United Petroleum Pty Ltd v McGrathNicol Advisory Partnership
[2017] VSC 239
•5 May 2017
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S CI 2016 05251
| UNITED PETROLEUM PTY LTD (ACN 085 779 255) | Plaintiff |
| v | |
| MCGRATHNICOL ADVISORY PARTNERSHIP (ABN 34 824 776 937) | Defendant |
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JUDGE: | EFTHIM AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 29 March 2017 |
DATE OF JUDGMENT: | 5 May 2017 |
CASE MAY BE CITED AS: | United Petroleum Pty Ltd v McGrathNicol Advisory Partnership |
MEDIUM NEUTRAL CITATION: | [2017] VSC 239 First Revision: 13 June 2017 |
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CORPORATIONS – Whether statutory demand defective – Whether to set aside defective statutory demand – Corporations Act 2001 (Cth), s 459J(1) – Vary statutory demand to remove interest component – Corporations Act 2001 (Cth), s 459H(4) – Whether a genuine dispute.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S Hay | David Hopwood (In-house counsel for United Petroleum) |
| For the Defendant | Mr A Rollnik | Brygel Lawyers |
HIS HONOUR:
The plaintiff, United Petroleum Pty Ltd, applies to set aside a statutory demand served on it by the defendant, McGrathNicol Advisory Partnership. The demand claims that the plaintiff owes the defendant $62,845.57. The debt is described in the schedule of the statutory demand as follows:
Schedule Description of the debt Amount of the debt The price of services provided by the creditor summarised in the invoice dated 02/12/2015 including interest of $1,660.81 calculated in accordance with the McGrathNicol Terms and Conditions of Business. $62,845.57 Total amount $62.845.57
The plaintiff submits the statutory demand is defective and should be set aside pursuant to s 459J(1) of the Corporations Act 2001 (Cth) (‘the Act’) because:
- it does not specify the period for which interest has been charged;
- it does not specify the rate at which interest has been charged; and
- even if one looks to the defendant’s terms and conditions upon which services were provided it is not possible to determine the rate of interest that has been charged.
Section 459J(1) states:
459J Setting aside demand on other grounds
(1)On an application under section 459G, the Court may by order set aside the demand if it is satisfied that:
(a)because of a defect in the demand, substantial injustice will be caused unless the demand is set aside; or
(b)there is some other reason why the demand should be set aside.
In Topfelt Pty Limited v State Bank of New South Wales Limited[1] Lockhart J said:
This case turns on its facts. The statutory demand served by the respondent on the applicant states that the judgment in the Supreme Court amounted to $429,722.73 together with interest thereon, less amount received on sale of the mortgaged property; that the claim is made for $179,722.73 together with interest from 11 March 1993 “to date and continuing”. The demand does not specify the rate at which interest had been calculated or a daily figure calculated with reference to the rate. Also, it claims interest that is “continuing”. In particular, the demand fails to specify the amount of the interest claimed to the date of the demand. Nor does the demand state whether the source of the respondents' entitlement to it is the Supreme Court judgment or the mortgage. However, in my view the fact that interest is claimed from the date of the judgment suggests that its source is the judgment and not the mortgage.
Rules of courts which provide for the payment of interest on judgments change not infrequently. Why should the applicant have to consult its solicitor or otherwise gain access to the Supreme Court Act 1970 or the rules of the Supreme Court or speak to the respondent in order to determine the amount of interest which is claimed from it?[2]
[1](1993) 12 ACSR 381.
[2]Ibid 456.
The demand is clearly defective. The defendant submits that the Court should vary the demand as it abandons its claim for interest. It relies on s 459H(4) of the Act which provides:
459HDetermination of application where there is a dispute or offsetting claim
(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.
Pursuant to s 459J(1) a defective demand may be set aside if the Court is satisfied that substantial injustice will be caused to the plaintiff if the demand is set aside. The plaintiff has continually not made payment of the requests alleged debt due despite numerous requests by the defendant for payment. There has been no injustice here as there was in Topfelt. The plaintiff had no intention to pay the amount due which can be inferred from its conduct. The defendant has also abandoned its claim for interest.
The defendant says that the demand can be varied pursuant to s 459H. I can only vary the demand if there is a genuine dispute about the existence or amount of the debt. By abandoning the claim for interest the defendant is in my view conceding that there is a dispute regarding interest. I will vary the demand.
