SM@RTTRANS Ltd v Exploration and Mining Consultants Pty Ltd - [2001] WASC 164

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: SM@RTTRANS LTD -v- EXPLORATION & MINING CONSULTANTS PTY LTD [2001] WASC 164

CORAM: MASTER SANDERSON

HEARD: 19 JUNE 2001

DELIVERED : 27 JUNE 2001

FILE NO/S: COR 143 of 2001

MATTER :Sections 459G and 459J of the Corporations Law
BETWEEN: SM@RTTRANS LTD
Plaintiff
AND
EXPLORATION & MINING CONSULTANTS PTY LTD
Defendant

Catchwords:

Corporations Law - Application to set aside statutory demand - Turns on own facts

Legislation:

Corporations Law, s 459G, s 459H

Result:

Demand set aside

Representation:

Counsel:

Plaintiff: Mr K L Christensen
Defendant: Mr M S Macdonald

Solicitors:

Plaintiff: Tottle Christensen
Defendant: Macdonald Rudder

Case(s) referred to in judgment(s):

David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353

Case(s) also cited:

Australian Growth Resources Corporation Pty Ltd (Receivers and Managers Appointed) v Van Reesema (1998) 6 ACLC 529
Chew v R (1991) 5 ACSR 473
Chew v R (1992) 173 CLR 626
Classic Ceramic Importers Pty Ltd v Ceramica & Antigasa (1994) 13 ACSR 263
Eden Bay Pty Ltd v Bennett & Co (1997) 15 ACLC 1634
Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 14 ACLC 1703
John Shearer Ltd v Gehl Co (1996) 18 ACSR 780
Kalamunda Meat Wholesalers Pty Ltd v Reg Russell & Sons Pty Ltd (1994) 13 ACSR 525
Re Louisbridge Pty Ltd [1994] 2 QdR 144
Richard Brady Franks Ltd v Price (1937) 58 CLR 112
Scandon Pty Ltd v Dome Suppliers Pty Ltd (1995) 17 ACSR 662
South Australia v Marcus Clark (1996) 66 SASR 199
Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452
Transfloors Pty Ltd v SWF Hoists & Industrial Equipment Pty Ltd (1985) 3 ACLC 66
Verte Pty Ltd v Grisbrook (1997) 5 ACLC 1306

