Alem v Brandup

COUNSEL : Mr F Assef for plaintiff Mr JJ Young for defendant

SOLICITORS : Harris Freidman Hyde Page for plaintiff Edwin Davey Commercial & Litigation Lawyers for defendant

• 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

1540/07 Alem Pty Ltd v Brandup Business Solutions Pty Ltd JUDGMENT 1 His Honour: This is an application by the plaintiff under section 459G of the Corporations Act 2001 (Cth) to set aside a statutory demand dated 29 January 2007 served by the defendant on the plaintiff claiming that an amount of $281,206.97 is due and payable by the plaintiff. 2 The plaintiff submits that there is a genuine dispute that there is no debt due and owing in order to support the demand and there are defects in the demand which should lead to the demand being set aside. As is apparent from the description of the debt in the statutory demand the matter concerns building works carried out on a property situated at 61/67 O'Riordan, Alexandria. That property was owned by the trustee of the L & H Weinstock Family Trust. 3 Originally, a company Marelex Pty Ltd was the trustee of that trust. On 15 June 2001 the plaintiff became the trustee of the trust. Alem Pty Ltd is the owner and landlord of the property referred to above. The works which were carried out by the defendant builder were an upgrade of the premises part of the costs of which were borne by the lessee with part to be borne by the landlord. 4 Works were carried out during 2005 and also during a period from March through to June 2006. During this period a Mr Amiram Weinstock was the sole director of the plaintiff company and responsible for organising the appropriate building works with the defendant. On 25 August 2006, he resigned as a director and his sister Tamar Rivqa Beck was appointed sole director of the plaintiff company. 5 Because of the falling out between Amiram Weinstock and Tamar Beck, there was no continuity in respect of the building works and the builder has been waiting patiently for some time to be paid what it claims is the outstanding money due to it some of which is now included in the demand which is sought to be set aside. Genuine Dispute 6 The genuine dispute which is alleged by the plaintiff is the identity of the contracting party on the proprietor's side. The plaintiff submits that there is no evidence to establish that a contract for the relevant works ever existed with the plaintiff and to the extent that the contract might have been with some other party it identifies Maralex Pty Ltd, the former trustee, who has not been the trustee of the trust since 15 June 2001 a date well before the carrying out of the relevant building works. 7 Unfortunately the paper trail seems a little confusing at first instance but the plaintiff has not advanced any evidence to suggest that the work was not done or that it was done in a faulty manner. Early in 2006 there seems to have been four separate tenders and a quotation by the defendant. In an email of 30 March 2006 from Mr Malcolm Liles of Howie Herring & Forsyth Pty Limited, the contract manager, addressed to Mr Whitfield of the defendant, Mr Liles refers to the various tenders and quotation under the heading "Letter of intent". The letter stated as follows: "Further to your letter dated 29 March 2006 on behalf of our client Maralex Pty Limited we confirm acceptance of your revised overall project pricing as detailed in your letter of offer dated 29 March 2006, all terms and conditions as per the tender documents. Please accept this communication as your authorisation to proceed with the work. Formal letters and contract documents will be prepared and issued for both parties to execute. " 8 Based upon that letter the defendant went ahead with the works on the property in April 2006. In a letter dated 12 May 2006, Mr Lisles of Howie Herring and Forsyth Pty Ltd sent copies of four sets of contract documents to the defendant for execution. Although the letter made reference to Maralex the copy of the contract documents did not specify the parties. The principal did not sign the contract documents. 