Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd
[2007] WASC 187
•27 JUNE 2007
GIACCI HOLDINGS PTY LTD -v- GIACCI [2007] WASC 187
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2007] WASC 187 | |
| Case No: | COR:151/2006 | 27 JUNE 2007 | |
| Coram: | MARTIN CJ | 27/06/07 | |
| 11 | Judgment Part: | 1 of 1 | |
| Result: | Application granted Statutory demand set aside under s 459H of the Corporations Act 2001 (Cth) | ||
| B | |||
| PDF Version |
| Parties: | GIACCI HOLDINGS PTY LTD (ACN 008 708 370) ANTONIO CARMINO GIACCI |
Catchwords: | Corporations Application to set aside statutory demand under s 459G of the Corporations Act 2001 (Cth) Genuine dispute about the existence or amount of debt to which the demand relates Whether the action is statute barred under the Limitation Act 1935 (WA) Whether there was acknowledgment of the debt |
Legislation: | Corporations Act 2001 (Cth), s 459G, s 459H Limitation Act 1935 (WA), s 44 |
Case References: | Commonwealth v Verwayen (1990) 170 CLR 394 Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ASCR 785 Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290 Process Machinery (Australia) Pty Ltd trading as DCL Engineering v ACN 057 260 590 [2002] NSWSC 45 Scanhill Pty Ltd v Century 21 Australasia Pty Ltd (1993) 47 FCR 451 Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
ANTONIO CARMINO GIACCI
Defendant
Catchwords:
Corporations - Application to set aside statutory demand under s 459G of the Corporations Act 2001 (Cth) - Genuine dispute about the existence or amount of debt to which the demand relates - Whether the action is statute barred under the Limitation Act 1935 (WA) - Whether there was acknowledgment of the debt
Legislation:
Corporations Act 2001 (Cth), s 459G, s 459H
Limitation Act 1935 (WA), s 44
Result:
Application granted
Statutory demand set aside under s 459H of the Corporations Act 2001 (Cth)
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Category: B
Representation:
Counsel:
Plaintiff : Mr P Mendelow
Defendant : Mr M L Bennett
Solicitors:
Plaintiff : Taylor Smart
Defendant : Lavan Legal
Case(s) referred to in judgment(s):
Commonwealth v Verwayen (1990) 170 CLR 394
Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ASCR 785
Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290
Process Machinery (Australia) Pty Ltd trading as DCL Engineering v ACN 057 260 590 [2002] NSWSC 45
Scanhill Pty Ltd v Century 21 Australasia Pty Ltd (1993) 47 FCR 451
Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452
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1 MARTIN CJ: The plaintiff, Giacci Holdings Pty Ltd, applies pursuant to s 459G of the Corporations Act 2001 (Cth) for an order setting aside a statutory demand which was served on the company. That statutory demand was served by the defendant Antonio Carmino Giacci on or about 30 August 2006 and was supported by an affidavit sworn by him on 28 August 2006. I will refer throughout these reasons to the plaintiff as "the company" and to the defendant as "Antonio Giacci".
2 The company has taken issue with respect to the form of the affidavit accompanying the statutory demand. Because of the view to which I have come in relation to the substantive issues, it is unnecessary for me to deal in detail with those issues, other than to observe that in my view the complaints with respect to form should not in this case be upheld as, if there were any defects in form, they did not give rise to any substantial injustice.
3 Before dealing with the substantive issues that have arisen in the case, it is appropriate to set out some of the principles that govern the court's consideration of applications of this kind. Those principles are well established and have not been seriously contested in the submissions that have been filed by the parties to these proceedings. They include the proposition that when a company seeks to satisfy the court that there is a genuine dispute between the company and the person issuing the statutory demand about the existence or amount of a debt to which the demand relates, the court does not have to weigh the merits of the dispute before it can make an order setting the demand aside or varying it. The court needs only to find that there is a dispute and that it is a genuine dispute. Authority for that proposition can be found in Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290.
4 It is also established that although the onus borne by an applicant for relief under s 459H in asserting a genuine dispute or offsetting claim is not a particularly demanding one, the word "genuine" when used in that section requires that the dispute be bona fide and that the grounds for alleging the dispute are real and not spurious, hypothetical, illusory or misconceived. Authorities that support that proposition include Process Machinery (Australia) Pty Ltd trading as DCL Engineering v ACN 057 260 590 [2002] NSWSC 45 and Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452.
5 The expression "genuine dispute" has been considered in a number of cases and has been held to connote the establishment of a plausible connection requiring investigation, raising much the same sort of
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- considerations as the criterion of "serious question to be tried" which arises when applications are made for interlocutory injunctive relief. Authority for that proposition can be found in Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ASCR 785.
