United Industries (WA) Pty Ltd v OH&S Management (International) Pty Ltd
[2013] WASC 450
•16 DECEMBER 2013
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: UNITED INDUSTRIES (WA) PTY LTD -v- OH&S MANAGEMENT (INTERNATIONAL) PTY LTD [2013] WASC 450
CORAM: MASTER SANDERSON
HEARD: 2 DECEMBER 2013
DELIVERED : 16 DECEMBER 2013
FILE NO/S: COR 200 of 2013
BETWEEN: UNITED INDUSTRIES (WA) PTY LTD (ACN 097 788 344)
Plaintiff
AND
OH&S MANAGEMENT (INTERNATIONAL) PTY LTD (ACN 104 146 036)
Defendant
Catchwords:
Corporations law - Application to set aside statutory demand - Turns on own facts
Legislation:
Nil
Result:
Demand set aside
Category: B
Representation:
Counsel:
Plaintiff: Mr L Hager
Defendant: Mr M Mirzai
Solicitors:
Plaintiff: Metaxas & Hager
Defendant: Rowe Bristol Lawyers
Case(s) referred to in judgment(s):
Canon Australia Pty Ltd v Yong Bros Pty Ltd [2009] NSWSC 842
Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785
Graywinter Properties Pty Ltd v Gas & Fuel Corp Superannuation Fund (1996) 70 FCR 452
Meadowfield Pty Ltd v Gold Coast Holdings Pty Ltd (in liq) [2001] WASCA 360
NA Investments Holdings Pty Ltd v Perpetual Nominees Ltd [2010] NSWCA 210
POS Media Online Ltd v B Family Pty Ltd [2003] NSWSC 147; (2003) 21 ACLC 533
Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452
MASTER SANDERSON: This is the plaintiff's application to set aside a statutory demand. The demand appears as attachment JM3 to the affidavit of Julian Monaco sworn 4 October 2013 and filed in support of the application. The schedule to the demand is in the following form:
SCHEDULE
1. Unpaid balance of invoices numbered 2387, 2406, 2417, and 2465 rendered in accordance with the terms and conditions of the My OSH Consultancy Services Agreement entered into between the Debtor Company and the Creditor, dated 26 October 2011.
$34,080.00 2. Debt Collection Agency fees recoverable pursuant to the terms and conditions of the My OSH Consultancy Services Agreement.
$3,408.00 3. Interest on all unpaid invoices as set out in schedule A (attached hereto) at the rate of 6.00% per annum pursuant to section 12 of the Magistrates Court (Civil Proceedings) Act 2004. $514.36 Total $38,002.36
In his affidavit Mr Monaco says on 26 October 2012 the plaintiff and the defendant entered into an agreement pursuant to which the defendant was to provide to the plaintiff occupational health and safety services. A copy of the agreement (or part of the agreement) appears as annexure JM4 to Mr Monaco's affidavit. Mr Monaco says, and it is common ground between the parties, the defendant was to provide the services to the plaintiff under the terms and conditions relating to the defendant's 'Gold Program'. The contract relates to what are described as 'My OSH Service Programs'. The first two pages of the document give an overview of the services provided by the defendant and lists reasons why a party - in this case the plaintiff - should make use of those services. There then follows details of various programs on offer. The 'Gold Program' is introduced in the following way:
Twenty Four Hours consultancy time on your site each month to fully manage all Occupational Health and Safety / Injury Management functions the business requires.
A series of terms and conditions which form part of the contractual relationship between the parties, relevantly, the terms are as follows:
Terms of the Agreement:
OH&S Management will undertake to provide support within extended business hours: 8am to 6pm, Monday to Friday. Work outside of these times may be arranged at the discretion of OH&S Management. Charges will be time and a half according to the current hourly agreement rate, after 6pm and on weekends. Phone, fax and email support is available 24 hours a day, seven days a week.
Agreement Hours:
Unused hours within a month period, shall not accumulate and shall not be carried forward to the following month. Extra time may be arranged on an hourly basis. This rate shall be at your regular hourly rate according to your current agreement rate. There are no callout fees associated with this agreement. All hours scheduled to be worked for the relevant month will be agreed prior to commencement of work in consultation with the client.
...
Invoicing:
The retainer payment and any additional charges shall be invoiced at the beginning of each month and will be payable on receipt of invoice.
Consultancy hours /Consultant will be allocated to the relevant agreement based on receipt of payment. The prices quoted in this Agreement include Goods and Services Tax (GST), unless specified.
