AUS ASIA MINERALS LTD -v- BALL [2015] WASC 399 (26 October 2015)

3 On 22 June 2015 Mr Ball served on AAM a statutory demand dated 17 June 2015 for the amount he says he is owed by AAM, being $160,045 (the Statutory Demand). The service of the Statutory Demand did not lead to payment. Rather, by application dated 7 July 2015, AAM sought an order setting aside the Statutory Demand on the basis that there was a genuine dispute as to the debt owed. AAM concedes that it was prepared to enter into an agreement on the terms asserted by Mr Ball but, as was known to (and agreed with) Mr Ball, was not then in a position to do so because it had not yet raised funds for its project but would do so upon the funds being raised and AAM's board of directors ratifying the agreement with Mr Ball. Until that time, AAM says that it agreed to engage Mr Ball as a non‑executive director at the rate of $5,000 per month.

4 Mr Swarbrick filed three affidavits in support of AAM's application, sworn 7 July 2015, 7 September 2015 and 12 October 2015.[1] Mr Ball filed two affidavits in response, being sworn 17 August 2015 and 12 October 2015.[2] Mr Ball also relies on an affidavit filed by Clara Elisabeth Hagan, a solicitor employed by his lawyers.

5 AAM does not assert that the Statutory Demand was invalid. The application by AAM to set aside the Statutory Demand was made within 21 days of the date of its service as required by the Corporations Act 2001 (Cth) (CA) s 459G, and otherwise complies with the formal requirements of that section.

6 The only issue for consideration is whether there is a genuine dispute between AAM and Mr Ball about the existence or the amount of the debt to which the Statutory Demand relates for the purposes of CA s 459H(1)(a). The onus is on AAM as the recipient of the Statutory Demand to establish a genuine dispute.[3] If it can do so, then pursuant to CA s 459H(3) and (4), the court has jurisdiction to set aside or vary the Statutory Demand.

7 It is instructive to analyse the facts in three phases:

• Meeting in Singapore on 10 December 2014.
• Events of 11 ‑ 13 December 2014.
• Events of January to April 2015

8 There is no dispute between the parties that between October and November 2014 Mr Swarbrick and Mr Ball met in Jakarta on three occasions to discuss AAM's mining projects in Indonesia. Nor does there appear to be a dispute that on 10 December 2014 Mr Swarbrick and Mr Ball met over lunch at the Grand Hyatt Hotel in Singapore. There is however, a dispute as to what was discussed at this meeting.

9 Mr Swarbrick's evidence is as follows:[4]

1. At a meeting I had with Mr Ball on or before 11 December 2014 (I don't recall the exact date), I said to Mr Ball words to the effect that until the Company had raised funds, which I was confident it would do, the Company would not be able to engage him as a full time employee or director of the Company and, until the Company was in a position to do so, he would be engaged as an executive director on a salary of $5,000.00 per month to which he said words to the effect that he agreed with that.
2. During discussions I had with Mr Ball prior to 11 December 2014 (I don't recall the exact date), I advised him that any agreement we came to would be subject to the approval of the board of directors of the Company and any other requirements or approvals.

10 Mr Ball's evidence of the 10 December 2014 meeting is as follows:[5]

1. On 10 December 2014 I met with Mr Swarbrick, over lunch at the Grand Hyatt in Singapore. At that meeting:

7.1 Mr Swarbrick said he wanted me to take on a permanent position with AAM from 5 January 2015 and that he wanted to announce my appointment as a Non‑Executive Director of AAM within a few days.

7.2 I said to Mr Swarbrick I was content with that but that I required confirmation that my package would be:

(a) $35,000 a month;

(b) $5,000 for accommodation; and

(c) money for a telephone and car.

7.3 Mr Swarbrick replied that this was not a problem and he would send through to me some documents to sign the next day.

1. I did not at the 10 December 2014 meeting or at any other time discuss with Mr Swarbrick the prospect of working for AAM for a salary of $5,000 a month. I would not have accepted a position with AAM for a salary of $5,000 per month. Mr Swarbrick did not say to me that he did not have the authority of the Board or that my agreement was subject to the approval of the Board and any other requirements or approvals.

