ZMB Australia Pty Ltd v De Simone; ZMB Australia Pty Ltd v Walking on Sunshine Pty Ltd
[2008] VSC 136
•9 April 2008
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
CORPORATIONS LIST
No. 8111 of 2007
| ZMB AUSTRALIA PTY LTD | Plaintiff |
| v | |
| GIUSEPPE DE SIMONE | Defendant |
and
No. 8112 of 2007
| ZMB AUSTRALIA PTY LTD | Plaintiff |
| v | |
| WALKING ON SUNSHINE PTY LTD | Defendant |
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JUDGE: | ROBSON J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 9 April 2008 | |
DATE OF JUDGMENT: | 9 April 2008 | |
CASES MAY BE CITED AS: | ZMB Australia Pty Ltd v De Simone | |
MEDIUM NEUTRAL CITATION: | [2008] VSC 136 | |
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CORPORATIONS - Appeals from Order of Master - Statutory demands - Setting aside - Whether genuine dispute – Sections 459G and 459J Corporations Act 2001.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr RA Brett QC with Ms L Kinda | Michael Brereton & Co |
| For the Defendant | Mr GT Bigmore QC | Brand Partners |
HIS HONOUR:
These are appeals by Mr Giuseppe De Simone (Mr De Simone) and Walking on Sunshine Pty Ltd (Walking on Sunshine) from a decision of Master Efthim of 20 December 2007 whereby he set aside statutory demands served on ZMB Australia Pty Ltd (ZMB) by Mr De Simone for $100,000 and Walking on Sunshine for $75,000 respectively. The appeals proceed as a hearings de novo. For convenience, I have heard the appeals together. The reasons of Master Efthim set out the background to the matters in issue and I adopt and repeat them here.
In substance, Ms Marie Brereton (Ms Brereton) was an investor in a development at Ocean Grove. Three other investors were Mr De Simone, Mr Alan Griffiths and Mr Martin Jurblum who in each case held their interests through companies associated with them. Ms Brereton held her interest through ZMB. Ms Brereton is the sister of Mr Michael Brereton solicitor who was instrumental in establishing the development. Mr Griffiths held his interests through Pital Business Pty Ltd (Pital), Mr De Simone through De Simone Nominees Pty Ltd (DSN), and Mr Jurblum through PM Management Pty Ltd (PM) and Dark Star Corporation Pty Ltd (DSC).
The exact details of these holdings and corporate identities are not relevant for present purposes save that Mr De Simone was the sole shareholder and director of Walking on Sunshine and the investors in the project held their interests via a series of partnerships and loans to those partnerships. ZMB held 57 of the 150 units into which the investors divided their interests in the project.
Ms Brereton deposes that in 2007 she wished to withdraw from the project and held discussions with the other investors and in particular Mr Griffiths and Mr De Simone to resolve the terms of her withdrawal. It is accepted by ZMB that at this time it owed $100,000 to Mr De Simone and $75,000 to Walking on Sunshine which had been borrowed by ZMB for the purposes of its investment in the project.
Ms Brereton deposes as to the negotiations in paragraphs 6 to 18 of her affidavit of 4 November 2007 as follows:
6.In 2007 I wished to withdraw from the project, and discussions were entered into between the parties to attempt to resolve matters.
7.As these partnerships had created a complicated set of accounts, a number of spreadsheets were prepared by Giuseppe de Simone and forwarded to me via email. One of these spreadsheets, exhibited to my affidavit sworn 2 November 2007 and marked “MAB-7”, is a true copy of one such email which evidences the parties’ positions with regard to contributions by the parties.
8.Various meetings were held between the parties to effect the cancellation of ZMB’s interests in Seachange. These meetings were supplemented by emails setting out how the disengagement of ZMB would be accomplished legally as well as financially. By 24 May 2004 the parties had essentially agreed on an arrangement under which ZMB would sell its interest in the development at its then value to Pital and WOS, and that all outstanding debts owed by ZMB or me or Michael Brereton would be repaid out of the proceeds of the sale. In addition, Giuseppe de Simone and Alan Griffiths had decided to equalize their interests, so that after the departure of ZMB, it would effectively be an equal partnership between them.
9.Giuseppe de Simone, who I believe is also a qualified lawyer, set out the various documents required to ensure the business efficacy of the transactions. Now produced and shown to me and marked “MAB-8” is a true copy of emails dated 24 May 2007 between Giuseppe de Simone and Kristen Moran, Personal Assistant to Michael Brereton, which set out both the intention of the parties and the documents to be produced to give effect to those intentions.
