Balsamo v Medici

Judgment (ex tempore) 1HIS HONOUR: On 6 September 2013, the defendant Rural & General Insurance Broking Pty Ltd served on the plaintiff company W D Gelle Insurance and Finance Brokers Pty Ltd, a creditors statutory demand for a debt of $103,750, described in the schedule to the demand as follows: The debt consists of money paid by the creditor to the debtor company for an insurance premium the debtor company being a licensed insurance brokerage firm instructed by the creditor, who is also a licensed insurance brokerage firm to pay the said moneys in the sum of $103,750.00 to Finn Foster Pty Ltd an insurance underwriting company, to secure insurance cover under an insurance policy for Soft Star Pty Ltd ACN 080 645 398 trading as Christmas Island Resort. The creditor transferred the said sum of $103,750.00 to the trust account of the debtor company on 12 October 2013 however, the debtor company failed to pay the moneys to Finn Foster, thereby causing the creditor to pay moneys directly to Finn Foster to secure the said insurance coverage. 2The creditor's statutory demand was accompanied by an affidavit said to be sworn by Timorthy Charles Pratten, as follows: 1. I am a director of Rural & General Insurance Broking Pty Ltd (ACN 093 483 928) (the creditor), the creditor named in the creditor's statutory demand, which this affidavit accompanies, in respect of a debt for $103,750.00 owed by W D Gelle Insurance & Finance Brokers Pty Ltd (ACN 002 427 456) (the debtor company) to the creditor. 2. I am authorised by the creditor to make this affidavit on its behalf. The creditor is a licensed insurance brokerage firm, Australian Financial Service Licence No 262353. The Debtor company is a licensed insurance brokerage firm, Australian Financial Service Licence No 246294. In or about mid-August, 2012, the creditor requested the debtor company to arrange and secure insurance cove for Soft Star Pty Ltd (ACN 080 645 398) trading as Christmas Island Resort (CI Resort), a client of the creditor. I am informed by Aaron Stephenson (Mr Stephenson), a former director of the creditor, and verily believe on or about 10 September 2012, Warren Gelle (Mr Gelle), director of the debtor company, advised Aaron Stephenson that insurance coverage had been arranged for CI Resort and rendered a tax invoice in the sum of $103,750 (the tax invoice). The tax invoice included the brokerage fee to the debtor company in the sum of $11,000 inclusive of GST. Annexed and marked "A" is a true copy of the email dated 10 September 2012, tax invoice for the insurance premium of the policy for CI Resort (the premium) and the schedule of insurance. On 12 October 2012, the creditor transferred the sum of $103,750 into the debtor company's trust bank account in payment of the tax invoice referred to in previous paragraph hereof. Annexed and marked "B" is a true company of the funds transfer confirmation dated 11 October 2012. The debtor company confirmed with the creditor it had arranged and secured insurance cover using the services of Finn Foster Pty Ltd (Finn Foster), being holder of an Australian Financial Services Licence No 225022 and an agent of Arch Underwriting of Lloyd's of London (the underwriter), the insurance underwriter which agreed to issue the insurance policy contract. The debtor company confirmed with the creditor that the insurance cover from the underwriter was incepted on 1 September 2012 and that an insurance premium in the sum of $94,110.71 (the insurance premium) was required by the underwriter in return for providing the insurance cover,. The debtor company failed to pay the insurance premium to the underwriter and accordingly, the creditor paid the insurance premium directly to Finn Foster on 23 January 2013. annexed and marked "C" is a company of the creditor's bank statement showing the transfer. The creditor has demanded the refund of the said sum of $103,750.00 from the debtor company. As a director of the creditor, I am familiar with the records of the creditor in respect to the debtor company, including the creditor's computer system which recovers the information relating to the debt owing to the creditor by the debtor company. I have inspected the said records of the creditor in relation to the debtor company and its debt to the creditor. I confirm the amount of $103,750.00 is due and payable by the debtor company. I believe that there is no genuine dispute about the existence or amount of the debt. 3By originating process filed on 26 September 2013, admittedly within the 21 day period, the company applies, pursuant to (Cth) Corporations Act 2001, s 459G, to set aside the demand relying both on s 459H (contending that there is a bona fide dispute as to the debt claimed), and s 459J (contending that there are defects in the demand). 