Period:
The client agrees to enter into this consultancy agreement with OH&S Management for a period of twelve (12) months from the date on which it is entered into. Renewal of the Service Agreement will automatically active at the end of the 12 month term unless we are advised otherwise. Each renewal will incur a minimal 3% increase.
As I indicated above the copy of the agreement referred to by Mr Monaco in his affidavit is not in fact the complete agreement. A copy of the complete agreement appears as attachment PCH1 to an affidavit of Philip Hugh Cleverly sworn 5 November 2013 and filed in opposition to the application. The full copy of the agreement contains an extra relevant term as follows:
Suspension /Termination of Services:
The Client can terminate the agreement by supplying in writing to OH&S Management, a request to terminate and reason for termination.
The Service Agreement shall then be paid out in full in accordance with the remaining time to be served.
OH&S Management reserves the option to suspend services at any stage for late payment of invoices outside of the agreement terms. If payment is still not resolved after the suspension notice has been served, an invoice will be issued noting that the Service Agreement has been terminated and must be paid out in full in accordance with the remaining time to be served. If a collections service is appointed to collect outstanding debts on behalf of OH&S Management (International) Pty Ltd due to breach of these agreement terms, the client will be responsible for all/any associated costs involved in the collections agency recovering all associated costs on behalf of OH&S Management.
It is worth pausing at this point to analyse the contractual arrangement between the parties. The defendant was to provide consultancy services to the plaintiff of up to 24 hours per month. In other words the defendant was on a retainer. If the defendant's services were not used by the plaintiff - that is to say during the course of a month 24 hours of the defendant's services were not used - the time was lost. During the course of his submissions counsel for the plaintiff maintained it was the obligation of the defendant to supply 24 hours of services each and every month no matter what. With respect that is clearly not what was anticipated. This was a classic retainer agreement. It is also clear the agreement anticipated the parties getting together and settling what work would be done during the course of a particular month. That appears to be the intent as set out in the clause 'Agreement Hours' in the contract. What that clause does not specify is when the parties were to meet, how the meeting would be conducted and how any disagreement between them would be resolved. But it is not difficult to imply a term into the agreement that both parties would use their best endeavours to reach agreement as to what work was to be undertaken by the defendant and when and where the work was to be undertaken.
The defendant was to invoice the plaintiff at the beginning of each month. Once the invoice was received by the plaintiff it was due and payable forthwith. If the invoice was not paid the defendant was entitled to suspend its services. The agreement appears to anticipate the parties discussing the matter to resolve any issues surrounding the non‑payment of an invoice. But if no resolution is achieved then the defendant could serve a suspension notice. If that is done the contract is terminated and the plaintiff was liable to pay out any remaining 'period' under the contract. Against that background it is clear Mr Monaco's affidavit lacks specifics. By par 11 of his affidavit he says the defendant did not provide 24 hours consultancy time for the three month period from 1 December 2012 to 28 February 2013. He says for that three month period only 7 hours and 41 minutes was provided. He goes on to say after 18 February 2013 the defendant did not provide any services to the plaintiff. That may be so. What Mr Monaco does not say is whether any discussions took place between the parties as to what services were to be provided by the defendant to the plaintiff during each of those three months.
The question is whether the material in Mr Monaco's evidence is sufficient to satisfy the court there is genuine dispute about the existence of the debt. Before answering that question it is as well to repeat again what has been said about the nature of the test in the legislation.
There are endless authorities on this question but the two most often quoted are Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 and the decision of the Full Federal Court in Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452. Dealing first with Eyota, McLelland CJ in eq said:
It is, however, necessary to consider the meaning of the expression 'genuine dispute' where it occurs in s 450H. In my opinion that expression connotes a plausible contention requiring investigation, and raises much the same sort of considerations as the 'serious question to be tried' criterion which arises on an application for an interlocutory injunction or for the extension or removal of a caveat. This does not mean that the Court must accept uncritically as giving rise to a genuine dispute, 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' not having 'sufficient prima facie plausibility to merit further investigation as to [its] truth' ... , or 'a patently feeble legal argument or an assertion of facts unsupported by evidence' ... .
But it does mean that, except in such an extreme case, a Court required to determine whether there is a genuine dispute should not embark upon an inquiry as to the credit of a witness or a deponent whose evidence is relied on as giving rise to the dispute. There is a clear difference between, on the one hand, determining whether there is a genuine dispute and, on the other hand, determining the merits of, or resolving, such a dispute.