6 It is also established that in the case of an offsetting claim a similar test is to be applied; that is to say, whether the Court is satisfied that there is a serious question to be tried to the effect that the applicant has an offsetting claim. That criterion is more easily satisfied than the requirement to establish a prima facie case. Authority for that proposition can be found in Scanhill Pty Ltd v Century 21 Australasia Pty Ltd (1993) 47 FCR 451.
7 It is also established that an offsetting claim can arise even if it does not arise out of the same transaction or circumstances as the debt to which the demand relates - Scanhill (supra) is also authority for that proposition.
8 In this case, the affidavit which accompanied the statutory demand sworn by Mr Antonio Giacci claimed that the amount owed was an amount of $197,000, said to be due from the company in respect of outstanding employee entitlements. It is clear from the evidence that those entitlements are asserted to arise from Mr Antonio Giacci's service as a director of the company.
9 The circumstances of that service and the role and history of the company have been set out at length in the decision which I delivered in company matter 298 of 2005, which was a claim by Mr Antonio Giacci for oppression in relation to the conduct of the affairs of the company. By referring to that judgment, it is not necessary to refer further to the circumstances of the company and the role played by Mr Antonio Giacci and his brothers, Peter Giacci and Mario Giacci, in relation to the company and its affairs.
10 In the affidavit accompanying the statutory demand, Mr Antonio Giacci asserts that the debt has been acknowledged by the debtor as being a debt owing, as evidenced by, firstly, the Giacci Holdings Ltd independent indicative valuation report dated June 2006 - that is a report which was tendered in evidence by Peter and Mario Giacci in the course of the proceedings to which I have just referred - and, secondly, an acknowledgment said to arise from the draft judgment delivered by me on 3 August 2006 in those proceedings.
11 In addition to the two matters raised in the affidavit accompanying the statutory demand, it is apparent from evidence which has been filed in
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- these proceedings and from the submissions which have been advanced that Mr Antonio Giacci also relies upon the evidence which has been adduced as to differential payments to directors of the company over a period of time and also relies upon a proposition to the effect that the company is estopped from denying that the debt is due and owing to him as a consequence of the oppression proceedings to which I have referred.
12 I will deal with each of the bases upon which Mr Antonio Giacci asserts that he has established a debt due and owing in turn. I will start firstly with the evidence which has been adduced as to the differential payments made to directors. It seems that that evidence was first provided to Mr Antonio Giacci and his advisers when documents were provided to them by KPMG on 23 October 2006.
13 Those documents include a memorandum from a Mr John Fordham, who was a director of the company, to the other directors of the company dated 15 March 2006 and a number of spreadsheets and worksheets supporting that memorandum and showing the differential payments that were made. Dealing firstly with those spreadsheets and worksheets and in particular the document entitled, "Group Certificates Reports," it is clear that from the years ending June 1998 onwards differential payments were made to the three directors of the company.
14 In each of those years the payments made to Mr Antonio Giacci were somewhat less than the payments made to his brothers Peter and Mario. The total of the differential up to and including the year ended 30 June 2002 is an amount of $186,931. The memorandum from Mr Fordham to which I have referred identifies an amount due by way of wages in the amount of $186,931, being the same amount as identified on the spreadsheet.
15 In these worksheets a further amount due by way of superannuation in the sum of $14,711.60 was apparently added, from which certain personal payments made, apparently on behalf of Mr Antonio Giacci by the company, have been deducted to produce a net amount of $193,562.85. To that amount was also added the amount $3061.12 apparently owing to Mr Peter Giacci. It is through that means that the amount of $197,000 was arrived at. It is appropriate to note that Mr Fordham's memo makes no allowance for interest and also that the amount of $197,000 includes the small amount owing to Mr Peter Giacci.
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16 The differential payments to directors need to be viewed in the context of the company's articles of association. Article 64 of the articles of association of the company provides that:
"The remuneration of the Directors shall from time to time be determined by the Company in General Meeting and such remuneration shall (unless otherwise determined by the resolution by which it is voted) be divided amongst the Directors in such proportions as they shall agree between themselves or failing agreement equally. The Directors shall also be entitled to be repaid out of the funds of the Company all travelling, motor, hotel, and other expenses as may reasonably be incurred by them respectively in or about the performance of their duties as Directors including any such expenses incurred in connection with their attendances at meetings of Directors. If any of the Directors being willing shall be called upon to perform extra services or make any special exertions on behalf of the Company or the business thereof the Company in general meeting may remunerate such Director by a fixed sum and such remuneration may be either in addition to or in substitution for his share in the remuneration hereinbefore provided."
17 It is common ground between the parties to these proceedings that there is no evidence of any relevant resolution by the company in general meeting as required by article 64 of the articles of association of the company. More specifically there is no evidence of any resolution by the company determining the amount of remuneration to be paid by the directors nor is there any evidence of a resolution by the company or the board to the effect that they shall be paid differentially.