10.In his email of 24 May 2007 at 3.00pm, at item 4, it may be seen that one of the documents that Giuseppe de Simone states needed to be drawn up was as follows:
“the debt release deeds between MRB and GDS for $100,000, MRB/ZMB and Sunshine Boys for $75,000, MRB/ZMB and Pital/AG/EH or whoever for their money and MRB/ZMB and Paul Marc for their money”.
11.I understand the reference to “MRB” to be a reference to my brother, Michael Brereton, “GDS” to be a reference to Giuseppe de Simone, “ZMB” to be a reference to the plaintiff, and “Sunshine Boys” to be a reference to the Sunshine Boys Trust, of which the trustee is WOS.
12.The documents referred to in the above emails were produced, namely:
a. Pital/ZMB Purchase Deed
b. Seachange Set-Off Deed
c. Security Release Deed
d. Discharge of Charge given to Galambos
e. Discharge of Charge given to Pital
13.As at 24 May 2007 agreement had not been reached on the value of the development or ZMB’s interest in it. Nor had there been agreement on what adjustments needed to be made for contributions made and loans, etc. However there had been numerous discussions about these matters, and the parties were aware of what their areas of disagreement were.
14.One of the documents produced by Mr de Simone is the spreadsheet which is part of exhibit “MAB 7” to my affidavit sworn on 2 November 2007. That spreadsheet was sent as an attachment to the email that is also part of the exhibit. The email was sent to Mr Rostkier, who is ZMB’s accountant. It may be seen that the last group of items in the spreadsheet includes the debt referred to in the statutory demand which is the subject of this proceeding.
15.A meeting was arranged on 28 May 2007 between myself, as Director of ZMB, Michael Brereton, Giuseppe de Simone, Alan Griffiths, Martin Jurblum and Erin Harte for the purpose of reaching final agreement on all outstanding matters, including all figures. Prior to that meeting a revised version of the spreadsheet was produced, a copy of which is now shown to me and marked “MAB 9”. It may be seen that the spreadsheet is set out in three columns, headed “Marie”, “GDS #2” and “ZMB 26.05.07”. The column headed “Marie” sets out the figures which ZMB contended were appropriate for the various items; for example, that the valuation of the project was $18,250,000. The column headed “GDS #2” sets out the figures for which Mr de Simone then contended. The column headed “ZMB 20.5.07” set out figures which ZMB proposed for agreement at the meeting on 28 May 2007. The spreadsheet was circulated prior to the meeting.
16.I was present at the meeting on 28 May 2007. The spreadsheet in exhibit MAB 9 was discussed extensively. We went through all the items on which there was disagreement and resolved them all, and at the end of the meeting we congratulated one another on having finally reached agreement on the termination of our relationship.
17.The basic terms of the agreement we reached were that ZMB’s units in Seachange were cancelled, ZMB was released from all further liabilities to any of the other parties, Pital assumed some of ZMB’s liabilities and Pital and Giuseppe de Simone’s interests were equalized.
18.The various documents that were needed to effect the termination had already been drafted, but they needed some amendment so that they contained the final agreed figures. This was done and the documents were all executed. ZMB was paid an amount that I do not now exactly recall, but was between $600,000 and $700,000.
She says that all parties, and in particular herself, Mr De Simone and Mr Griffiths "reached agreement on the termination of our relationship." As a result of this agreement, several documents were executed. She says these documents included a Pital/ZMB Purchase Deed which is Exhibit MAB4, Seachange Set off Deed which does not seem to be exhibited, Security Release Deed which is probably MAB6, Discharge of Charge given to Galambos, Exhibit MAB5, and Discharge of Charge given to Pital which does not appear to be exhibited.
ZMB submits that under the agreement between the parties, Pital was to acquire ZMB's interest in the project and the purchase price it had agreed to pay was calculated on the basis that Pital assumed the liabilities of ZMB to Mr De Simone and Walking on Sunshine (and other parties to which ZMB had owed monies).
Further, ZMB says that it was agreed that ZMB would be released from its obligations to Mr De Simone and Walking on Sunshine and that Pital would assume those obligations and be liable to Mr De Simone and Walking on Sunshine for those debts.
