all of their accounting services to a new accounting firm as he was unhappy with the performance of Zest. He states that he was not satisfied that Mr Kortesis was acting in their best interests and thought that the level of service that was being provided had dropped. More sites were being acquired to be developed by the group but there was no tax planning and advice, unlike in the past when such advice would be provided by Mr Kortesis.
He states that Mr Ugrinovski indicated that he too had lost confidence in Mr Kortesis and mentioned that he had previously had a discussion with a firm of accountants in Footscray. He stated that he would arrange a meeting with them, which took place on 12 August 2014. They discussed the requirements of the group and Mr Naumovski gained the impression that those accountants would provide a more satisfactory service. The group had grown and the number of day to day transactions had increased dramatically and Mr Naumovski considered Mr Kortesis’ performance and involvement had become more distant and more like that of a bookkeeper. Mr Naumovski considered that more sophisticated and attentive accounting expertise was required and Mr Ugrinovski and he said that they would forward some basic information about the group to Collins & Co and made a time to meet again on 11 September 2014. The meeting did not proceed because of the disputes the subject of the oppression proceeding came to a head.
In the oppression proceeding, Sifris J made orders appointing Moore Stephens as the new accountants of the group. Mr Naumovski states that he was informed by the new accountants, who are preparing up to date financials for the group, that they have discovered anomalies with the accounts that have been prepared by Zest but these are not specified.
Zest’s affidavit material
In his affidavit of 29 May 2015, Mr Kortesis states that Zest carries on business as a public accountant and has been the accountant for Resdal and the other companies in the group since about 2005.
In regard to the assertion of Mr Naumovski, that some of the conduct alleged in the oppression proceeding was undertaken in conjunction with, and aided and abetted by Zest and him, he states that neither Zest or himself are a party to the oppression proceeding and denies this allegation. He states that as to the businesses owned or operated by Mr Ugrinovski, Zest’s role was solely to provide accountancy service and tax services to establish corporate structures. He stated at no time did he have any involvement in the decision making process in relation to any acquisition of properties or any decisions about the long term strategic objectives of any of the entities or companies.
As to the allegations in respect of the City Road property, he states that Zest was a tenant as were other entities at that premises, including Landstream Group Pty Ltd (‘Landstream’). The directors of Landstream were Mr Naumovski and Mr Ugrinovski. Landstream ceased to occupy the premises in or about mid July 2013. He states that Mr Ugrinovski invited him to purchase the City Road premises with him and take a 35% share in the property. He states that he considered this to be a private transaction with him and not to be in any way a transaction involving the Resdal group, as Mr Ugrinovski advised him he was personally purchasing the City Road premises. He is not aware of any legal proceedings commenced by Mr Naumovski, or his related entities, against himself or Zest in relation to the City Road premises.
Mr Kortesis states that he had never been provided with any specific details concerning the allegations that the work carried out on behalf of Resdal, the subject of invoice 3710 or any of the other invoices, was not carried out properly and carefully and to a competent manner. The invoice was provided to Mr Ugrinovski in or about 10 March 2014. Mr Ugrinovski subsequently advised him not to forward any reminders for payment and requested an indulgence from Zest in relation to payment of this invoice until after the VCAT dispute had been resolved between Resdal and IGA. He states that as Resdal had been a long standing client he agreed to the request for the indulgence.
Mr Kortesis states that over a period of time he failed to realise that invoice 3710 was still outstanding, particularly because no reminders for payment were forwarded to Resdal as requested by Mr Ugrinovski. He states that when Zest became involved in the oppression proceedings by way of being subpoenaed to produce voluminous documents (which subpoena was subsequently withdrawn) he became aware that invoice 3710 was still outstanding and had not been paid. He states that Zest then requested and pursued payment from Resdal.
He states that, in the absence of specific details being provided, he is unable to respond to the allegations involving anomalies in the financial statements. As to the allegations involving Mr Ugrinovski, concerning borrowing of money for his own purposes and the allegations concerning Geopec, he contends that these matters are not relevant to the present proceeding.