11 Following the meeting on 10 December, there was a series of email exchanges between Mr Swarbrick and Mr Ball.

12 By email sent at 3.52 pm on 11 December 2014, Mr Swarbrick sent to Mr Ball three documents; a consent to act as director, a deed of indemnity and a director deed. The email read as follows:[6]

Evan

Can you sign the enclosed forms and return.

Your executive agreement will cover $35,000 AUD + $5000 Rent and mobile phone and car/driver.

I would like to announce tomorrow.

Thx

Robert

13 On 11 December 2014 at 4.20 pm, Mr Ball emailed Mr Swarbrick in the following terms:[7]

Robert

I don't think $5000 is enough to cover apartment and services, car and driver and fuel etc. and mobile phone charges.

As apt is $4000 electricity and Internet is $1000

Car and driver and fuel $1500.

Phone bill will be around $500

So more like $7000/month for those expenses.

I will have to pay rent 12 months in advance and buy a car.

Is the executive agreement of $35,000 monthly or annual amount.

Evan

14 Mr Swarbrick responded two minutes later with an email in the following terms:[8]

Evan

It was $5000 per month just for rent.

Car/driver $2000

I was thinking all up $7500 - $10,000

$35,000 is monthly.

15 Following the receipt of this email, Mr Ball signed the documents attached to the email sent by Mr Swarbrick and returned them by email to Mr Swarbrick at 5.13 pm that day.[9]

16 Mr Ball asserts that as a result of this email chain there was a concluded agreement on terms that he would be paid:

(a) $35,000 per month;

(b) $5,000 per month for rent; and

(c) $2,000 per month for a car/driver

(up to a maximum of $10,000 for rent, car, driver and telephone expenses).

17 Mr Swarbrick's evidence is that following the emails of 11 December 2014, the directors of AAM executed a circular resolution in the following terms:[10]

Appointment of Director

The board has previously flagged to shareholders via ASX announcements that they intent to appoint suitably qualified directors to the board.

The board discussed the merits of appointing Mr Evan Ball as a director, including the networks and skill sets Mr Ball would bring to the company.

A signed consent form agreeing to be appointed as a director was tabled from Mr Ball.

It was agreed that Mr Ball would initially be appointed as a non-executive director prior to being appointed an executive director in due course.

After some discussion, IT WAS RESOLVED that Mr Evan Ball be appointed as a non-executive director of the Company effective immediately on similar terms to the other non-executive directors, and that the Company Secretary be authorised to lodge all appropriate documentation with ASIC and ASX.

IT WAS FURTHER RESOLVED that the Company Secretary be authorised to finalise all Deed of Indemnity, Disclosure and engagement letter with Mr Ball and that any two officers of the Company be authorised to sign the forms and enter into such documents on behalf of the Company.

18 On 13 December 2014 AAM announced to the ASX that it had appointed Mr Ball as a non‑executive director effective 1 January 2015.[11]

19 Thus AAM submits that it agreed to engage Mr Ball as a non‑executive director at the rate of $5,000 per month, this being on similar terms to the other non‑executive directors as set out in the circular resolution. On 12 October 2015, that is the day before the hearing of the application, AAM caused Mr Ball to be paid $20,000, being the payment for the four months work he undertook between his appointment on 1 January 2015 and his resignation on 22 April 2015.[12]

20 Mr Swarbrick says that AAM was prepared to appoint Mr Ball upon the terms and conditions which he asserts. However, at no time prior to Mr Ball's resignation had it raised the funds to do so, though it was in the process of doing so. Mr Swarbrick says that this is why there was no employment agreement between AAM and Mr Ball on the terms and conditions which he and Mr Ball had discussed.[13]

21 There is again a dispute between Mr Swarbrick's evidence and Mr Ball's evidence as to what then happened following the announcement of Mr Ball's appointment. Mr Ball's evidence is as follows:[14]

Between 5 January 2015 until 22 April 2015 I was actively involved in AAM's day-to-day operations and management. I assisted with, among other things, costing projects, arranging exploration programs, negotiating contracts to have the minerals crushed, screened and transported once extracted and meeting with AAM's legal representatives to ensure compliance with Indonesian law. I also evaluated and provided advice to AAM on other potential projects.

I know that Ball, amongst other things, prepared a budget on the possibility that the Company would have a mine in Indonesia but at that stage it did not have a project and I do not otherwise know what Mr Ball in fact did.