In the Spencer Constructions case the Full Court was of the view there are two main elements to the question of what is a 'genuine dispute'. They are:
(i)the dispute must be bona fide and truly exist in fact; and
(ii)the grounds for alleging the existence of a dispute are real and not spurious, hypothetical, illusory or misconceived.
The test to be applied in determining whether there is a genuine dispute has a lot in common with the test applied when determining a summary judgment application. The version of events most favourable to a plaintiff in an application to set aside a statutory demand ought be assumed. It is only in the clearest cases summary judgment ought be entered; it is only in the clearest cases a court should determine there is no serious question to be tried on an application to set aside a statutory demand. In seeking to establish there is a serious question to be tried a plaintiff on an application to set aside the statutory demand must produce evidence to show there is a serious question to be tried. The evidentiary and legal onus is on the plaintiff.
Of course situations may vary. If a plaintiff was said to be liable for a debt pursuant to a contract allegedly entered into between the plaintiff and the defendant and the plaintiff led evidence saying the signature on the agreement was not the signature of a director of the company but was a forgery that would be enough to establish a genuine dispute. In different circumstances the evidence led by a plaintiff might be quite elaborate but however it is done there must be evidence which establishes a genuine dispute.
It is difficult to resist the conclusion in this case the plaintiff's solicitors simply did not sufficiently investigate the circumstances giving rise to the alleged debt. The other alternative is that Mr Monaco did not know enough about the circumstances in which the contract was entered into and how its terms operated to give cogent evidence showing there was a genuine dispute. All his affidavit says is the defendant did not provide services for particular months. Given this was a retainer agreement such a bald statement was never going to be enough. Some detail as to the circumstances was necessary.
In his affidavit in opposition to the application Mr Cleverly says the plaintiff was consistently late paying invoices rendered by the defendant. Eventually this led to the defendant issuing a notice suspending the operation of the agreement. A copy of an email sent by the defendant to the plaintiff attaching a suspension notice appears as attachment PHC8 to Mr Cleverly's affidavit. The notice itself is undated but the email to which it is attached is dated 1 July 2013. Subsequent to the suspension notice the defendant issued a notice of termination. That document is dated 10 July 2013 and is attachment PHC9 to Mr Cleverly's affidavit. It was the defendant's case this led to an acceleration of the defendant's entitlement under the agreement which in turn led to the entitlement referred to in invoice 2465.
During the course of his submissions counsel for the plaintiff called into question what the proper 'period' was under the agreement. The argument ran this way. Mr Monaco said in his affidavit the agreement between the plaintiff and the defendant was entered into on 26 October 2012 (par 9). In fact the agreement was entered into on 26 October 2011. Mr Cleverly makes that plain in his affidavit (par 14). Mr Cleverly says the copy of the agreement in Mr Monaco's possession shows a date of 26 October 2012 but in fact the '2012' had been altered from '2011'. Mr Cleverly says this was done because of the automatic renewal found in the agreement. In other words the initial contract was for 12 months from 26 October 2011, it automatically renewed on 26 October 2012 to expire in October 2013. It was on that basis the claim for accelerated payment was made.
Counsel for the plaintiff submitted the wording of the provision relating to 'Period' in the agreement left open the possibility the renewal period was month to month. In other words the wording of the provision was not such that it can be assumed the 12 month period applied.
This was not an argument raised by Mr Monaco in his affidavit. It was raised for the first time in the plaintiff's written submissions. That then raises as a preliminary question whether it is open to the plaintiff to rely on this argument. The starting point in answering that question is the decision of Sundberg J in Graywinter Properties Pty Ltd v Gas & Fuel Corp Superannuation Fund (1996) 70 FCR 452. His Honour said:
In a s 459H(1)(a) case, the affidavit must in my view disclose facts showing there is a genuine dispute between the parties. A mere assertion that there is a genuine dispute is not enough. Nor is a bare claim that the debt is disputed sufficient. It follows from the fact that the affidavit need not go into evidence, which is the customary function of an affidavit, that it may read like a pleading (459).