The plaintiff also seeks to set aside the statutory demand on the basis that there is a genuine dispute. It is not for me to enter into the merits of the dispute between the parties, but only to ascertain if there is a genuine dispute. In TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd,[3] Dodds‑Streeton J said (citations omitted):
The court, in the context of an application to set aside a statutory demand, must determine whether there is a genuine dispute about the existence or amount of the debt or whether the company has a genuine off-setting claim. No in-depth examination or determination of the merits of the alleged dispute is necessary, or indeed appropriate, as the application is akin to one for an interlocutory injunction. Moreover, the determination of the ‘ultimate question’ of the existence of the debt should not be compromised …
… As the terms of section 459H of the Corporations Act and the authorities make clear, the company is required, in this context, only to establish a genuine dispute or off-setting claim. It is required to evidence the assertions relevant to the alleged dispute or off-setting claim only to the extent necessary for that primary task. The dispute or off-setting claim should have a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion, and sufficient factual particularity to exclude the merely fanciful or futile. As counsel for the appellant conceded however, it is not necessary for the company to advance, at this stage, a fully evidenced claim. Something ‘between mere assertion and the proof that would be necessary in a court of law’ may suffice.[4]
[3](2008) 66 ACSR 67.
[4]Ibid [56]-[57], [71].
The standard to demonstrate a genuine dispute is not onerous. In Powerhouse Australasia Pty Ltd v Viar (‘Powerhouse’),[5] Dodds‑Streeton J in reference to McLelland J in Eyota v Hanav[6] repeated:
A genuine dispute connotes a plausible contention requiring investigation and raises much the same sort of considerations as a serious question to be tried prior to and arising on an application for the interlocutory injunction or extension, 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 decision inconsistent with the undisputed contemporary documents or other statements by the same deponent or inherently and probable in itself” it may not be — “it may be not having sufficient prima facie plausibility to merit further investigation as to its truth or a patently feeble legal argument or assertion of the facts unsupported by evidence.”[7]
[5][2006] VSC 508.
[6](1994) 12 ACSR 785.
[7]Powerhouse [41]-[42].
The grounds for alleging a dispute or an off-setting claim must not be spurious, hypothetical, illusory or misconceived. In Powerhouse, Dodds‑Streeton J stated:
While it is not a very exacting standard, on the one hand mere, assertion of a dispute or off-setting claim, mere bluster or advancing grounds which are illusory or spurious or insufficiently particularized will not suffice. The court must not enter into the merits of the dispute, but it is not crossing the line in regards to its legitimate role in these applications to consider evidence which ‘bears on whether or not the asserted dispute or off-setting claim is genuine’. Indeed, that is its necessary function …[8]
[8]Powerhouse [48].
On 22 October 2014 the plaintiff was approached by the defendant to conduct forensic investigations in connection with an employee of the defendant who was suspected of having committed fraud. On 28 October 2015 Mr Peter Larsen the former General Senior Counsel and Company Secretary of the defendant agreed to the defendant’s terms of engagement.
Work was completed and the plaintiff received an invoice for the work done. The plaintiff complains that the amount claimed in the invoice is excessive and unreasonable. The plaintiff complains that after the defendant ceased performing work, investigations conducted by the defendant revealed further instances of fraud.
The plaintiff’s dispute is articulated in the affidavit of Andrew McLean, General Counsel, in support of the application to set aside the demand. He refers to the costs charged by an employee, a partner and a senior manager for conducting interviews in relation to these fees he deposes:
I am informed by Mr Larsen that the interviews were all transcribed.
I am further informed by Mr Larsen that the interview with Mr Armstrong was conducted by telephone and the outcome of the interview was relayed to him on completion.
In those circumstances, it was unnecessary and unreasonable for three senior personnel from McGrath to attend at the interview of Mr Armstrong and to claim for the time spent by each in attending at this interview.
The amount charged for this work is disputed.[9]
[9]Affidavit of Andrew McLean sworn 22 December 2016, [16]-[19].
Mr McLean also refers to the costs charged for undertaking an analysis of electronic data. In relation to those costs he deposes:
United collects and stores data on a drive called S:\Drive). The S:\Drive is made up of a number of sub-folders, sorted according to relevant departments. For example, there are folders for Construction, Finance, HR, Legal and Property, each with their own sub-folders. The Construction department folder has 30 sub-folders.
Mr Saleh had access to four key S:\Drive folders – ‘Construction’, ‘Property’, ‘Pumps and Tanks’ and ‘Wholesale’ (Key S:\ Drive Folders).
Each person employed by United also has their own email account. The data on each email account is retained and stored off-site. That data includes all sent, received, deleted and stored emails and attachments to the particular account (unless the data has been deleted from the account). Mr Saleh had his own email account.