Mr Kortesis contends that the allegations, that the work the subject of the invoice has not been performed for Resdal, if it has been performed at all, or if it has, it has not been performed at the request of Resdal, are so generalistic to be incapable of response.
Resdal’s evidence in reply
In Mr Naumovski’s affidavit of 25 June 2015, he deposes that the oppression proceeding referred to in the previous affidavit was settled on 13 June 2013 and that he would acquire full ownership, control and directorship of Resdal by no later than 28 October 2015. He states that under the terms of the settlement he is the beneficial owner of the other half of the shares in Resdal and will become the owner of all of the shares and be the sole director no later than that date. He states that he has instructed his lawyers to make application to have Zest and Mr Kortesis joined as parties to the oppression proceeding based on their conduct. However, on the advice of his lawyers, he has not done so because he has been advised that he should litigate his claims with Mr Ugrinovski and then bring any separate claims against Zest and Mr Kortesis.
He asserts that in discussions with his new accountants that the accounts prepared by Zest are ‘irregular, incomplete, not how they should be and called for significant explanation.’ He states that he is informed that many of the account balances and transactions in the accounts are not substantiated and that there is either insufficient or no information or explanation as to the nature of the balances and reasons behind certain adjustments. In my view, that evidence, which does not specify the alleged deficiencies or identify the persons who made such comments, is cast in such general terms that I should give it very little weight. Such alleged deficiencies could well have been particularised and exemplified and identified the persons who expressed such views but instead they are left as generalistic unsupported assertions.
He states that counsel has been briefed to draw proceedings against Zest and Mr Kortesis and that he has met with counsel for the purpose of giving instructions to do so. He states the proceedings will be commenced when he has obtained full control of Resdal pursuant to the settlement reached in June 2015.
Mr Naumovski then refers to the largest invoice, invoice 3710. He states that this invoice is part of a claim for loss and damage made in the VCAT proceeding brought by Geopec against IGA Distribution and BMS Retail Group Pty Ltd, who are respondents in the VCAT proceeding and who were tenants at the relevant time of the premises owned by Resdal. He states that the VCAT proceedings were brought in the name of Geopec seeking loss and damage in relation to the premises owned by Resdal arising from breaches by IGA and BMS of their lease of Resdal’s premises at Caroline Springs. Mr Naumovski states that the invoice relates to work alleged to have been done by Zest and Mr Kortesis on behalf of Resdal in relation to the claim brought in the VCAT proceeding in the name of Geopec. The invoice is part of the damages claimed by Geopec in the VCAT proceeding which includes seeking recoupment and recovery of the invoice alleged to have been rendered by Zest.
Mr Naumovski states that he has never seen any of the alleged work in question and does not believe any of the work has been done. He states he was not consulted concerning the work which was allegedly the subject of the invoice and did not request or authorise the work. He asserts that he did not approve of the work, does not believe that the invoice was a genuine invoice and that it has been manufactured.
I observe at this point that if one goes to the narrative of the invoice, in large part it concerns the claim in the VCAT proceeding in respect of the premises owned by Resdal, and appears to be work done on its behalf as owner of the premises or on behalf of its related entity, Geopec. A claim for the recoupment of the costs of such work the subject of the invoice has been made in the VCAT proceeding.
The assertion by Mr Naumovski that he did not approve of the work personally and that he was not consulted about it does not establish that Mr Ugrinovski’s involvement in engaging Zest to carry out such work was undertaken without authority. The fact that there is internal turmoil between the directors of Resdal is of no relevance to its dealings with third parties. Being a director, Mr Ugrinovski clearly had the authority to engage Zest to carry out such work. Mr Ugrinovski has not sought to participate in this application. Indeed, in a letter of 7 April 2015 from Mr Ugrinovski’s solicitors, Thomson Geer, to Mr Naumovski’s solicitor, they state that Mr Ugrinovski does not consider that there is a genuine dispute in respect of the invoices the subject of the demand.[7]
[7]The letter is part of Exhibit VN–12 to Mr Naumovski’s first affidavit.