MASTER SANDERSON: This is the plaintiff's application to set aside a statutory demand. The application is brought under s 459G of the Corporations Law. The plaintiff says that it has an offsetting claim greater than the amount of the demand. The amount of the demand was $66,847.77. There is no dispute that this amount is owing by the defendant to the plaintiff. For the purposes of s 459H(2) the amount of the "admitted total" is $66,847.77.
The dispute between the parties is of relatively narrow compass. It can be summarised in this way. The plaintiff was formerly known as Swantop Corporation Pty Ltd and it is a subsidiary of Coolgardie Gold NL ("Coolgardie"). The defendant is properly described as Exploration and Mining Consultants Pty Ltd. At the commencement of hearing counsel for the plaintiff applied for leave to amend the title of the defendant accordingly and there being no objection leave was granted. On 20 August 1999 the plaintiff, Coolgardie, the defendant, Ronald Heeks ("Heeks") and Peter Batten ("Batten") entered into various agreements being an option agreement, a consultancy agreement and a sale agreement. Copies of all of these documents appear as annexure "MS3" to the affidavit of Malcolm Keith Smartt ("Smartt") sworn 4 May 2001 and filed in support of this application. It is unnecessary to go into any detail as to these agreements. Essentially they involved the transfer of certain software to deal with electronic tracking and routing systems from the defendant to the plaintiff. It is relevant to note that the sale agreement settled on 1 October 1999. This is common ground between the parties.
Between the date of the signing of the various documents and the settlement date the defendant rendered to the plaintiff three invoices. The first, dated 31 August 1999 was for $42,111.42. The second and third were dated 30 September 1999 were for $43,482.93 and $23,050 respectively. All of these invoices were paid by the plaintiff to the defendant on 22 October 1999. The plaintiff now says that pursuant to the various agreements the defendant had no contractual right to be paid the amounts it claimed. It is said by the plaintiff that payment was made under a mistake of fact - Smartt thought that the contractual position between the plaintiff and the defendant allowed the defendant to charge the plaintiff in line with the invoices. That, it was said, was not the case. The plaintiff says it is entitled to recover money paid under a mistake of fact and in the circumstances the "offsetting total" is just over $108,000. On that basis it is said that the statutory demand ought be set aside.
The defendant resists the application on three separate but interrelated grounds. First, it is said that pursuant to the consultancy agreement the term of that agreement was to commence on the date of execution of the agreement. It is said that the invoices were rendered pursuant to the consultancy agreement and they are, therefore, due and payable. Without seeking to determine the issue between the parties it can quickly be seen that there is a genuine dispute on this question. Settlement of the deal between the parties did not take place until 1 October 1999. Prior to that date the plaintiff had no business because it had no rights to the software the subject of the various agreements. It is at least arguable then that any development work undertaken on the software by the defendants was not for the plaintiff's account.
Secondly, it was said that Smartt on behalf of the plaintiff expressly agreed that the defendant could render these invoices to the plaintiff and that they would be paid. The evidence relating to this alleged agreement is to be found in par 3 of the affidavit of Heeks, sworn 11 May 2001 and filed in opposition to this application. Heeks says that Smartt, in his capacity as a director of the plaintiff "expressly agreed that EMC (the defendant) could render these invoices". During the course of his submissions counsel for the plaintiff objected to this evidence. He submitted that properly viewed it amounted to a conclusion of law. It was said that if the defendant wished to allege some form of agreement then the words used by the parties should have been quoted so as to allow a conclusion to be drawn from the evidence. In the circumstances it was submitted that par 3 ought be struck out.
In my view the objection is well taken. There is no doubt that Heeks, as a person present during conversations which took place with Smartt, can give direct evidence of what passed between the parties. That is what he should do. Based upon what was said and perhaps by implication it might be possible to reach a conclusion that the parties had reached an agreement. But in its present form par 3 is inadmissible and ought be struck out.
Even if par 3 in its present form were to stand there would still remain a dispute between the parties as to whether or not any agreement had been concluded. As I understand the defendant's case it is said that an oral agreement reached between Smartt and Heeks varied the terms of agreement as embodied in the documents. Accepting, without deciding, that such an agreement might possibly have been reached and have been consistent with the documented agreement, Smartt, in a supplementary affidavit sworn 25 May 2001 disputes that any such agreement was reached. It is true that Smartt's evidence (to be found in par 3 of his supplementary affidavit) is somewhat equivocal. But he certainly does not concede that any agreement was reached. The defendant asks that I reach a concluded view on this question and determine that there was an agreement as alleged. In my view that is beyond the scope of the statutory demand procedure. All I can conclude is that there is a genuine dispute on this issue.
Finally it is said that any payment made by the plaintiff was not made under a mistake of fact but was a voluntary payment made by the plaintiff after careful consideration. The evidence of Heeks on this question may be summarised in the following way. Payment of the three invoices by the plaintiff on 22 October 1999 was authorised by Smartt. The affidavit of Annette Joy Batten, sworn 11 May 2001 and filed in opposition to the application, details the way in which invoices were dealt with and accounts were paid by the plaintiff. Based upon Mrs Batten's evidence it is clear that each of the invoices was brought to Smartt's attention and it was not simply a matter of the company making payment pursuant to some remote internal process. Furthermore, each of the invoices, save the third, provided a detailed analysis of work done the subject of the invoice. In the circumstances it was submitted, Smartt on behalf of the plaintiff authorised payment of the invoices voluntarily and not pursuant to a mistake. The defendant says further support for this proposition is to be found in the conduct of Smartt and the plaintiff subsequent to payment of the invoices. On 23 December 2000 Smartt wrote to the defendant. The letter dealt with a number of matters, including amounts contained in the three invoices. Essentially what Smartt sought to do was claim that any amounts invoiced for work done prior to 23 August 1999 were amounts not properly paid. Based upon this correspondence and discussions which took place between the parties, it is said that it is plain that there was no question of the payment in October 1999 being made by mistake.
In dealing with an application to set aside a statutory demand it is not appropriate to deal in any detail with the principles relating to mistake. Both parties relied upon the decision of the High Court in David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353. In particular the defendant relied upon the following passage in the majority judgment (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ at 373 ‑ 374):
"The payment is voluntary or there is an election if the plaintiff chooses to make payment even though he or she believes a particular law or contractual provision requiring the payment is, or may be, invalid, or is not concerned to query whether payment is legally required; he or she is prepared to assume the validity of the obligation, or is prepared to make the payment irrespective of the validity or invalidity of the obligation, rather than contest the claim for payment. We use the term 'voluntary' therefore to refer to a payment not made in satisfaction of an honest claim, rather than a payment not made under any form of compulsion or undue influence. If such qualifying, factual circumstances are considered relevant, the sweeping principle that money paid under a mistake of law is irrecoverable or even the Federal Court's modification of that principle to the effect that mistake of law does not on its own found an action for recovery of money paid is broader and more preclusive than is necessary. As the authorities cited earlier in explanation of the term 'mistake of law' make clear, the concept includes cases of sheer ignorance as well as cases of positive but incorrect belief."
The Court then went on (at 376):
"Having rejected the so‑called traditional rule denying recovery in cases of payments made under a mistake of law, it is necessary to consider what principle should be put in its place. It would be logical to treat mistakes of law in the same way as mistakes of fact, so that there would be a prima facie entitlement to recover moneys paid when a mistake of law or fact has caused the payment."
It is important to note that what the Court determined was that prima facie a party that pays money under a mistake of law or fact is entitled to recover that payment. It must be assumed then, for the purposes of this application, that prima facie the plaintiff is entitled to recover money paid to the defendant based upon the invoices. In answer to that the defendant says that the payment was voluntary and no recovery is possible. But Smartt says that he made a mistake - he thought the plaintiff was obliged to meet the invoices pursuant to the agreement between the parties. There is clearly a dispute between the plaintiff and the defendant on this question. In light of Smartt's evidence, in particular par 11 of his affidavit of 4 May 2001, there is clearly a dispute between the parties which cannot be resolved in the context of this application.
In calculating the substantiated amount account must be taken of a sum of $36,250 which according to Heeks (par 30 of his affidavit) has been wrongly paid to the plaintiff and is in fact due to the defendant. Smartt, in his affidavit of 25 May 2001, acknowledges this to be the case (par 14). However, even taking this amount into account the plaintiff's offsetting claim exceeds the admitted total, leaving the substantiated amount less than the statutory minimum. On this basis the statutory demand ought be set aside.
I will hear the parties as to the precise form of orders and as to costs.