9 There had been work carried out during 2005 that was managed in the same way as the additional contracts which are now the subject of the dispute and the statutory demand. As early as 24 October 2005, quotations for this work had been sent to "Ami Weinstock, Director -- Alem Pty Ltd c/- of Maralex Pty Ltd. Thereafter invoices were issued by the defendant between 16 October 2005 and 26 May 2006 all addressed in the same way. Each of the invoices were paid after they had been approved by Mr Liles who apparently had the role of signing off all of the progress payments to be made to the defendant. 10 Between 30 June 2006 and 30 July 2006 a total of 14 invoices were issued which totalled the sum of $281,206.97. These invoices were issued in the same way and related to the work done under the contracts proposed in the letter of 30 March 2006. There was evidence that Mr Liles approved all of these invoices, except for one invoice (number 121 of 30 July 2006) in the sum of $43,708.50. It is apparent from later correspondence from Mr Liles on 7 November 2006 that he was of the view that all outstanding invoices should be paid. There does not therefore seem to be any dispute that the amount payable for the work was approved pursuant to the procedures that were in place under the practical arrangements put in place by the parties. If one has regard to the contract which was not signed by the proprietor, then under the terms of that contract the amounts having been assessed under clause 2 of the contract were payable within 30 days from the end of the month of the relevant invoice. 11 The only question is who was the principal and not whether any amount is owing by the relevant principal. I had the benefit of a number of submissions in respect of the principles to be applied and I think the most useful summation of what is a genuine dispute is that given by McLelland CJ in Equity in Eyota Pty Limited v Hanave Pty Limited (1994) 12 ACLC 669. At page 671 His Honour made the following comments respect of the expression "genuine dispute": "It is, however, necessary to consider the meaning of the expression 'genuine dispute' where it occurs in s.459H. 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' (cf Eng Mee Yong v Letchumanan (1980) AC 331 at 341), or 'a patently feeble legal argument, or an assertion of facts unsupported by evidence' (cf South Australia v Wall (1980) 24 SASR 189 at 194). 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 Mibor Investments (at ACLC 1066; ACSR 366-7) Hayne J said, after referring to the state of the law prior to the enactment of Division 3 of Part 5.4 of the Corporations Law, and to the terms of Division 3: 'These matters, taken in combination, suggest that at least in most cases, it is not expected that the Court will embark upon any extended inquiry in order to determine whether there is a genuine dispute between the parties and certainly will not attempt to weigh the merits of that dispute. All that the legislation requires is that the Court conclude that there is a dispute and that it is a genuine dispute.' In Re Morris Catering (Australia) Pty Limited (1993) 11 ACLC 919 at 922; (1993) 11 ACSR 601 at 605 Thomas J said: 'There is little doubt that Division 3 . . . prescribes a formula that requires the Court to assess the position between the parties, and preserve demands where it can be seen that there is no genuine dispute and no sufficient genuine offsetting claim. That is not to say that the Court will examine the merits or settle the dispute. The specified limits of the Court's examination are the ascertainment of whether there is a "genuine dispute" and whether there is a "genuine claim". It is often possible to discern the spurious, and to identify mere bluster or assertion. But beyond a perception of genuineness (or the lack of it) the Court has no function. It is not helpful to perceive that one party is more likely than the other to succeed, or that the eventual state of the account between the parties is more likely to be one result than another. The essential task is relatively simply - to identify the genuine level of a claim (not the likely result of it) and to identify the genuine level of an offsetting claim (not the likely result of it).' I respectfully agree with those statements."