23 On 9 February 2015, Mr Ball rendered an invoice to AAM for work performed and expenses incurred during January 2015. This was sent by email to Mr Swarbrick. The description of the amounts claimed in the invoice is in the following terms:[16]

Work for the Month of January 2015 A$35,000.00

Accommodation and Services US$5,000.00

Vehicle Hire and Telephone IDR22,000,000

24 Mr Ball says that the rent component of the invoices he rendered to AAM was in US dollars and the component for the car/driver and telephone expenses was in Indonesian Rupiah because he incurred those expenses in those currencies.[17]

25 On 21 February 2015, Mr Ball emailed Mr Swarbrick enquiring when his January salary and expenses would be paid. The email is in the following terms:[18]

Hi Robert,

Just wondering how you are getting on with obtaining funding?

I notice that my January salary and expenses are yet to be paid.

Is funding turning out to be problematic.

Anything I can do to help?

Evan

26 Mr Swarbrick responded within half an hour in terms indicating a hope that AAM would be able to pay his January and February salary:[19]

Evan,

Hope Africa went well.

Looks like 5M USD has been approved.

TCA Funds Management underwriting committee approved it yesterday, with Investment committee to sign off on monday [sic].

Apparently legal drafts have already commenced with closing documents to be circulated early this week.

We should get USD 3M drawdown by Friday.

We can then pay Budi 1.7M USD and begin mining.

I am hoping we can sell stockpile ASAP and do 1 shipment per week of 7500 MT. moving forward.

I think if we estimate taking 14 days from mining to loading, another 7 days to get to Cilegon and another 14 days to unload, sample and to receive documentation from Krakatoa Steel before we get paid.

Hopefully can pay your January and February Salary over the next 2 weeks.

Appreciate your support and Assistance.

Robert.

27 On 3 March 2015, Mr Ball rendered an invoice to AAM for work performed and expenses incurred in February 2015, which he sent by email to Mr Swarbrick that day. The description of the expenses is in identical terms to the January invoice.[20]

28 By 6 April 2015, Mr Ball's invoices for January and February had still not been paid by AAM. On 6 April 2015, Mr Ball sent copies of his invoices for January and February to Mr Swarbrick by email, together with an invoice in the same terms for work performed and expenses incurred in March 2015.[21]

29 On the same date, 6 April 2015, Mr Ball received an email from Mr Swarbrick in which Mr Swarbrick stated:[22]

Evan

Thx have not forgotten them.

I think we owe you around 130K.

RS

30 On 22 April 2015 Mr Ball sent his letter of resignation to Mr Swarbrick by email.[23] The covering email read: 'Given the current situation with funding and how things have not progressed as planned, please find attached my letter of resignation, effective today'. The substance of the resignation letter read: 'As the SOLOK project has not progressed as quickly as planned and my transition to a role as executive director has yet to occur, I need to progress other opportunities outside of this company'.

31 On 23 April 2015, AAM announced to the ASX that Mr Ball had resigned.[24]

32 On 4 May 2015 Mr Ball rendered an invoice to AAM for work performed and expenses incurred between 1 ‑ 22 April 2015. The invoices are in similar terms to the earlier invoices.[25]

33 In terms of the documentary trail, the first appearance of any suggestion by Mr Swarbrick that there was not a contract in the terms asserted by Mr Ball came in an email on 4 May 2015. That email is in the following terms:[26]

Evan

I confirm receipt of your email.

Your contract was not executed by Aus Asia Minerals nor did it receive Board approval as is required.

I will therefore have to refer this matter to our lawyers.

I will be in Jakarta later this week, if you wish to discuss the matter.

Robert Swarbrick.

34 It is common ground that despite demand, AAM has refused to pay the full amount of the outstanding invoices.

35 The principles which the court must apply in determining whether to set aside a statutory demand on the basis of a genuine dispute pursuant to CA s 459H are conveniently summarised by Murphy JA (Buss JA agreeing) in Central City Pty Ltd v Montevento Holdings Pty Ltd:[27]

The expression 'genuine dispute', within the meaning of s 459H(1)(a) of the Act, connotes a plausible contention requiring investigation: Createc Pty Ltd v Design Signs Pty Ltd [2009] WASCA 85 [44]. The demand will be set aside if there is a bona fide disputed issue of fact or law, which is not based on spurious, hypothetical, illusory or misconceived grounds: Createc v Design Signs [45]; Asian Century Holdings Inc v Fleuris Pty Ltd [2000] WASCA 59 [35]. Once such a dispute is raised, it is not necessary for a company to satisfy the court as to where the merits of the dispute lie: Turner Corporation (WA) Pty Ltd v Blackburne & Dixon Pty Ltd [1999] WASCA 294 [30]. The court will not attempt to weigh or examine the merits of any dispute: Createc v Design Signs [46]; Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] Vic Rp 61; [1994] 2 VR 290, 295.

