ANZ Banking Group Limited v Tiricovski

Judgment - EX TEMPORE 1HIS HONOUR: By originating process filed on 16 July 2013, the plaintiff AP and HR Investments Pty Ltd claims an order under (Cth) Corporations Act 2001, s 459H setting aside a creditors' statutory demand dated 25 June 2013 and served on the plaintiff on 27 June 2013 claiming a debt of $47,000, on the basis that there is a genuine dispute as to the existence of the indebtedness. 2The indebtedness claimed is described in the schedule to the creditors' statutory demand in the following terms: Loan made 17 September 2012 - $7,000. Loan made on 25 September 2012 - $40,000. 3The test to be applied by the Court in an application of this kind is now well-established, and has recently been restated by the Court of Appeal in Britten-Norman Pty Ltd v Analysis and Technology Australia Pty Ltd [2013] NSWCA 344 in the following terms: 30. It is settled law that s 459H requires the Court to be satisfied that there is a "serious question to be tried": see Scanhill v Century 21 Australasia at 467, or "an issue deserving of a hearing" as to whether the company has such a claim against the creditor: see Chase Manhattan Bank Australia Limited v Oscty Pty Limited [1995] FCA 1208; 17 ACSR 128 at [42] per Lindgren J; Eumina Investments Pty Ltd v Westpac Banking Corp [1998] FCA 824; 84 FCR 454 per Emmett J (as his Honour then was). The claim must be made in good faith: Macleay Nominees v Belle Property East Pty Ltd. In that case, Palmer J observed, at [18], that good faith, in this context, meant that the offsetting claim was arguable on the basis of facts that were asserted "with sufficient particularity to enable the Court to determine that the claim is not fanciful". 31 In similar vein, although dealing with the question whether there was a genuine dispute within the meaning of s 459H(1)(a), McLelland CJ in Eq, in Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 787 considered that the expression "genuine dispute" involved a plausible contention requiring investigation and raised much the same sort of considerations as the "serious question to be tried" criterion that applied in the case of an interlocutory injunction. 4The company was incorporated on 25 September 2012 as a proprietary company limited by shares. It has two directors, Herman Ramos and Allan Po, each of whom were appointed on 25 September 2012. It has 1364 ordinary shares, each of them fully paid at $1 per share, of which 682 are held by Mr Ramos and 682 by Mr Po. 5The background to the current dispute is that in late July or early August 2012, Mr Po and Mr Ramos discussed and agreed to open a cafe business, to be called "Cafe on Legs." They discussed the initial funding for the cafe and agreed that the capital would be provided as to $70,000 by a loan to be sourced from the bank and as to $30,000 by contributions of $15,000 from each of them. In this respect I observe that Mr Ramos in his affidavit acknowledges that the original agreement was that he was to contribute $15,000, although he caveats that with a proviso to the effect "if I was able to do so." 6Initially, a partnership structure was contemplated, but on 5 September 2012 an accountant consulted by the parties advised that the business should be set up as a company rather than partnership, and the parties confirmed that they would have a 50% interest each. 7Shortly before this, Mr Ramos had said to Mr Po, according to Mr Po: My parents have offered to lend me some money to contribute my share of the start-up funds for the business. They don't want me to have the burden of a large loan to pay off. 8Mr Ramos' version is different. He says, in effect, that he reported that his parents had offered to lend money to the business. 9As I have said, the company was incorporated on 25 September 2012. In circumstances where an initial application for finance had not progressed, the company applied for finance from the ANZ Bank, but when that had not been approved, Mr Po approached the parents of his domestic partner, Ms Christine Veljanoska and obtained from them an advance of $50,000. The plaintiff says that this was on the basis that it would be interim finance to be repaid from the ANZ loan once it was available, and that the agreement to do so was made in consultation with Mr Ramos. Accordingly, the plaintiff says that this loan from Ms Veljanoska's parents was a loan to the company, not to him personally. 10On 19 December 2012, the ANZ Bank approved finance and advanced a loan of $65,000, an overdraft facility of $35,000 and a credit card facility of $7,500. the loan from Ms Veljanoska's parents was not repaid. 