12 In the documents to which I have already referred there has been reference to Maralex by the contract managers in the correspondence approvals process and within the body of some of the contracts issued in March 2006. The plaintiff points to the fact that the defendant gave notice to Maralex in respect of mediation pursuant to the terms of the uncompleted contract documents. One thing that the plaintiffs have not sought to do is to identify what was the role of Maralex in the course of the contract. 13 The answer is no doubt as suggested by the defendant that Maralex's role was simply as an agent for the plaintiff. Whether it was disclosed or undisclosed makes no difference to the principal's liability. The fundamental matters which go to the role that each company played are evident from the history. Maralex ceased to be a trustee in 2001 and the plaintiff was appointed the new trustee in its place. The plaintiff owns the land in respect of which the building work was done. The only individual on the proprietor's part that was involved in all the negotiations and contract work was a director of both companies. 14 It is also apparent that when work was paid for cheques were drawn on an account styled Maralex Pty Limited in trust for L & H Weinstock Family Trust. The bank authorities which were tendered disclosed that the owner of that account was in fact the plaintiff. It is also plain, as appears from a number of documents, that the plaintiff and Maralex have the same address and the same style of letterhead. 15 It is apparent that after Mrs Beck became involved, following the dispute with her brother, there were a number of discussions concerning outstanding amounts which did not progress the matter. There is some dispute about these but it is plain that two cheques were sent by her brother on account of payment for the outstanding amount drawn on the usual cheque account in amounts of $54,450 and $47,388. At the request of Mrs Beck's accountant, who was now advising her, the contract manager returned the cheques to her accountant. Obviously her brother, who had supervised the works, thought that these amounts were due. 16 It seems to me that the confusion in the documents really stems from the change in trustee and, to the extent that Maralex played a part, it was as agent for the plaintiff. In my view there is no genuine dispute that the plaintiff was the principal and liable for amounts due under the arrangement between the parties. Was a debt due and owing 17 It was submitted by the plaintiff that there was no debt due and payable as, at its highest, the evidence discloses that some building work may have been done for the benefit of the plaintiff as trustee of the property. The submissions suggested that the precise scope and amount of that work has not been ascertained. As I have previously mentioned, the plaintiff did not challenge the extent of the work or the claims by the defendant as to the amount which it was entitled to recover. 18 Under the arrangements which saw the parties do the building work or, alternatively, under the form of contract which was submitted but which may have governed the relationship between the parties, the work was assessed by the contract manager and approved for payment. In these circumstances, having regard to the claims in the invoices and their approval by the contract manager, I am satisfied that there is a debt due and payable. Accordingly this ground does not succeed. Defects in the demand and affidavit 19 In respect of the demand it is said that paragraphs 1 and 3 of the form which referred only to a single debt is inappropriate and that the schedule fails to itemise what is said to be multiple debts. The basis of this submission is that the defendant alleges that there are a number of unpaid invoices and hence multiple debts but not a single debt as suggested by the statutory demand. The wording used in the statutory demand is as follows: " The debt of $281,206.97 being monies owed to the creditor by the debtor pursuant to building and construction works performed by the creditor for the benefit of the debtor under a works contract. The invoices have been issued and a debt remains unpaid. " 20 The use of the words "works contract" was also criticised on the basis that there was not one particular contract which had been executed by the parties. It seems to me that the use of the words is in a general sense. Plainly the various invoices related to separate parts of the work on the same building which apparently were tendered and all received separate quotes. The words used in the demand are general and not specific. 21 The question of several debts was recently dealt with by Barret J in Condor Asset Management Ltd v Excelsior Eastern Ltd [2005] NSWSC 1139. He said: "14 Section 459E makes it clear that a statutory demand may be based on one debt or several debts. Section 459E(1)(b) says that a statutory demand may relate to "2 or more debts that the company owes to the person, that are due and payable and whose amounts total at least the statutory minimum". A person to whom several debts are owed may thus use a single statutory demand covering all the debts or, if preferred, a separate statutory demand for each separate debt: Cooloola Dairys Pty Ltd v National Foods Milk Ltd [2005] 1 QdR 12.

