Baa Baa Black Cow Pty Limited v CAFGA Livestock Pty Limited

The terms and conditions of the lease instrument 11 In support of the application Mr David Mack swears to these things. 12 He is the sole director of each of the plaintiff companies. Mack Grazing is in the process of being deregistered as a consequence of external administrators having been appointed to that company. Mr Mack accepts that BBMS entered into a lease of cattle from CAFGA acting in its own right and as trustee for the Earlwood Trust and the obligations arising under that lease were the subject of guarantees given to CAFGA by BBBC, Focus and Mack Grazing. The Cattle Lease was signed by Mr Mack on behalf of those entities on 24 October 2007 and then signed by CAFGA and dated 1 November 2007. 13 At annexure "DBM1", Mr Mack annexes to his affidavit a copy of the Cattle Lease "as I believe it was signed by me": para 5 of Mr Mack's affidavit. The Cattle Lease at "DBM1" consists of a two page schedule reciting the essential financial elements of the lease. The schedule bears the execution clauses on behalf of all of the parties. Immediately following the schedule is that part of the lease bearing the heading "Terms and Conditions". Immediately following the Terms and Conditions is "Annexure 'A'" which consists of eight pages. Annexure A recites each serial number for the cattle. Page 8 of Annexure A is signed on behalf of CAFGA and signed by Mr Mack. The Cattle Lease Mr Mack believes he signed contains four pages of "Terms and Conditions" which conclude with clause 21.2 "Definitions" which ends with the defined term "Commercial Incapacity". The first two lines of that term are recited on the concluding page. Plainly enough, the defined term "Commercial Incapacity" has further words omitted from the document (on the assumption that the "Terms and Conditions" are limited to the pages reflected in the version of the lease Mr Mack believes he signed). The version relied upon by CAFGA contains a further page setting out the balance of the defined term "Commercial Incapacity" and nine other terms including a definition of the term "Early Termination Amount". 14 The lease, whether in the form Mr Mack believes he signed or in the form relied upon by CAFGA, provides for a term of 60 months from 1 November 2007, the "Commencement Date", and consists of monthly instalments (including GST) of $15,674.33 with a residual value of $225,675.38 (excluding GST). The residual value including GST is $248,242.91. The total amount payable under the Cattle Lease is $1,188,702.72 (including GST) which, as a matter of mathematics, is made up of 60 instalments of $15,674.33 plus a residual amount of $248,242.91. 15 CAFGA contends that on 1 January 2010 BBMS failed to make the monthly lease payment of $15,674.33. CAFGA contends that pursuant to clause 9.1 of the lease it accepted BBMS's repudiation of the lease and by notice in writing CAFGA terminated the lease. Consequent upon that termination, CAFGA called upon BBMS to immediately pay rental arrears of $15,674.33 together with the "Early Termination Amount" of $699,029.00 (inclusive of GST) calculated under clause 9.1 in reliance upon the definitional term "Early Termination Amount". That amount of $714,703.33 (in all) became the subject of the statutory demands now in issue. 16 CAFGA relies upon a series of affidavits which seek to explain the processes leading to the formulation of the lease in draft form, the submission of the lease to Mr Mack, the execution of the lease by Mr Mack on behalf of all of the plaintiffs and the return of the duly executed lease to CAFGA. CAFGA contends that having regard to these affidavits, it is clear that the lease instrument consisted of terms and conditions which incorporated the so-called missing page. 17 Ms Claire Hammond deposes to these things. 18 She is the Sales Support Superior of CAFG Australease Pty Limited ("CAFG"). She prepared the Cattle Lease Agreement on behalf of CAFGA. It provided for a lease of cattle to BBMS with guarantees of BBMS's obligations by the guarantor entities. She wrote on the first page of the lease the date 1 November 2007 in the two places where that date appears. She prepared the draft lease including Annexure "A", a Privacy Act form and a "Direct Debit form" and forwarded those documents to Mr Ian Powell and Ms Colleen Hammond on 19 October 2007. Those documents attached to her email were either Word documents or PDF documents. Ms Claire Hammond annexes to her affidavit a copy of the attachments to her email which she says is a true copy of those documents printed by her from her computer at CAFGA on 2 June 2010 where they are saved in the CAFGA computer system by reference to particular file names which she describes in her affidavit. 