The Purchase Deed between ZMB as vendor and Pital as purchaser provided that the vendor and the purchaser agree that the payment of the purchase price will be made by the purchaser assuming “vendor liabilities” and paying the cash consideration. The vendor liabilities expressly included the debts owed by ZMB to Mr De Simone and to Walking on Sunshine.
Neither Mr De Simone nor Walking on Sunshine were party to this written document, although Mr De Simone signed it as secretary of two of the parties who were management companies of two of the partnerships involved with the project.
No document was executed under which Pital agreed with Mr De Simone or Walking on Sunshine to pay the liabilities ZMB owed them and that Pital had agreed with ZMB to assume under the Purchase Deed. Further, no document giving a release by Walking on Sunshine to ZMB was executed.
Under a deed of release between, inter alia, Mr Simone and ZMB, Mr De Simone agreed not to sue, and released ZMB from all claims and such like arising from or relating to certain defined disputes.
It is doubtful whether the release extended to the moneys owed by ZMB to Mr De Simone.
ZMB submits that there was a wider agreement between the parties than that which is reflected in the executed documents, and in particular, under that wider agreement, ZMB would be released from any obligation to pay the existing debts owed to Mr De Simone and Walking on Sunshine as previously referred to.
In support of that submission Mr Brett, one of , relies on three pieces of evidence. First of all, he referred to the spreadsheet MAB9 which was sent by Mr De Simone to Ms Brereton prior to the meeting of 28 May, at which Ms Brereton said that agreement was reached between all the parties. It contains two columns recording the values put on ZMB's units in the project by Ms Brereton and by Mr De Simone. The document calculates the total to be paid for ZMB's interest in the project. The amount was calculated on the assumption that the debts owed by ZMB to Mr De Simone, were to be repaid by Pital, the purchaser. The loan to Walking on Sunshine was listed in Mr De Simone's column as being repaid, but not in Ms Brereton’s column.
Following the meeting on 28 May, at which Ms Brereton says the wider agreement was made, Mr De Simone sent an email to the accountant for ZMB on 7 June 2007. It attached a revised spreadsheet in a similar format to the earlier one. In this case, both the $75,000 to be paid to Walking on Sunshine, as well as $100,000 to be paid to Mr De Simone, were listed. The calculation shows that the net payable sum, which I think we can safely infer is the sum payable to ZMB, is calculated after deducting the loans of ZMB owing Mr De Simone and Walking on Sunshine. On that basis, the value of ZMB’s units are reduced by $100,000 and the $75,000.
Ms Brereton says that ZMB was in fact paid between $600,000 and $700,000 which is consistent with the agreed value of the units being reduced by the amount of the liabilities owed by ZMB to Mr De Simone and to Walking on Sunshine.
ZMB seek to draw the inference supported by the Deed of Purchase that ZMB was to receive a lesser sum for its investment in the project as Pital was assuming its liabilities to Mr De Simone and Walking on Sunshine, and that Mr De Simone had agreed to this arrangement.
ZMB seek to infer that, not only did Mr De Simone agree to this arrangement, but also agreed on his own behalf and on behalf of Walking on Sunshine, to release ZMB to give commercial efficacy to this arrangement.
The second piece of evidence relied on by Mr Brett is exhibit MAB8 which are emails passing between the relevant parties on 24 May prior to the date upon which the alleged agreement was made on the 28 May. The first email relied upon is an email dated 24 May 2007 sent at 1408 hours from Christine Moran, who is David Brereton's assistant and we can assume was acting on behalf of ZMB, to Mr De Simone. It says:
Subject, update, Hi Joe, deed of release. Michael has dictated the deed of release which I am about to type up. Michael has put in a definition of departure transaction document, meaning that the other docs are going to be signed today. If you could please give us a list that we wish to put into the release.
Letter to Law Institute:
Joe would it be possible to provide me with a copy of the letter that went to the Law Institute of Victoria so we can refer to it, or are you happy for us just to do a letter that the allegations are withdrawn? Under the heading of Seachange, the (indistinct) accounts are currently being changed and will be completed today. Back to you shortly. Kind regards, Christine.
Then in an email dated the same day at 3 p.m., which is about an hour after Ms Moran’s email, Mr De Simone sent an email to Ms Moran, subject, "Seachange and ZMB transaction", as follows:
I will give you a copy of the complaint that went so we can attach it to the letter with drawing the complaint. That way, there is no confusion anywhere. The departure transaction documents are the Western, Walton, and Seachange set off deed, the ZMB, MRB, YT, and Seachange Galambos set off and security release deed, the Pital ZMB purchase deed for units in Interesting Developments Pty Ltd and Galambos Pty Ltd. I am doing these documents for the debt release deeds between MRB and GDS for $100,000, MRB/ZMB and Sunshine Boys for $75,000, MRB/ZMB and Pital/AG/EH or whoever for their money, and MRB/ZMB and Pourmark for their money.