4The relevant background is as follows. Rural & General are insurance brokers. From about 11 March 2010, Soft Star Pty Ltd trading as Christmas Island Resort was a client of Rural & General. In 2011 and 2012, Rural & General obtained insurance for Soft Star through Miramar Agencies and Underwriters at Lloyds. When Soft Star's insurance for 2013 became due for renewal on 1 September 2013, Miramar advised Rural & General that their guidelines now precluded them from offering renewal terms for Soft Star. Rural & General then approached the company, of which it was a tenant, and with which it had some ongoing dealings to obtain insurance for Soft Star. 5According to Mr Gelle's affidavit, which was not contested for present purposes, in about August 2012 Rural & General's then director Aaron Stephenson had a conversation with him to the effect, "Warren, Soft Star needs insurance renewal for a property in Christmas Island in WA. I cannot help him, can you source the market for them?" To which Mr Gelle responded, "Not a problem, I will look after it for them". Mr Gelle and his company then set about finding an underwriter who would insure Soft Star's property. 6In due course, such underwriters were found at Lloyds, through the medium of Finn Foster & Associates. In about late August, Mr Gelle informed Mr Stephenson that he had access to a Lloyds underwriter who would be interested in quoting on Soft Star. 7Some time in early September, it seems, the policy was closed. On 26 September 2013, the company raised an invoice apparently addressed to Soft Star Limited CI Resort for a sum of $103,750, comprising premium of $92,750, brokerage of $10,000, and GST of $1,000. That invoice is described as an "amended policy invoice", an earlier invoice having been forwarded by Mr Gelle on behalf of the company to Mr Stephenson of the defendant on 10 September 2012, itself described as an "amended tax invoice" but also for $103,750, comprised of the same components. As I have said, although the invoice itself was apparently addressed to Soft Star Limited, it was forwarded by email to Mr Stephenson of the defendant. 8Following receipt of that invoice on 10 September, Mr Stephenson on 11 September 2012 sent to Mr Kwon of Soft Star an email, entitled "Renewal invoice and premium funding", which attached an invoice from Rural & General dated 11 September 2012 in the sum of $117,500. That sum was comprised of premium of $92,750, underwriting levy of $10,000, GST of $2,250, and broker fee of $12,500. The email also enclosed the schedule of cover. 9On 17 September 2012, Soft Star paid the sum of $117,500 to Rural & General by electronic funds transfer. On 11 October 2012, Rural & General paid the sum of $103,750 into the company's trust account in payment of its tax invoice. As a result of that payment, and a subsequent withdrawal on the same day of $39,000, the trust account was in credit at the close of that day in the sum of $96,029. 10Over the next few days, a number of withdrawals were made from that account, including a funds transfer of $11,000 on 12 October 2012. By 11 December 2012, the trust account had been reduced to the point that it was in debit. No funds were remitted to Finn Foster or otherwise in payment of the premium for the policy. During November and December Rural & General attempted to obtain a certificate of currency from the company without success. However, the company did provide a certificate of insurance issued by Finn Foster on 12 December 2012. 11On 20 December 2012, Mr Stephenson was informed by Finn Foster that it had not received the premium payment. Rural & General then made repeated attempts to ascertain why the payment had not been made, without success. In order to avoid cancellation of Soft Star's policy, Rural & General on 23 January 2013 paid the premium of $94,110.71 to Finn Foster. Rural & General also explained to Soft Star that the insurance had been in place, so that Soft Star was covered at all relevant times. 12Also on 23 January 2013, Rural & General sent an email to Mr Gelle of the company, demanding repayment in the following terms: You must immediately return to RGIB the CI Resort (Soft Star) premium that RGIB paid to your firm on 11 October 2012 in the sum of $103,750. 13On 29 January 2013, Mr Gelle sent Mr Stephenson a text message to the effect: If CI instructs me to refund the premium back to you, that will be done today. 14On 29 January, Rural & General obtained from Soft Star a letter addressed to W D Gelle requesting that Gelle "return the premium paid directly to RGIB". Rural & General forwarded that letter to the company and Mr Gelle. Neither the $103,750 nor any part of it has since been repaid. 15I will deal first with the allegation that the demand is defective in a number of ways. Corporations Act s 459J provides as follows: (1) On an application under section 459G, the Court may by order set aside the demand if it is satisfied that: (a) because of a defect in the demand, substantial injustice will be caused unless the demand is set aside; or (b) there is some other reason why the demand should be set aside. (2) Except as provided in subsection (1), the Court must not set aside a statutory demand merely because of a defect. 