19 She says that she prepared a further draft lease document including an Annexure "A" and a Direct Debit form and forwarded these documents to Ms Colleen Hammond and Mr Ian Powell by email on 23 October 2007. Those documents were either in Word format or PDF format. She annexes to her affidavit a copy of the email and attached documents which she describes as a true copy of those documents printed by her from her computer at CAFGA on 2 June 2010 where those documents are saved in the CAFGA computer system under the file names she identifies in her affidavit. 20 Ms Claire Hammond deposes in her affidavit to having received the signed Cattle Lease and accompanying documents from Colleen Hammond after they had been returned to Ms Colleen Hammond executed by Mr Mack on behalf of the companies. 21 The draft version of the Cattle Lease of 19 October 2007 and the draft of 23 October 2007 incorporate "Terms and Conditions" which set out the entirety of clause 21.2 and thus include the page missing from the version Mr Mack believes he signed. The version of the lease Ms Claire Hammond describes as a true copy of the Cattle Lease taken from the CAFGA Livestock file signed by Mr Mack on behalf of BBMS and the guarantors and annexed to her affidavit as "CIH-1" contains "Terms and Conditions" which incorporate the page missing from the version Mr Mack believes he signed. 22 Ms Colleen Hammond has also sworn an affidavit in which she describes receiving a draft of the lease document from Ms Claire Hammond on 19 October 2007 and a further draft of the documents described by Ms Claire Hammond in her affidavit, on 23 October 2007. Ms Colleen Hammond says that the documents attached to the email of 23 October 2007 received by her from Ms Claire Hammond were forwarded by her (Ms Colleen Hammond) to Mr Mack by email for execution. She says that these documents were returned to her signed by Mr David Mack on behalf of BBMS and the guarantors and were dated 24 October 2007 by Mr Mack. The documents were returned to Ms Colleen Hammond by Mr Mack with a covering note with the letterhead "Mack Agri Business". Ms Colleen Hammond says that she briefly reviewed the documents enclosed with the covering note and passed them on to Ms Claire Hammond for processing and settlement. 23 Mr Ian Powell has sworn an affidavit on behalf of CAFGA in which he says that he is the Operations Manager of CAFG. He says that CAFGA acts as a lessor of cattle. He says the Cattle Lease signed by Mr Mack on behalf of BBMS and the guarantors and dated by Mr Mack on 24 October 2007 was subsequently signed by him on behalf of CAFGA and dated 1 November 2007. Mr Powell annexes to his affidavit a copy of the Cattle Lease taken from the CAFGA Livestock file. That lease incorporates "Terms and Conditions" which contain the final page of definitions completing clause 21.2 of the standard terms. 24 As already indicated, Mr Mack deposes at para 5 of his affidavit to a belief that the lease he signed was incomplete as the final page of the Terms and Conditions was not incorporated in the lease. The version of the lease he annexes to his affidavit concludes with the first two lines of the defined term "Commercial Incapacity". In one sense, it is difficult to identify the basis upon which Mr Mack asserts his belief, as at para 10 of his affidavit, he says that CAFGA sent the paperwork for the Cattle Lease to him at his accountancy practice and he simply signed it and returned it to CAFGA without reading it. He says he did so because he had previously had dealings with CAFGA and he trusted CAFGA and, in particular, Mr Paul Hammond, the Chairman of CAFG and a Director of CAFGA, with whom he dealt. 25 Nevertheless, Mr Mack has sworn to a belief that the version of the lease he signed was in the form of "DBM1" with the final page of the Terms and Conditions missing. 26 At "DBM6", Mr Mack refers to an email sent to him dated 26 October 2009 from Mr Paul Hammond in which Mr Hammond says that he has attached a copy of "your current lease as requested". Mr Hammond says that, "You will note that a copy of this was sent to you by Colleen [Hammond] on 6 November 2007". The letter from Colleen Hammond dated 6 November 2007 attached a copy of the Lease Agreement and a Payment Schedule setting out each monthly obligation from 5 November 2007 to 1 October 2012. The version of the Cattle Lease attached to the letter of 6 November 2007 as set out at "DBM6" contains Terms and Conditions which conclude with the first two lines of the definition of "Commercial Incapacity" in clause 21.2 and does not go on to incorporate the final page of the defined terms. In other words, the version of the lease at "DBM6" attached to Colleen Hammond's letter of 6 November 2007 is in the same terms as the version Mr Mack swears he believes he signed. 