Any claim by the company in dispute of the debt must be one which is 'genuinely believed [by the company] to exist': John Holland Construction & Engineering Pty Ltd v Kilpatrick Green Pty Ltd (1994) 14 ACSR 250, 253.

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: Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, 787; Createc v Design Signs [4]. Nor does it require the acceptance of a 'patently feeble legal argument' or 'matters of fact unsupported by evidence': Eyota v Hanave (787); Jarpab Pty Ltd v Winter t/as Boldon Haulage (1994) 14 ACSR 255, 261.

36 There are five reasons why I do not consider that AAM has discharged the onus upon it to establish that there is a genuine dispute in relation to the debt asserted by Mr Ball.

37 The first is that, in determining whether parties intended to make a concluded agreement, the intention of the parties is to be ascertained objectively by reference to what a reasonable observer would have concluded.[28] Looking at the email exchange on 11 December 2014 between Mr Swarbrick and Mr Ball (set out at [12] ‑ [14] above) it is difficult to see any basis upon which a reasonable observer could conclude that there was no concluded agreement between AAM and Mr Ball on the terms asserted by Mr Ball. In particular, the unequivocal way in which Mr Swarbrick answered Mr Ball's query of whether 'the executive agreement of $35,000 monthly or annual amount' undermines his oral evidence to the contrary ([9] above).

38 The 'plausible contention requiring investigation'[29] sought to be advanced by AAM is that its agreement with Mr Ball was in two stages. The first stage was his appointment as a non-executive director, remunerated at the rate of $5,000 per month (in line with the other non‑executive directors). The second stage was an agreement in the terms asserted by Mr Ball. However, this agreement was dependant upon:

(a) AAM raising funds for its Indonesian project; and

(b) The Board of Directors ratifying the agreement with Mr Ball.

The treatment of Mr Ball's appointment in the circular resolution (set out at [17] above) is consistent with this contention. However, this is an internal company document, and there is no evidence that it was provided to Mr Ball at the time. It is thus not a document which a reasonable observer could use to discern the intention of the parties. In terms of Mr Swarbrick's dealing with Mr Ball, the preconditions asserted by AAM do not appear in the email train on 11 December 2014.

39 The second to fourth reasons relate to the conduct of the parties after 11 December 2014. To the extent that the intention of the parties is equivocal, the subsequent conduct of the parties is admissible on the question of whether a contract has been formed.[30] Specifically, 'evidence of the parties' subsequent communications is admissible for the light it casts on their dealings from which the contract was alleged to have arisen'.[31] I am conscious that, for the purposes of the present inquiry, it is not necessary for AAM to satisfy the court as to where the merits of the dispute lie.[32] Rather, AAM may assert that in the subsequent conduct of the parties there is a plausible contention requiring investigation. The difficulty for AAM is that there is no such contention. Rather, the evidence is to the contrary.

40 Specifically, the second reason why I am not satisfied that there is a genuine dispute is that Mr Ball's conduct in the period from 11 December 2014 until he resigned in April 2015 has been consistent with the contract he asserts. In particular, his invoices are entirely consistent with the contract he asserts. If Mr Swarbrick and Mr Ball were genuinely at cross purposes in the emails of 11 December 2014, then one would have expected a swift and concerned response by Mr Swarbrick to Mr Ball upon receipt of his January 2015 invoice.

41 The third reason is that Mr Swarbrick in his email to Mr Ball of 21 February 2015 makes a clear statement that AAM hopes to be able to pay Mr Ball's January and February salary over the next two weeks (see [26] above). Again, if there was a genuine dispute as to the terms of the contract, one would have expected Mr Swarbrick to have raised the dispute at that point.

42 The fourth reason is that in Mr Swarbrick's email of 6 April 2015, there is again a clear statement that AAM owes Mr Ball an amount of money consistent with the terms expressed by Mr Ball, which Mr Swarbrick estimated to be around $130K (see [29] above). Yet again, if there was a genuine dispute, one would have expected Mr Swarbrick to have raised his concerns in this email, rather than to have expressly agreed with the position put forward by Mr Ball.