11Between 26 September 2012 and 2 February 2013, Mr Ramos made numerous payments on behalf of the company totalling approximately $39,000. It is not in dispute that those payments were made from funds advanced to him by his parents; it is also not in dispute that that advance was negotiated between Mr Ramos and his parents, the defendants in the present proceedings, and that Mr Po was not involved in those negotiations. Mr Ramos and the defendants say that what was negotiated was a loan to the company of $47,000. $7,000 was provided in cash to Mr Ramos, according to the creditor's statutory demand on 17 September, and $40,000 was provided by way of cheque, apparently drawn from Mr Herman Ramos' account on 25 September 2012, payable, the evidence establishes, to Mr Herman Ramos and deposited into Mr Herman's Ramos' account on 9 October 2012. 12The relationship between Mr Po and Mr Ramos deteriorated in early 2013, to the point that the parties were exploring how Mr Ramos might exit the business and, presumably, the company. In the course of those discussions Mr Po and Mr Ramos had a lengthy exchange of texts on 28 February 2013, in which Mr Po was proposing a meeting with their solicitor and accountant the following morning. In one message in that exchange, sent at or about 1.02pm, Mr Po said "We need to call meeting with your parents and Christine's parents, tomorrow morning at 8.00am ... ". In a subsequent message, sent by Mr Po at 1.24pm, he said, inter alia, "for the best interests of the business, we need to have your parents and Christine's parents as they have interest in this business." 13In early March 2013, Ms Veljanoska prepared a document entitled "Financial Outline", in preparation for a meeting with the solicitor and accountant on 13 March 2013. The Financial Outline lists, under the heading "contributions", Allan Po $15,000 from savings, and Herman Ramos $8,000 from savings. Then, under the heading "loans", it lists the defendants German and Cecilia Ramos $47,000, comprised of $7,000 cash and $40,000 cheque; Mr and Mrs Veljanoska (that is Ms Veljanoska's parents) $50,000 ($10,000 cash and $40,000 cheque) and Mr Po and Ms Veljanoska $10,000. In addition, it lists the ANZ Bank loan and interest, the overdraft and the credit card. 14A meeting was held between Mr Po, Mr Ramos and Ms Veljanoska and the solicitor Mr Leo in the first week of April 2013 or thereabouts, in which the "Financial Outline" was produced. Mr Ramos says that they did not achieve "significant agreement" over his directorship or his parents' loan of $47,000, that he did not sign anything and that nothing was agreed between the parties. However, on 18 April 2013, not long after that meeting, solicitors acting for Mr Ramos wrote to Mr Leo to the following effect: We are instructed by our client that an agreement has been reached in relation to our client selling his shares in the company to your client on the following basis: 1. Your client to pay our client the sum of $8,000.00 representing his initial contribution to the business. 2. That the company is to enter into a loan agreement with Herman and Cecelia Ramos for the sum of $47,000.00. This loan is to be guaranteed by the remaining director Alan Po. 3. Our client is to be released from the guarantees in favour of the ANZ Bank, the landlord, Silver Chef and Flexirent. Would you please obtain instructions from the remaining shareholders as to their agreement to the sale on this basis and please advise whether you would like our office to draft the sale of share agreement. 15The plaintiff contends that there is a plausible contention requiring investigation that the $47,000 advanced by the defendants was an advance to their son, Herman Ramos, and not a loan to the company, and (it would seem necessarily to follow) that any liability the company might have in respect of payments made on its behalf by Herman Ramos sourced from those moneys is to Mr Herman Ramos and not to the defendants. 16In support of that contention reference might be made to the following matters. 17First, the transaction with the defendants was, it would seem, not in dispute, negotiated by Mr Herman Ramos alone without involvement on the part of, or authority from, Mr Po. The authority of a single director to bind the company to such a transaction is at least reasonably disputable: see Northside Developments Pty Ltd v Registrar General [1990] HCA 32; (1991) 170 CLR 146 at 204-205 per Dawson J; Soyfer v Earlmaze Pty Ltd [2000] NSWSC 1068; ANZ Banking Group Limited v Tiricovski [2012] NSWSC 1304 at [45] per Adams J. 18Secondly, the payment was made, at least as to the $40,000, by cheque drawn in favour of Mr Herman Ramos personally. 19Thirdly, that cheque was deposited not into any account of the company but into Mr Herman Ramos' personal account, and the proceeds then drawn on by him from time to time, partly to make payments on behalf of the company but also, it would seem, partly for other purposes. 