15 Section 459E(2)(b) deals with the content of the demand "if it relates to 2 or more debts", that is, if the first approach is taken. In such a case, the demand "must specify the total of the amounts of the debts". Under s.459E(2)(c), the demand must then require the company to pay "the total of the amounts of the debts" (or to secure or compound for "that total"). In relation to the accompanying affidavit, the requirement imposed by s.459E(3)(a) where there are several debts is that the affidavit verify that "the total amount of the debts" is due and payable by the company. 16 A further requirement as to content is imposed by s.459E(2)(e). That section says that a statutory demand "must be in the prescribed form (if any)". A form is prescribed by the Corporations Regulations 2001 (Cth). It is Form 509H set out in Schedule 2 to the regulations. It is pertinent to set out paragraphs 1 and 3 of the form:

"1. The company owes ( name ) of ( address ) ('the creditor') * the amount of $( insert amount ), being the amount of the debt described in the Schedule. * the amount of $( insert total amount ), being the total of the amounts of the debts described in the Schedule." "3. The creditor requires the company, within 21 days after service on the company of this demand: (a) to pay to the creditor *the amount of the debt/*total of the amounts of the debts; or (b) to secure or compound for the *amount of the debt/*total of the amounts of the debts, to the creditor's reasonable satisfaction". 17 I also set out the schedule as it appears in the prescribed form: "SCHEDULE Description of the debt Amount of the debt (indicate if it is a judgment debt, giving the name of the court and the date of the order) ___________

                      ____________

                      ____________

18 There are, as may be seen, asterisks against "Total Amount" at the end of the schedule and against several parts of paragraphs 1 and 3. The footnote identified by asterisk is, "Delete if not applicable". 22 His Honour then set out the form of the demand in that case and proceeded. "20 The form of the schedule to Form 509H was the subject of comment by Lindgren J in Chippendale Printing Co Pty Ltd v Deputy Commissioner of Taxation (1995) 55 FCR 562. His Honour said (at p.579), after setting out that schedule: "Clearly, a statutory demand relating to two or more debts must give a 'description' of the individual debts and state their amounts as well as state the total of those amounts." 21 I respectfully agree. The matter to be specified in the first column of the schedule is "Description of the debt". Against that must be shown in the second column "Amount of the debt". Where, consistently with s.459E(1)(b), a single demand is based on several debts, the reference in the heading of each of the schedule's columns to "the debt" is a reference to each of the several debts individually. That reference to "the debt" is not concerned with the totality of the several debts. The direction in the heading of the first column does not call for an amalgamated single description of all the debts together; and the direction in the heading of the second column does not call for a statement of the aggregate amount of the several debts. The requirement that such an aggregate amount be stated where the demand is based on several debts comes from the words "Total amount" which is positioned on the lowest of the three ruled lines at the foot of the second column so as to indicate that that the separate amounts specified on the lines above in respect of individual debts are to be added together and the aggregate inserted on the lowest line. The clear intention is that a separate description and a separate amount be stated for each debt, together with an aggregate amount for all together. The case in which, as envisaged by the asterisked footnote, "Total amount" will not be applicable is the case where there is only one sum under "Amount of the debt" because there is only one debt. It is this analysis that underlies Lindgren J's observation.

22 The approach taken by Lindgren J was expressly approved and adopted by Nicholson J in Delta Beta Pty Ltd v Vissers (1996) 20 ACSR 583. His Honour held (at p.586) that, in a case where a statutory demand relates to several debts, compliance with s.459E(2)(e) (requiring adherence to the prescribed form) entails specification of individual debts and the total amount of all debts." 23 In the present case it seems that there has been a failure to specify the amount of the individual debts and, accordingly, there is a defect in the demand. However that does not lead to the setting aside of the demand unless there is substantial injustice. There was a submission that the plaintiff would be incapable of determining the individual amounts of the debts comprising the total amount. On the assumption that the plaintiff kept proper records and having regard to the information that was available to the plaintiff it seems to me that there was no substantial injustice. Indeed the plaintiff's affidavit does not suggest a factual basis for any such substantial injustice. Accordingly I would not set aside the demand on this basis. 24 It was also suggested that the affidavit was defective in that paragraph 2 of the affidavit was in the following terms: " pursuant to a works contract executed between the creditor and the debtor, the creditor completed building and construction work to the benefit of the doubt between the dates of 31 May 2006 and 28 June 2006 and on the basis of these works issued invoices to the debtor totalling $281,206.97. " 25 It was suggested in submissions that the paragraph fails to accurately describe the debts and incorrectly asserts that it is a "works contract". It also points to the use of the singular form of the word debt. I refer to my earlier description of the words "works contract" which I think is general even with addition of the word "executed". Although the description might not be an accurate description of the debts there is nothing in the circumstances of this case which would lead me to exercise my discretion to set aside the demand for some other reason in respect of this error. 26 I dismiss the proceedings and order the plaintiff to pay the defendant's costs. **********

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