In addition to conducting interviews and as above, McGrath undertook a review of the data contained in the Key S:\Drive Folders and Mr Saleh’s email account (Electronic Data), together with phone records of key personnel and hard copy documents taken from Mr Saleh’s office, to determine whether the alleged fraud with FuelSpec (as above) was an isolated incident. I am informed by Mr Larsen that in reviewing the Electronic Data, McGrath applied search terms to capture documents that would be potentially relevant to other instances of fraudulent activity. In applying relevant search items, McGrath limited the reviewed material to that which contained the relevant search terms.
As above, McGrath personnel have charged for in excess of a combine 78 hours to review and analyse the Electronic Data. I am informed by Mr Larsen that, in conducting this review and analysis of the Electronic Data, McGrath did not uncover any additional material or documents that implicated Mr Saleh in similar arrangements as above and, in fact, missed documents that were held in Mr Saleh’s office (including documents evidencing Mr Saleh paying money into FuelSpec’s account).[10]
[10]Affidavit of Andrew McLean sworn 22 December 2016, [21]-[25].
The defendant submits that this dispute is not genuine and can be demonstrated due to the manner in which the plaintiff has responded to the defendant’ attempts to recover its fees.
On 1 December 2014 Mr Larsen telephoned Dean Wesley Newland (Forensic Accounting Specialist and Senior Consultant of the defendant) and advised him that it would not be necessary for a final report and that the plaintiff did not want the defendant to do any more work unless the plaintiff came back to the defendant. No further work was done after that date. On 2 December 2015 the defendant sent its only invoice to the plaintiff by email.
On 29 January 2016 the defendant sent an email to Mr Larsen requesting payment of the invoice. No response was received to that email.
On 15 March 2016 Mr Newland received a telephone call from Mr Larsen who called to discuss the possibility of reduction for the invoice. Mr Newland offered a $5,000 discount if it meant that the bill was to be paid without further delay.
On 26 April 2016 Mr Newland sent an email to Mr Larsen seeking payment in the invoice. In that email he stated:
As a way of breaking the deadlock (if there is a deadlock) I would be happy to come out and see Arvi [Arvi Silver of the defendant] and talk him through what was done and the outcomes of the work and demonstrate that our fees were reasonable. If necessary also, I can produce a summary of the time spent as compared to the time invoiced.
In response Mr Larsen wrote:
No problems and thanks – I will pursue it with Arvi.
On 1 August 2016 Mr Newland received a telephone call from Mr Larsen who apologised about the outstanding invoice and requested an opportunity to speak to Mr Silver about it again before any enforcement action was undertaken. An email on that day was sent by Mr Newland to Mr Larsen confirming the telephone call and agreeing that the defendant would delay any further action until Mr Larsen had an opportunity to speak to Mr Silver. Later that day, Mr Larsen responded to that email and enquired whether the $5,000 reduction had been offered by the defendant was still on the table.
On 11 August 2016 Mr Newland received a telephone call from Mr Larsen. Mr Larsen advised that the defendant had conducted further investigations. He stated that he had spoken to Mr Silver and that Mr Silver was prepared to offer $30,000 to settle the invoice. That offer was rejected.
On 11 October 2016 the defendant engaged lawyers to act on their behalf to recover the debt outstanding and a letter of demand was forwarded to the plaintiff. On 1 December 2015 the statutory demand was served on the plaintiff. On 13 December 2015 the plaintiff’s solicitors forwarded a letter to the defendant through its solicitor and raised the dispute.
At no stage did with plaintiff raise the dispute prior to receiving the statutory demand. The fact that it was not raised does not necessarily mean that there can be no dispute. What is clear is that the plaintiff at no stage agreed to pay. It sought discounts and made an offer to settle. The fact that payment was not made demonstrates dissatisfaction with the plaintiff’s claims but does not demonstrate a genuine dispute. There is no doubt that work has been done and that there is a debt due. The plaintiff has not stated what amount is in dispute. It provides an assertion that the costs are unreasonable and excessive. Where there is an offsetting claim a plaintiff must advise the quantum of the claim. It has not provided any evidence as to what the quantum of the alleged overcharging and overservicing is.
The only evidence relied upon by the defendant of Mr McLean is his opinion evidence based on hearsay. His evidence amounts to mere assertion. The defendant has gone into great detail to explain what work was done. The evidence of Mr McLean is not sufficient to rebut this evidence or set up a genuine dispute.
The plaintiff’s other complaint that it found instances of fraud that was not found by the defendant is not sufficient to raise a genuine dispute. Work was done by the defendant. It is not relevant that the defendant, through its investigations, did not detect all instances of fraud.
The plaintiff’s application will be dismissed and the statutory demand will be varied to remove the interest component.
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