20Fourthly, as to the $7,000, at least according to the notice of demand, that advance was made before the incorporation of the company at a time when it had no legal personality. While it is not impossible that there could be a pre-incorporation contract, nonetheless it is not self-evident that that is so. 21Fifthly, and also as to the $7,000, it corresponds to the difference between Mr Herman Ramos' admitted initial contribution of $8,000 and the sum of $15,000 which he acknowledges was contemplated by the parties as both their initial contributions. Again, while there may be other perfectly good explanations, that lend some plausibility to the suggestion that the $7,000 was provided to him to enable him to make his contribution, rather than as a direct loan to the company. 22Sixthly, it is improbable that the defendants, and for that matter Mr Ramos, were referring to the company in their conversations in early September, as they depose in their affidavit, when it was only decided on about 5 September that there would be a corporate structure at all. 23Seventhly, while the defendants assert that their advance was on specific terms as to monthly repayments and interest, there is nothing to indicate that this was ever communicated to Mr Po, nor that any demand was made on the company for repayments in accordance with those terms contemporaneously. 24Against that, there are also significant indicia supportive of the defendants' case. First, there is the manner of treatment of the Veljanoskas' loan of $50,000 which is treated in the financial contribution document in the same way, and under the same heading as the defendants' advance and is said by the plaintiff to be a loan to the company and not to Mr Po personally, and which would be a surprising inconsistency of approach if an advance from the parents of one of the interested parties in the company was to be treated as an advance to the company, but one, by the parents of the other, an advance to that director alone. 25Secondly, there is the fact that in the Financial Outline document, the defendants' advance is apparently acknowledged as a loan to the company. 26Thirdly, there are the text messages which I have mentioned, which refer to the defendants having an interest in the company and proceed on the basis that they had a proper place at the table, so to speak, in a discussion about the company's future - which is difficult to reconcile with the view that their only interest was as creditors of one of the director's shareholders. 27The strength of those matters to some extent is reinforced by the fact that the Financial Outline and the text message are really the only contemporaneous documentation, so that it might be said that insofar as there is any contemporaneous material, it is all one way. 28On the other hand, differential treatment of the parental loans might be explained, as Ms Veljanoska suggested in her evidence, on the basis that the loan with her parents was negotiated with the concurrence of Mr Ramos and on the footing that it would be refinanced from the ANZ loan which was unquestionably a company liability, whereas the advance by the defendants was not. 29The Financial Outline is plainly not an accounting document, and Ms Veljanoska proffered an explanation that it was intended to identify the source of funds and not to characterise liabilities as liabilities of the company. That explanation, though it might well be tested further, I do not think can be completely rejected out of hand. And, similarly, Mr Po explained his reference in the text messages to the defendants having an interest as, in effect, reflecting that they were the ultimate source of the funds and, presumably, that they might ultimately expect to be repaid from the proceeds, but not as being intended to refer to them having made a loan directly to the company. 30That analysis, I think, shows that it cannot be said that the contention the plaintiff advances is implausible so as not to require any further investigation. On an application of this kind the Court is not involved in evaluating, even on the balance of probabilities, which of the competing contentions is likely to be correct. I am satisfied that there is a plausible contention requiring further investigation that the $47,000 was an advance to Mr Herman Ramos and not to the company. That said, it would seem difficult for the company to resist the proposition that it is indebted to Mr Herman Ramos in respect of the amounts paid by him on its behalf, subject of course to any counter claim or cross-demand that the company may have. 31It follows that the statutory demand must be set aside. 32I order that the creditors statutory demand served by the defendant on the plaintiffs and dated 25 June 2013 be set aside. I order that the defendant pay the plaintiffs costs which I assess in the sum of $12,500.