16The company raised a number of respects in which it was said that the demand was defective or misleading. The first was that, in the description of the debt, it refers to a sum paid to the company's trust account "on 12 October 2013", when no such amount was paid on that date; rather, the amount in question was paid on 11 October 2012. 17The defendant accepts that there was a defect in the demand in that respect. The affidavit accompanying the demand refers to the date 12 October 2012 rather than 12 October 2013, and annexes the funds transfer confirmation that proves that it in fact occurred on 11 October 2012. 18Given that the demand was issued on 5 September 2013 - that is to say before 12 October 2013 - it must have been plain that the reference to "2013" was erroneous. The supporting affidavit would have clearly conveyed to the recipient that what was in question was a sum paid in October 2012, not 2013. The circumstance that reference was made to 12 October and not 11 October could not conceivably mislead or disadvantaged the company, to which it must have been patently obvious to what the demand referred in that respect. 19Accordingly, even though in this respect there was a defect in the demand, I am not satisfied that substantial injustice would be caused unless the demand was set aside. 20Next, it is said that the demand is defective or misleading because it describes the demand in respect of a single sum of $103,750 without recognising that part of it was the brokerage fee. The fact that the sum claimed included the brokerage fee is made clear enough by paragraph 6 of the affidavit accompanying the demand. Again, it seems to me quite clear, and it must have been clear to the recipient, that the demand was a demand for repayment of the whole of the $103,750, inclusive of the brokerage fee. Whether there is a genuine dispute at least as to the brokerage fee is another matter to which I will have to return, but I do not consider that there would be any substantial injustice caused if the demand were not set aside on this account. 21Thirdly, it is said that the demand is defective because the affidavit accompanying it is undated. In Technology Licensing Limited v Climit Pty Ltd [2002] 1 QdR 566, Chesterman J in the Supreme Court of Queensland held that s 459E(3) required that a statutory demand be verified by an affidavit that spoke to the circumstances existing at the time when the demand was made and accordingly, that where the affidavit accompanying such a demand predated it by four days it would be set aside under s 459J(1)(b). In Fastlink Calling v Macquarie Telecom Pty Ltd (2008) 217 FLR 366, Barrett J observed (at [50]) that the affidavit accompanying the demand in that case did not record in its body the date on which it was sworn, there being a blank space where provision was made for the date to be inserted. His Honour continued: However, the cover sheet of Miss Jebril's affidavit carries the date 21 January 2008 and the annexure note ... refers to 'the affidavit of Ana Jebril sworn 21 January 2008', that deficiency would therefore not have stood in the way of a finding that the document was an affidavit had that conclusion otherwise been available. 22In this case, the annexure to the affidavit bears the note: This and the following six pages is annexure A of the affidavit sworn by Timorthy Charles Pratten on 6 September 2013 before me. 23In my view, it is plainly ascertainable from that annexure note that the affidavit was sworn on 6 September 2013. Though that was the day after the date born by the demand, it was the date on which the demand was actually served. Accordingly, the affidavit speaks from the date on which the demand was made on the company. In my view there is no defect in the demand in this respect, but if there be a defect, no substantial injustice would be caused if it were not set aside on that account. 24Next, it was said that the affidavit was not an affidavit of the type required, because it was not sworn by an authorised agent of the creditor. 25Paragraph 1 of the affidavit, as set out above, includes a claim to be a director of the creditor. Paragraph 2 includes a claim of authority. A company extract in respect of the defendant shows that its directors as at 25 September 2013 included one Charles Timorthy Pratten of the same address as is claimed by the deponent of the affidavit, born 26 September 1960 with an appointment date of 30 November 2012. The same person is shown as the secretary of the company. Previous directors include Timorthy Charles Pratten shown to be at a different address, albeit in Sydney, but having the same date of birth, 26 September 1960, from 14 December 2010 until 20 January 2011, and Charles Timorthy Pratten, of a different address in Sydney but having the same birth date, from 27 September 2007 to 11 October 2010. Mr Pratten, whose evidence was not the subject of challenge, in his affidavit sworn in the application on 13 December 2013, in the name of Charles Timorthy Pratten, deposed to a number of conversations with Mr Gelle. 