Alternatively, Mr Naumovski then asserts that by reason of the indulgence granted by Mr Kortesis, that payment of the invoice is not required to be made until after the VCAT proceeding has been finalised or settled and, because the VCAT proceeding could be reinstated, the invoice is not presently payable. He states that the VCAT proceeding was struck out with a right of reinstatement on 28 January 2015 by reason of the failure to comply with procedural orders but that he has been advised that an application could be made at any time to reinstate that proceeding and continue the prosecution of the claim. He states that the rest of the claim for loss and damage in the VCAT proceeding is good and that the VCAT proceeding should be reinstated as soon as possible and all other claims for loss and damage prosecuted.
Such a position in my view is unsustainable. It amounts to contending that the account is payable at the whim of Resdal. Over a year has passed since the proceeding was struck out in VCAT and there is no evidence that any attempts have been made to reinstate the proceeding. To the extent that there was an agreement that Zest would not pursue the invoice until finalisation or settlement of the VCAT proceeding, that moratorium has expired.
Mr Naumovski then goes on to assert that the invoice was a sham and that he proposes to take his concerns about the invoice to Victoria Police for investigation. His asserts that Resdal is solvent, which is not relevant in applications of the present character. He asserts that Zest has engaged in an abuse of process by reason that invoice 3710 is in dispute and that Zest has, notwithstanding its knowledge of the significant solvency of Resdal, used the statutory demand procedure as a debt collection device.
The second affidavit of Mr Naumovski is one I would place little weight on. It is riddled with assertion and unsupported by evidentiary foundation.
In his affidavit of 9 December 2015 Mr Lambros states that he is the solicitor having the responsibility for the carriage of the oppression proceedings. He also represented Mr Naumovski in the VCAT proceedings. He describes what has occurred in relation to the oppression proceedings and the background to how the dispute in respect of the heads of agreement has evolved. That dispute will require a determination by Almond J of questions of construction in relation to parts of the heads of agreement. For this reason Mr Naumovski has not obtained control of the shareholding in Resdal and the related entities nor has Mr Ugrinovski resigned from the directorship of Resdal to make Mr Naumovski the sole director.
As to the VCAT proceedings he provides a background to how the VCAT proceeding came to be struck out in January 2015 following the failure by Geopec to comply with orders made by VCAT as to the issue in respect of invoice 3710. He relays the instructions he has received from Mr Naumovski. It is not explained why Mr Naumovski has not deposed to such matters. However his affidavit takes it no further than Mr Naumovski’s generalistic assertions in regard to the alleged deficiencies in the work carried out by Zest. The balance of the affidavit is given over to why Mr Naumovski should be given leave under s 237 which are of no present relevance to the central issues in dispute.
In the course of hearing this application, Mr Kohn, Counsel for Resdal, contended that a dispute arises because there has been no evidence put on by Zest in respect of the actual time spent on the tasks the subject of the invoices and what hourly rates were applied by Zest in coming to the amounts claimed in the invoices. Such amounts were apparently arrived at by reference to time recording records. I do not consider that such matters were raised in the supporting affidavit of Mr Naumovski sworn 9 April 2015 and such an argument is not, in my view, available to Resdal in this proceeding on an application of the Graywinter principle.
The substance of Mr Naumovski’s evidence in his affidavits is as follows:
(i) Zest have been the accountant for Resdal and the other members of the corporate group since 2005. It has prepared all financial statements and tax returns for the group.
(ii) Mr Naumovski has been involved in complicated and protracted oppression proceedings in this Court against Mr Ugrinovski, the other director of Resdal. Aside from unsupported assertions that Zest and Mr Kortesis were involved in that oppressive conduct, there is no particularisation of the alleged conduct and no mention is made of them in the statement of claim. Those proceedings are the subject of terms of settlement entered into in June 2015 (although there is now a controversy before the court in relation to the construction of those terms).