18 Mr Antonio Giacci, through counsel, relies upon the provision in article 64 to which I have referred which relates to the presumption of equality of payment of remuneration to the directors. That is presumably the basis upon which the spreadsheets and memo, to which I have referred, assert that Mr Antonio Giacci is entitled to be paid an amount of $186,931 because that is the difference between the amount he has received and the amount paid to other directors.
19 However, in the absence of compliance with article 64 there are I think at least two alternative consequences open to argument. The first is that it should be presumed that the payments made to directors have been lawfully authorised by the company but because there has been no resolution to the effect that the directors be paid differential amounts, they
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- are entitled to equal amounts and, on that basis, Mr Antonio Giacci is to be topped up as it were, so that he has received an amount equal to that received by his brothers.
20 The alternative construction is that, in the absence of a resolution that the company in general meeting is required to make by article 64, all payments to directors including the payments to Mr Antonio Giacci's brothers that were greater than the amount he has received are unauthorised with the consequence that the company has an entitlement to reimbursement of those amounts. It is neither possible nor appropriate for me in proceedings of this kind to determine which of those competing contentions is correct.
21 Pursuant to the principles established in the authorities to which I have referred it is sufficient for the purposes of these proceedings for me to conclude that each is a plausible contention, the determination of which would have to be made in substantive proceedings commenced for that purpose rather than by way of collateral proceedings such as these.
22 The next question is whether the documents to which I have referred and the additional document in the form of the valuation report overcome the uncertainty with respect to the consequence of the differential payment made to directors and establish a debt due and owing to Mr Antonio Giacci. It is not at all clear from those documents just what their provenance is or with whose authority they were produced. In the case of the spreadsheet, all that we know from the evidence is that it appears to have come from documents produced by KPMG.
23 All that we know in relation to the memorandum from Mr Fordham is that he was a director and it went to other directors. We do not know what they did in response to it. We do not know what entries were made in the books of the account of the company, and we do not know if, for example, the board passed any resolutions as a consequence of those documents.
24 I turn now to the valuation report, which was tendered in evidence in the oppression proceedings to which I have already referred. That report was a report of Mr Duncan Calder in which he purported to value the shares in the company. In a portion of that report dealing with the provisions and other liabilities of the company, in a table, the report reflects an amount owing of $197,000 by reference to the category "amount owing to director". A note below that report refers to the entry in the following terms:
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- "We have been instructed to provide for amounts of underpaid salary and superannuation to Mr Antonio Giacci and Mr Peter Giacci."
25 Reference is then made to a footnote, which is in the terms:
"We are instructed that Mr Antonio Giacci and Mr Peter Giacci have claims for unpaid salary and superannuation less expenses totalling $196,624."
26 That amount is plainly the combination of the two amounts identified by Mr Fordham as being owing to the two directors, Antonio and Peter Giacci. What is, however, not clear from the evidence, is from whom Mr Calder obtained those instructions and, in particular, whether they were endorsed by the company acting as such. What is clear, of course, is that this report was tendered in evidence in the course of the proceedings to which I have referred by counsel for Peter and Mario. However, in those proceedings, Peter and Mario were acting in their capacity as shareholders and not as directors of the company. I do not take the tender of that report in those proceedings to be an act binding the company as such.
27 In summary, it seems to me that neither the spreadsheet nor the memorandum from Mr Fordham nor the valuation report of Mr Calder are clear and unequivocal statements by the company, binding upon the company, to the effect that any debt is due and owing to Mr Antonio Giacci. I therefore conclude that those documents do not overcome the uncertainty with respect to the existence of that debt created by the provisions of article 64 of the articles of association to which I have referred.
28 As I have already mentioned, reference has also been made both in Mr Antonio Giacci's affidavit supporting the statutory demand and in submissions to my draft judgment delivered on 3 August 2006. That is described as a draft because it was given by me ex tempore and a transcript of that ex tempore judgment was then produced and circulated to the parties as a draft. In the course of that judgment I observed that a question with respect to the issue of whether or not the company did, in fact, owe an amount of $197,000 had been taken out of contention in the course of the proceedings before me.
29 I made that observation because, in the course of argument in those proceedings, I asked counsel for Mr Antonio Giacci whether he wished to press the contention that the debt of $197,000 was not, in fact, due and
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- owing by the company with the consequence that the assets of the company should be valued accordingly and thereby increased by an amount of $197,000. Given that Mr Antonio Giacci only held one-third of the shares in the company, I suggested to counsel that it seemed contrary to Mr Antonio Giacci's interest to be making that assertion because, at best, being only a one-third shareholder he would only receive an increment in the value of his shareholding equal to one-third of the debt.