Then he refers to:
And (5), the release document itself that Michael is drafting,
(6) the letter to the legal services commissioner. I have not done the deeds in Item 4, but they will need to be done, I am hoping Michael has a precedent to use for these.
It appears therefore that Mr De Simone thought that a document would be drawn up in addition to the release, which I have previously referred to, and that document would constitute a release between MRB and Mr De Simone for the $100,000, and between ZMB and Sunshine Boys, who we can take to be Walking on Sunshine for $75,000.
Mr Bigmore, one of Her Majesty’s counsel, for Mr De Simone and Walking on Sunshine, submits that the release mentioned in this email was being discussed before the parties had reached agreement on 28 May, and the document is just as consistent with the debts of ZMB to Mr De Simone and Walking on Sunshine remaining. He said that the releases may have been used in the event that ZMB paid and discharged those debts.
Finally, Mr Brett refers to Exhibit AG2 to the affidavit of Mr Alan Griffiths, being the writ and statement of claim in Matter No. 8250 of 2007, where DSN was the plaintiff, and Pital was the defendant.
Mr Brett submits that the allegations in this statement of claim are further evidence that an agreement was made on 28 May between Mr Griffiths and Mr De Simone on behalf of their respective companies, before the documents were signed, and that the agreement went beyond the signed documents.
Under s 459 of the Corporations Act 2001, ZMB must satisfy me that there is a genuine dispute about the existence of the debt to which the demands relate. That is, there was a dispute and it was a genuine dispute. The dispute ought to be supported by evidence rather than mere assertion.
Mr Bigmore says that it is mere speculation as to whether that agreement was wider than the agreements recorded in the documents. Furthermore, if it was wider, what were its terms?
Ms Brereton says that the agreement effected a termination of ZMB's relationship with its co-investors, in particular, Mr De Simone and Mr Griffiths. The purchase deed provided that Pital assumed the liabilities of ZMB to Mr De Simone and Walking on Sunshine. In my view it is arguable that the termination of the relationship implied that thereafter Mr De Simone and Walking on Sunshine had no claim against ZMB for those debts. Such a release was referred to by Mr De Simone in his email of 24 may 2007.
Mr Bigmore asserts with some force that Ms Brereton does not squarely swear in her affidavit that Mr De Simone and Walking on Sunshine agreed with ZMB to release it from the claims of Mr De Simone and Walking on Sunshine in consideration of ZMB selling its interest to Pital.
Ms Brereton swore four affidavits and the last gives a detailed account of the negotiations. She does not go further than she said in the very first affidavit where she says that Pital, "took over all ZMB's liabilities", owed to Mr De Simone and Walking on Sunshine.
However, as indicated above, her argument is also made out on the basis that it was a necessary implication of the agreement between herself, Mr De Simone and Mr Griffiths and their respective companies that as Pital assumed ZMB’s liabilities to Mr De Simone and Walking on Sunshine, then Pital would be liable to Mr De Simone and Walking on Sunshine for them and ZMB would be released by Mr De Simone and Walking on Sunshine.
ZMB's claims go beyond mere assertions. They are supported by the Purchase Deed, the emails, the spreadsheet and the statement of claim. The onus is on ZMB to establish the genuine dispute. Nevertheless it is relevant to note that Mr De Simone does not challenge Ms Brereton's evidence on the negotiations and the agreement that was said to be entered in to by all parties on 28 May 2007.
I am satisfied that there are reasonable grounds to suggest that the group of documents referred to by Ms Brereton were brought into existence to reflect an agreement between Ms Brereton, Mr Griffiths, Mr De Simone and their corporate interests. I am satisfied that there are reasonable grounds to suggest that this agreement went further than the documents and may have included a term that ZMB would be released by Mr De Simone and Walking on Sunshine from the debts owed to them by ZMB. I am satisfied that ZMB is genuine in its dispute of the claims by Mr De Simone and Walking on Sunshine.
For the above reasons, I find that there is a genuine dispute in relation to both claims. I therefore dismiss the appeals with costs.
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