(iii) Despite the threat of proceedings against Zest and Mr Kortesis for loss and damage arising out of such alleged conduct, no such proceedings have been issued or outlined with any particularity. I do not consider that this allegation gives rise to any dispute in respect of the debts claimed in the demand or in any offsetting claim.
(iv)It is alleged that Mr Kortesis and Mr Ugrinovski were involved in a diversion of an opportunity to acquire City Road. In the statement of claim in the oppression proceeding, no claim is made against Zest nor is it mentioned in the detailed allegations in that document. No offsetting claim has been raised in respect of the City Road controversy nor could it be said to be the subject of a genuine dispute in respect of the debts the subject of the demand.
(v) It is asserted that the work which is the subject of invoice 3710, the largest of the invoices, has not been carried out properly but this assertion is not developed by evidence or particularisation and the allegation is left at the level of a generalistic unsupported assertion. It does not in my view go any way to establishing the existence of a genuine dispute or offsetting claim.
(vi)Allegations are made in respect of what are described as anomalies within the accounts prepared by Zest, in particular, those relating to Geopec, but such allegations could not, in my view, give rise to a genuine dispute involving the debt, the subject of the demand, or in any off-setting claim against Zest.
(vii) Mr Naumovski asserts that the work, the subject of invoice 3710, has not been performed for Resdal nor has the work alleged been performed at Resdal’s request. If one looks to the narrative of the invoice it clearly relates to work done in relation to premises owned by Resdal. It is not explained how Geopec came to make the claim in the VCAT proceeding given that Resdal is the proprietor of that property. Even if Mr Naumovski had no knowledge of the engagement of Zest to perform the work the subject of that invoice, he ignores the ability of his co‑director, Mr Ugrinovski, to engage Zest to perform that work. I regard it as being most significant that Mr Ugrinovski has indicated through his solicitors that he does not consider that there was any genuine dispute in relation to Zest’s claim.
(viii) Mr Naumovski contends that Zest has not pursued invoice number 3710 until recent times. Mr Naumovski’s co-director had received the invoice but had directed it not be paid (apparently it transpires with the agreement of Mr Kortesis until resolution of the proceedings in VCAT had ‘finalised or settled’). The VCAT proceeding was struck out by reason of non-compliance with procedural orders on Geopec’s part on 28 January 2015. Any moratorium in respect of payment for the invoice for that reason expired some 12 months ago. Mr Kortesis’ evidence to my mind adequately explains why the amount claimed in invoice 3710 was overlooked and is now pursued.
(ix) Aside from the submission sought to be made by Mr Kohn in relation to the time costing issue, which as I have said is not able to be made in this application, none of the other invoices claimed in the other demand are referred to by Mr Naumovski in his affidavits. No disputes or offsetting claims are raised against those invoices.
(x) In early 2014 Mr Naumovski and Mr Ugrinovski considered moving all of their accounting requirements to a new accounting firm because of their discontent with Zest’s performance. The matters referred to are no more than a mere expression of discontent with Zest generally and of an intention to end Zest’s retainer as the group’s accountant and to appoint new accountants. It is not put that such matters form the basis of a genuine dispute in respect of the debts the subject of the demand.
In my view Resdal, which bears the onus in this application, has not established the existence of a genuine dispute in respect of the invoices the subject of the demand or of any genuine offsetting claims. Adopting the words of the authorities to which I have referred, I do not regard the alleged disputes and claims put by Mr Naumovski on behalf of Resdal as having sufficient prima facie plausibility to merit a finding that further investigation as to the truth of such matters being put is warranted. A number of matters are raised in Resdal’s affidavit material but I do not consider that any of them meet the requisite standard to establish the existence of a genuine dispute or offsetting claim. I consider that the disputes which are sought to be raised are spurious and illusory. The application should be dismissed with costs.
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