26I do not think that the reader of the affidavit accompanying the credit statutory demand would have been under the slightest misapprehension but that the Timorthy Charles Pratten referred to in it was the same person shown in the corporate records as Charles Timorthy Pratten. I do not consider that this amounted to a defect in the demand. If it did, failing to set it aside on that account would occasion no substantial injustice. 27Finally, it was said that the demand was defective because the affidavit accompanying it referred to a payment made on 12 October 2012, when no payment was made on that date, and it annexed proof of payment on 11 October 2012. For the reasons given in connection with the similar though not identical objection raised in respect of the date of the demand and the description of the debt in the demand itself, I do not consider that this occasions any substantial injustice. 28Accordingly, all the grounds raised under s 459J fail. 29I turn then to the case under s 459H, that there is a genuine dispute as to the indebtedness claimed. This itself falls into two respects. One concerns so much of the debt as relates to the claimed brokerage fee of $11,000. The other relates to the whole amount of $103,500. 30So far as concerns the first, it is clear that the amount claimed and the amount paid included $11,000 for the company's brokerage fee. It is also clear that the company performed work to source an insurer for Soft Star as it had been requested to do, and succeeded in sourcing such an insurer even though it did not pay over the premium. On that basis, it seems to me that it must be at least arguable that the company had earned its brokerage fee. 31On that footing, I am bound to find that there is a genuine and arguable dispute at least to the extent of the $11,000 brokerage fee. If that be the extent of any genuine dispute, then that would warrant an order varying the demand by reducing it by that sum. 32Turning then to the submission that there is a genuine dispute as to the whole of the indebtedness claimed, that is founded on the contention that there is a genuine dispute as to whether Rural & General, as distinct from Soft Star, is the proper creditor in respect of the claim. 33For the company, it is said that it is at least arguable that its contractual relationship was with Soft Star as its principal and not with Rural & General, and accordingly that it is liable to account, if at all, to Soft Star and not to Rural & General. It follows, so it is said, that only Soft Star and not Rural & General could claim reimbursement of the amount in question. 34Examination of the evidence such as it is, demonstrates that the approach to the company was made by Rural & General and not by Soft Star. There is no evidence of any direct communication between the company and Soft Star. The company's invoice, although addressed to Soft Star, was sent to Rural & General. Soft Star paid on Rural & General's invoice, which was for an amount larger than the company's invoice and included remuneration for Rural & General as well as for the company. When the company failed to pay the premium to Finn Foster, Rural & General, on behalf of its client, paid the premium of $94,000 itself. 35As I have said, there is no evidence of any direct communication between the company and Soft Star, nor of any direct commercial dealing or payment between the company and Soft Star. 36In my judgment, the proper characterisation of the relationship is that the company was a subagent, being retained by Soft Star's agent Rural & General to do the work or some of the work that Rural & General had initially been retained to perform. As Bowstead and Reynolds On Agency says (at article 37, page 136): There is long standing authority that the lack of privity between principal and subagent means that not only is the principal not liable to the subagent for remuneration [citing Schmaling v Thomlinson (1815) 6 Taunt 147, and Mason v Clifton (1863) 3 F&F 899] but also that the subagent has in general no duty to account to the principal, citing a number of examples to which I shall return, and can be sued by the principal, neither in contract nor in restitution [citing Robbins v Fennell (1847) 11 QB 248, Cobb v Becke (1845) 6 QB 930, Stephens v Badcock (1832) 3 B and Ad 254 and Sims v Brittain (1832) 4 B & Ad 375]. 