43 Counsel for AAM submitted that the terms of Mr Ball's resignation letter and covering email (set out at [30]), were consistent with Mr Swarbrick's version of events. At best these statements are equivocal, and do not in the context of the strength of the contrary evidence as a whole give rise to a plausible contention requiring investigation.

44 The fifth reason is that Mr Swarbrick was less than transparent in the evidence which he placed before the court in his July affidavit as to the nature of the contractual arrangement which he agreed with Mr Ball. In particular, in his July affidavit he states:

Attached hereto and marked 'RS5' are true copies of emails passing between Mr Ball and myself on 11 December 2014 [8].

However, when one looks at the full text of the emails passing between Mr Swarbrick and Mr Ball on 11 December 2014 it is clear that Mr Swarbrick has been selective in what he has included. A fuller version of those emails is at annexure EWB4 to the August Ball affidavit.[33] As set out above at [12] ‑ [14] these emails contain a clear statement by Mr Swarbrick of the terms on which AAM was prepared to engage Mr Ball. This lack of transparency casts further doubt on the genuineness of the dispute asserted.

45 For these reasons, I do not consider that AAM has discharged the onus upon it to establish the existence of a genuine dispute between AAM and Mr Ball. The application should be dismissed, allowing the statutory demand to stand. I will hear from counsel as to costs.

[1] Which I will refer to as the 'July Swarbrick affidavit', 'September Swarbrick affidavit' and 'October Swarbrick affidavit' respectively.

[2] Which I will refer to as the 'August Ball affidavit' and 'October Ball affidavit' respectively.

[3] Central City Pty Ltd v Montevento Holdings Pty Ltd [2011] WASCA 5 [15] (Murphy JA, Buss JA agreeing); Kellogg Brown & Root Pty Ltd v Doric Contractors Pty Ltd [2014] WASC 206 [12] (Acting Master Gething); KEP Management Services Pty Ltd v Goldwest Enterprises Pty Ltd [2015] WASC 132 [12] (Acting Master Gething).

[4] July Swarbrick affidavit [9] ‑ [10].

[5] August Ball affidavit [7] ‑ [8].

[6] August Ball affidavit, annexure EWB3 (page 11).

[7] August Ball affidavit, annexure EWB4 (page 25).

[8] August Ball affidavit, annexure EWB4 (page 25).

[9] August Ball affidavit [11]; July Swarbrick affidavit, annexure RS5 (page 46).

[10] July Swarbrick affidavit, annexure RS11 (page 63).

[11] July Swarbrick affidavit, annexure RS7 (page 50).

[12] October Swarbrick affidavit [2].

[13] September Swarbrick affidavit [7].

[15] September Swarbrick affidavit [6].

[16] August Ball affidavit [13], annexure EBW5 (pages 28 ‑ 29).

[18] August Ball affidavit [14], annexure EWB6 (page 31).

[19] August Ball affidavit [14], annexure EWB6 (page 31).

[20] August Ball affidavit [15], annexure EWB7 (pages 33 ‑ 34).

[21] August Ball affidavit [16], annexure EWB8 (pages 35 ‑ 39).

[22] August Ball affidavit [17], annexure EWB9 (page 40).

[23] July Swarbrick affidavit, annexure RS9 (pages 58 ‑ 59).

[24] October Ball affidavit, annexure EWB2 (page 10).

[25] August Ball affidavit [19], annexure EWB10 (pages 41 ‑ 47).

[26] August Ball affidavit [20], annexure EWB11 (page 48).

[27] Central City [9] ‑ [11] (Murphy JA, Buss JA agreeing).

[28] Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 [40] (the Court); Central City [34]; Secola v McCann [No 2] [2011] WASC 342 [13] (Le Miere J).

[30] RJ Baker Nominees Pty Ltd v Parsons Management Group Pty Ltd [2010] WASCA 128 [65] (Newnes JA); Secola [18].

[31] R J Baker Nominees [66], citing Abigroup Contractors Pty Ltd v ABB Service Pty Ltd (formerly ABB Engineering Construction Pty Ltd) [2004] NSWCA 181; (2005) 21 BCL 12 [63].