30 In response, counsel replied that his instructions were to withdraw the assertion that the debt of $197,000 was not due and owing by the company. He indicated that Mr Antonio Giacci would take his own steps to recover that amount from the company in due course and that it could, therefore, be excluded from consideration by me in the valuation of the company. That was all that was said on this subject at the time of my ex tempore judgment and in the corrected reasons which I later delivered. I did not, at any point in the course of those proceedings, determine or purport to determine whether that amount was due and owing. There is nothing in my judgment that would overcome the uncertainty with respect to the debt to which I have referred.
31 The final matter relied upon by Mr Antonio Giacci to sustain the proposition that there is a debt due and owing, is the proposition that the company is estopped from denying the existence of the debt by reason of its two current directors, Peter and Mario, standing by and taking no issue with respect to the existence of the debt in the course of the oppression proceedings to which I have referred.
32 The consequence of them standing by and taking no issue in respect of the existence of the debt was that the shares in the company were valued on the basis that the company did owe a debt of $197,000, with the result that the net asset backing of the company was correspondingly reduced, when the value of Mr Antonio Giacci's shares was assessed.
33 Mr Antonio Giacci argues that that conduct was unconscionable and that he relied upon the position adopted by Peter and Mario with the consequence that the amount which the Court ordered Peter and Mario to pay for the purchase of his shares was reduced. He submits that he has suffered detrimental reliance on their conduct which estops Peter and Mario from resiling from the belief which their conduct induced, in accordance with the doctrine of estoppel enunciated by the High Court in cases such as Commonwealth v Verwayen (1990) 170 CLR 394 and others.
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34 There are two contentious issues that arise in relation to that contention. The first is whether the conduct of Peter and Mario in standing by was unconscionable in the sense described in the authorities, or whether it was simply an indication on their part that they were content to allow Mr Antonio Giacci to conduct the case on the basis he chose, reserving to themselves the capacity to contest the question of the existence of the debt in some other proceedings.
35 The second question that arises is whether their conduct in the course of those proceedings in which they were acting in their capacity as shareholders can be said to be conduct binding upon the company for the purposes of estopping the company, which was not a party to those proceedings.
36 As I have earlier indicated, in proceedings of this kind it is neither necessary nor appropriate for me to purport to resolve those issues. It is sufficient for me to observe that those issues give rise to plausible contentions which should be tried and determined in more appropriate substantive proceedings.
37 The applicant relies upon two other matters that are said to justify setting aside the statutory demand. The first is the existence of a genuine dispute with respect to the portion of the claim made by reason of the effect of the Limitation Act 1935 (WA). That arises because $106,000 or so of the differential in payments to directors arises from payments made prior to 30 June 2000 and the statutory demand was not made until more than six years later, in the latter half of 2006.
38 It is said therefore that any claim by Mr Antonio Giacci is statute barred in respect of those amounts of approximately $106,000. In answer to that contention Mr Antonio Giacci asserts that the documents to which I have referred constitute an acknowledgment of debt so that for the purposes of s 44 of the Limitation Act time runs from the time of that acknowledgment.
39 There is an arguable issue as to whether that contention is correct, given that the documents to which I have referred are, in the case of the company documents, entirely internal and, in the case of the report from Mr Calder, a document of a third party. Consistent with the authorities to which I have referred, it is neither necessary nor appropriate for me to attempt to determine those contentions. It is sufficient for me to observe that they give rise to plausibly contentious issues and therefore a genuine
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- dispute as to the existence of a debt in respect of the amount of approximately $106,000.
40 The applicant also relies upon an offsetting claim in an amount of approximately $113,000 said to arise from a direction given by Mr Antonio Giacci in his capacity as a director of the company and without reference to the board of the company to the effect that some trucks to be acquired by the company be painted in a livery different to the usual livery of the company.
41 It is further alleged that as a result of that direction it was necessary to repaint those trucks at a cost of approximately $113,000. It is said that this gives rise to an offsetting claim against Mr Antonio Giacci because of his breach of his duties as a director.
42 There is some evidence to support that contention and, given the relatively low hurdle which has to be met in relation to the demonstration of an offsetting claim, I am satisfied on the evidence that the hurdle has been crossed by the applicant in this case and that there is a sufficiently arguable basis for that claim for it to be considered an offsetting claim for the purposes of these proceedings.
43 In conclusion, in addition to the difficulties which Mr Antonio Giacci faces in establishing the basis upon which he asserts a debt due and owing, in my opinion there is a genuine dispute with respect to $106,000 or so of that amount by reason of the Limitation Act issue and an offsetting claim in relation to the $113,000 or so which together would extinguish the amount of the statutory demand. Therefore, for those various and alternative reasons this seems to me to be a case in which the statutory demand should be set aside under s 459H of the Corporations Act and I will so order.
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