27 At "DBM10", Mr Mack annexes to his affidavit a copy of a letter dated 17 December 2009 by Mr Paul Hammond on behalf of CAFGA addressed to Bernays Lawyers, the solicitors then acting on behalf of BBMS and the guarantors. Mr Hammond makes reference to the obligation of the lessee to keep the lease current and observes "I draw your attention to clauses 3 and 7 of the lease agreement (attached). A copy of this agreement and the repayment schedule was sent to David Mack on 6th November 2007". The version of the lease appearing at "DBM10" as sent to Bernays Lawyers cross-referenced to the letter of Colleen Hammond of 6 November 2007 contains "Terms and Conditions" which also conclude with that part of clause 21.2 concluding with the first two lines of the term "Commercial Incapacity". The final page of the Terms and Conditions as appearing in the version of the lease annexed to the affidavits of Ms Claire Hammond, Ms Colleen Hammond and Mr Ian Powell is not incorporated in the version annexed to the letter sent to Bernays Lawyers. 28 Mr Joshua Aylward has sworn an affidavit in support of the application. Mr Aylward is a solicitor employed by Shannon Donaldson Province Lawyers. Mr Aylward has the carriage of the application on behalf of the plaintiffs. Mr Aylward says that on 12 March 2010 he telephoned the then solicitors for CAFGA, Musgrave & Peach Lawyers, and spoke with the Secretary to Mr Warren Smith. Mr Aylward asked for a copy of the complete lease to be sent to him. That day he received a facsimile from Musgrave & Peach of a letter dated 12 March 2010 enclosing a copy of the lease dated 1 November 2007. The copy of the lease attached to that letter contains Terms and Conditions which conclude with clause 21.2 ending with the first two lines of the definitional term "Commercial Incapacity". That version of the lease also fails to include or incorporate the final parts of clause 21.2 as contained in the versions of the lease annexed to the affidavits of Ms Claire Hammond, Ms Colleen Hammond and Mr Ian Powell. 29 CAFGA seeks to explain the missing page in the versions of the lease referred to in the evidence of Mr Mack at "DBM1", "DBM6" and "DBM10" on this footing. 30 Ms Claire Hammond says that she was requested by Paul Hammond to make a copy of the Cattle Lease to accompany a letter being forwarded to the solicitors for BBMS and Mr David Mack. She says that in order to do so she scanned the original Cattle Lease held on the CAFGA file in the office printer/scanner and then forwarded the saved file of the scanned lease to the solicitors with the email. Mr Hammond's letter (annexed at "DMB10") is dated 17 December 2009 and seems (by "CIH 8" to the affidavit of Ms Claire Hammond) to have been sent by Mr Hammond as an attachment to his email of 17 December 2009 at 4.19pm. However, although the letter was attached to the email, the agreement was not. 31 On 18 December 2009, Mr Hammond sent a copy of the agreement by email to Bernays Lawyers. That seems to be the version that Ms Hammond scanned and saved as a file for sending to those solicitors. Ms Hammond says that the scanned version does not contain the so-called missing page containing the definition of "Early Termination Amount". Ms Hammond says that she printed out a copy of the scanned version and a copy of that version was provided to CAFGA's solicitors. She says that she is informed by Mr Warren Smith, a solicitor employed by CAFGA's lawyers, and verily believes that a copy of the scanned document was provided to the plaintiff's solicitors. 32 Ms Claire Hammond then expresses the opinion that when she scanned the original Cattle Lease the final page of the "Terms and Conditions" part of the lease was not read by the scanner and was thus not saved in the relevant document file. Accordingly, the final page was omitted from versions of the document provided to the plaintiffs' solicitor. 