This has become what is generally known as the 'Graywinter principle'. It has been considered and elucidated in any number of cases. In this jurisdiction it was considered by the Court of Appeal in Meadowfield Pty Ltd v Gold Coast Holdings Pty Ltd (in liq) [2001] WASCA 360. A case not dissimilar to the present was the decision of Austin J in POS Media Online Ltd v B Family Pty Ltd [2003] NSWSC 147; (2003) 21 ACLC 533. The detailed facts of the case are not presently relevant. It is sufficient if I say the plaintiff claimed a debt arose under a 'Put and Call Option Agreement' entered into between the plaintiff and the defendant. The defendant issued a statutory demand seeking payment of what it says was the balance owed by the plaintiff under the agreement. The plaintiff applied to set aside the demand. In support of the application it relied on an affidavit of a Mr Patkin. This affidavit did not have annexed to it a copy of the Put and Call Option Agreement. The agreement was put into evidence by the defendant. Austin J said:
In the present case the ground for concluding that there is a genuine dispute as to the existence of the debt emerges from the terms of the Put and Call Option Agreement, which was referred to in the statutory demand and was put into evidence by the defendant at the hearing. As I have said, the question whether a vendor is entitled to demand payment of the purchase money otherwise than upon offering to transfer or deliver the property to the purchaser depends on the terms of the contract. In the present case cl 2.1 and cl 2.5 of the agreement make it plausibly arguable that the defendant had no such entitlement and therefore that the debt claimed is not due and payable.
In my opinion Mr Patkin's affidavit of 9 December 2002, which was the only affidavit filed and served by the plaintiff within the 21 day time period, did not give the defendant the faintest inkling that any such argument would be made. It did not annex the agreement, and so the ground ultimately alleged at the hearing could not be said to have emerged from a perusal of the affidavit and its annexures. It did not give an account of the contents of the agreement sufficient to identify the ground. It did not expressly articulate the ground, either in para 23 of the affidavit (where the related party ground was articulated) or anywhere else. Indeed, the terms of the affidavit seem inconsistent with the 'no debt' ground, to the extent that para 22 presents the issue as an issue about 'collection' of the put option and para 24 implies that the related party ground articulated in para 23 is the only ground advanced.
The case would have been more difficult to decide if the affidavit of 9 December 2002 had annexed the agreement, for if that had happened then the affidavit filed within the 21 day period would have contained everything necessary to make out the 'no debt' ground, and even though that ground was not articulated, one might argue that it was an obvious ground on the face of the document. It is unclear to me whether that argument is open, in light of the case law. Here, however, the affidavit contained nothing from which the 'no debt' ground could emerge, as it were, of its own force. Whatever the precise limits of the authorities, they require me to conclude that in such circumstances it was impermissible for the plaintiff to raise the 'no debt' ground at a later stage [41] ‑ [43].
It now seems settled that if a document is annexed to an affidavit and from the document the nature of the dispute emerges there need not be reference in the body of the affidavit to that dispute. This was the conclusion of Brereton J in Canon Australia Pty Ltd v Yong Bros Pty Ltd [2009] NSWSC 842 and Lindgren AJA in NA Investments Holdings Pty Ltd v Perpetual Nominees Ltd [2010] NSWCA 210.
It seems then the argument put in relation to the 'Period' is open to the plaintiff. It is to be noted there was nothing in the defendant's submissions to the contrary. The question is whether or not the position is arguable.
It must be said at the outset the drafting of the clause is unfortunate. The issue could have been easily put beyond doubt by including a phrase to the effect renewal was for a 12 month or 6 month or 3 month period. At first reading the clause suggests renewal would be for 12 months. That is because there is the automatic escalation in the fee paid by the plaintiff of 3%. That is somewhere around the annual inflation rate and so it strongly suggests when renewal occurs it occurs for a 12 month period. The only other possible alternative is renewal would be on a month to month basis. Support for that argument is found in the fact the plaintiff pays for the defendant's services on a monthly basis. Furthermore, the provision of the agreement dealing with 'Suspension/Termination of Services' allows the plaintiff to terminate the agreement by simply giving notice.
On balance I am satisfied the ambiguity in what is in effect an automatic renewal clause can be said to give rise to a genuine dispute. It may be there was some interaction between the plaintiff and the defendant - perhaps discussions leading to the agreement - which might throw some light on the proper interpretation of this clause. Of course none of that is hinted at in the affidavit in support of the application. Nonetheless I am satisfied on the face of the document an argument emerges about the automatic renewal clause which requires further investigation.
Accordingly I am satisfied there is a genuine dispute between the parties and the statutory demand ought be set aside. I will hear the parties as to costs.
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