37Thus, in New Zealand and Australian Land Company v Watson (1881) 7 QB Div 374, a factor employed to sell goods on a del credere commission with the principal's authority employed a broker on an ordinary commission to sell the goods. The broker sold the goods and received the proceeds and made payments on account to the factor from time to time. While the balance of the proceeds was still in the hands of the broker, the factor, who was then indebted to the broker in respect of other independent transactions, became bankrupt. It was held that there was no privity of contract between the principal and the broker, notwithstanding that the broker had been employed by the factor with the principal's authority, that the broker was not liable to account to the principal for the proceeds of the goods sold; and that the principal was not entitled to recover the balance of the proceeds from the broker in the factor's name without allowing the amount due from the factor to the broker in respect of other transactions to be set off. The necessary corollary is that only the factor and not the principal was entitled to sue the broker for recovery of the proceeds. 38In Henderson v Merrett Syndicates Limited [1994] 3 WLR 761, it was held that the investors had no privity of contract with the "names" but only with the managing agents although that they were liable in tort directly to the names. Of course liability in tort would not suffice to found a debt of the type required to found a creditor's statutory demand. 39In Lockwood v Abadee (1845) 14 Sim 437, an agent who was expressly authorised by the principal to do so appointed a solicitor as subagent to manage the principal's affairs. The subagent took over their entire management and communicated with the principal direct. Even in those circumstances, it was held that the subagent was not liable to render an account of his agency to the principal. 40A number of cases deal with the relationship between clients, country solicitors and city agents. Thus in Robbins v Fennell (1847) 11 QB 248, the London agent of a country solicitor in the ordinary course of business received the proceeds of a cause in which the solicitor and agent were engaged. It was held there was no privity of contract between the client and the London agent, so that the client could not recover the proceeds from him, as money received to the client's use. Similarly, in Ex parte Edwards (1881) 8 QBD 262, a London agent who in the ordinary course of business gave credit to the country solicitor and not to the client, had no personal remedy against the clients for costs. 41All of those cases seem to me to demonstrate that, there being no privity of contract between the subagent and the principal, the subagent has no right or remedy against or liability to the principal, but has rights against and liabilities to the agent. 42In the short time I have had available to look at this topic, there does not appear to be much in the way of Australian authority on the topic. However, Halsbury's Laws of Australia touches on it at paragraphs [15-120] and [15-125], expressing conclusions to the same effect. The author, Professor Gino E Dal Pont, expresses the view that the subagent, not as a rule being brought into a contractual relationship with the principal, must look to the agent for his or her remuneration and indemnity, and that similarly, as a general rule, a subagent is accountable only to the agent who employs him or her and that agent in turn to the principal. For that last proposition is cited the cases of Stephens v Badcock, Sims v Brittain and Lockwood v Abadee to which I have referred, and also Cartwright v Hateley (1791) 1 Ves 292 30 ER 349 and Balsamo v Medici [1984] 2 All ER 304; [1984] 1 WLR 951. 43In the absence of the slightest evidence of any direct dealing between the company and Soft Star, and in the presence of the evidence that the company sent its invoice to Rural & General, and that Rural & General sent its own invoice to Soft Star including a component for its own remuneration, it seems to me not arguable that this case falls outside the general rule illustrated by the cases to which I have referred. Accordingly, there is not a genuine dispute as to Rural & General's standing to claim return of the unpaid premium: essentially, as a debt arising on the basis of money had and received. 44It follows that I will not set aside the demand, but I will make an order varying the demand pursuant to s 459H(4). 45The court orders that: (1)The creditor's statutory demand dated 5 September 2013 and served by the defendant on the plaintiff on 6 September 2013, be varied by substituting as the amount of the demand $92,750 for the sum of $103,750. 46The court declares that: (2)The demand has effect as so varied as from when the demand was served on the company. 47As the plaintiff has had a modicum, but far from total success, it seems to me that, unless there are any special matters to be put before the court, there should be no order as to costs. 48There will be no order as to costs to the intent that each party will bear its own costs.