33 Although the facts deposed to by Ms Claire Hammond provide one explanation for the version of the lease sent to Bernays Lawyers, there remains the question of the version of the lease enclosed with Ms Colleen Hammond's letter of 6 November 2007 at least as reflected in "DBM6" from 6 November 2007 which, according to "DMB6", attaches a version of the lease with clause 21.2 ending with the first two lines of the defined term "Commercial Incapacity". "DBM6", of course, starts with an email sent on 26 October 2009 which attaches the letter of 6 November 2007 and a version of the Lease Agreement. 34 It may be that the version of the Lease Agreement selected for attachment to the email of 26 October 2009 is a version of the lease scanned by Ms Claire Hammond rather than a version of the lease from the files of CAFGA on or about 6 November 2007. 35 Ms Colleen Hammond in her affidavit says, as already mentioned, that the documents sent to her by Ms Claire Hammond by email on 23 October 2007 were forwarded by Ms Colleen Hammond to Mr Mack for execution. Ms Claire Hammond took steps to investigate whether the version of the documents as sent by her to Mr Mack could be identified. She says at para 9 of her affidavit that she is informed by Mr Ian Powell of CAFGA and verily believes it to be true that "the laptop computer from which [she] forwarded by email the lease and associated documents on 23 October 2007 was unable to be accessed and was sent for forensic examination and recovery of all relevant transmissions; and no emails or documents in respect of the transactions with [Mr] Mack/BBMS during the relevant period were able to be recovered from that laptop computer". 36 It is apparent from this review of the affidavits that there is a contentious factual question as to whether the lease instrument incorporated all of the "Terms and Conditions" as CAFGA contends having regard to the versions of the lease annexed to the affidavits of Ms Claire Hammond, Ms Colleen Hammond and Mr Ian Powell or whether the "Terms and Conditions" of the lease conclude with a version of clause 21.2 that concludes with the first two lines of the defined term "Commercial Incapacity". 37 That controversy requires a finding of fact to be made in the context of a disputed question of fact. In Spencer Constructions v G & M Aldridge (1997) 76 FCR 452 at 462-464, the Full Court of the Federal Court (Northrop, Merkel and Goldberg JJ) reviewed various formulations of the notion of "genuine dispute" and concluded at 464: In our view a "genuine" dispute requires that: · the dispute be bone fide and truly exist in fact; and · the grounds for alleging the existence of a dispute are real and spurious, hypothetical, illusory or misconceived. 38 Their Honours at 464 observed that various formulations can be helpful in determining whether there is a genuine dispute in a particular case so long as the formulation used does not become a substitute for the words of the statute. 39 These formulations include the notion that there must be a "plausible contention requiring investigation" along the lines of a "serious question to be tried" criterion for interlocutory injunctions: Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 787 per McLelland CJ in Eq. The Court should not embark upon any "extended enquiry" to determine whether there is a genuine dispute and "certainly must not attempt to weigh the merits of that dispute": Mibor Investments v Commonwealth Bank (1994) 2 VR 290 at 295 per Hayne J; WEC Pty Ltd v Cypriot Community of Queensland Inc. [2002] QCA 506 at [10] per McMurdo P (Cullinane and Holmes JJ agreeing); Createc v Design Signs (2009) 71 ACSR 602; [2009]; WASCA 85 at [46] per Martin CJ (Owen and Miller JJ agreeing). There must be "something between mere assertion and the proof that would be necessary in a court of law": John Holland Construction and Engineering v Kilpatrick Green (1994) 14 ACSR 250 at 253 per Young J; see also, Trecomax Pty Ltd v Prentice (2004) 50 ACSR 314; [2004] FCA 1057 at [25] - [35]. 40 The threshold for demonstrating a "genuine dispute" is not a demanding one. As Barrett J said in Solarite Air Conditioning v York International Australia [2002] NSWSC 411 at [23] (in comments followed by McMeekin J in Thomasson Earthmoving v Cyonara Snowfox [2010] QSC 48 at [6]): … the task faced by a company challenging a statutory demand on the "genuine dispute" ground is by no means at all a difficult or demanding one. The company will fail in that task only if it is found upon the hearing of its s.459G application that the contentions upon which it seeks to rely in mounting its challenge are so devoid of substance that no further investigation is warranted. Once the company shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow. The court does not engage in any form of balancing exercise between the strengths of competing contentions. If it sees any factor that, on rational grounds, indicates an arguable case on the part of the company, it must find that a genuine dispute exists, even where any case apparently available to be advanced against the company seems stronger. [emphasis added] 41 See also: Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37 at 39 per Lockhart J; C & E Pty Ltd v Corrigan [2006] 2 Qd R 399 at 404 per Keane JA (Williams JA and Muir J agreeing). 42 Accordingly, having regard to these principles and the review of the affidavits I have undertaken, I am satisfied that there is a genuine dispute for the purposes of s 459G and s 459H of the Corporations Act as to the amount claimed by the statutory demands under the description "Early Termination Amount $699,029.00". 43 Having regard to these matters, it is not necessary to consider the question of whether the formulation of the amount of the debt constitutes a penalty rather than a genuine pre-estimate of the loss suffered by the defendant. No doubt, in proceedings taken to establish the contention of CAFGA as to the composition of the lease and the amount said to be due under it, the plaintiffs will put in controversy the question of whether the clauses of the lease dealing with the "Early Termination Amount" constitute a penalty. It is not necessary to express any view about that question in these reasons. 44 The plaintiffs also contend that CAFGA engaged in contraventions of s 52 giving rise to a claim for damages under s 82 of the Trade Practices Act or alternatively a remedial order under s 87 of the Trade Practices Act. Further, the plaintiffs contend that CAFGA engaged in a contravention of s 51AC of the Trade Practices Act. I am not satisfied that the affidavit material relied upon by the plaintiffs establishes any arguable contravention of those sections of the Act. Mr Mack has not deposed to foundation facts that disclose any basis for concluding that CAFGA (or its officers) engaged in a contravention of s 52 or s 51AC of the Trade Practices Act. The contention does not rise above a broad sweeping allegation. It follows that the statutory demands ought to be varied to the extent that they rely upon a debt comprising the early termination payment but remain proper demands in respect of the demand for payment based upon the unpaid instalment for January 2010 of $15,674.33. The plaintiffs concede that if they cannot make out their offsetting claims, they have no dispute regarding the January instalment: Transcript, p 32, ln 2-4. Accordingly, the statutory demands should be varied rather than set aside. The Court may vary the statutory demand under s 459H(2) and (5) of the Corporations Act. The admitted total of the January instalment is $15,674.33. There is no offsetting claim demonstrated on the material and thus the offsetting total is nil. Accordingly, the orders of the Court will be that the statutory demands are varied by reducing each of them to $15,674.33 and a declaration will be made that the statutory demands have had effect, as so varied, as from the date of service of the demand upon each corporation. 45 As to the question of costs, the application to set aside the statutory demands falls into two questions. First, whether the component of the demand described as "Early Termination Amount $699,029.00" is the subject of a genuine dispute. Secondly, whether the plaintiffs have established an arguable contravention of ss 51AC and 52 of the Trade Practices Act so as to give rise to a cross-claim or setoff. The question of whether the Early Termination Amount, as claimed, constitutes a penalty is a separate question. The applicants have been successful on the first question but not the second. The statutory demands make proper demand for the unpaid amount of $15,674.33. The parties have not been heard on the question of costs. I propose to order that the parties file submissions in relation to costs within seven days should they wish to be heard in relation to a proposed order that the defendant pay 50% of the plaintiffs' costs of and incidental to the application. If submissions are lodged by either party on the proposed costs order I will consider those submissions and make an order as to costs on the papers. In the absence of submissions, I will make a further order on the expiration of seven days in terms of the proposed costs order. I certify that the preceding forty-five (45) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood.