Britten-Norman Pty Ltd v Analysis and Technology Australia Pty Ltd

Supreme Court of NSW|2019-10-09|Before: Gleeson J, Legislation Amendment J

Solicitors: James Legal (Plaintiff) Kent Attorneys (Defendant) File Number(s): 2019/250585

Judgment

GLEESON J: The plaintiff, Crowe Consulting Pty Ltd (the Company), seeks an order under s 459G of the Corporations Act 2001 (Cth) setting aside a creditor's statutory demand dated 19 July 2019 served by the defendant, K M Management Services Pty Ltd (in liquidation) (Management). The debt to which the statutory demand relates is described in the schedule to the demand as follows: "Amount due and payable by the Company to the Creditor pursuant to an agreement entered into between the Company and the Creditor on 6 June 2019 - $55,000".
The affidavit verifying the demand is sworn by Mr Angus Gordon, the liquidator of Management, who deposed: "as liquidator of the creditor and on its behalf I entered into the agreement with the debtor company that gave rise to the debt". No particulars of that agreement are given in the affidavit.

Jurisdiction issue

There is an issue concerning the date of service of the demand, which raises an issue of jurisdiction. In order to satisfy the time requirements of s 459G, an originating process and supporting affidavit must be filed and served within 21 days after service of the statutory demand on the plaintiff. Management contended that the application does not satisfy the time requirement in s 459G and thus the Court has no jurisdiction to determine it: David Grant & Co Pty Ltd v Westpac Banking Corp (1995) 184 CLR 265; [1995] HCA 43.
In the present case, the demand was served by post as allowed by s 109X(1)(a) of the Corporations Act. That posting occurred on 19 July 2019, and the originating process and supporting affidavit were served on Management on 13 August 2019. It is common ground that, if, as Management contends, the demand was served on 22 July 2019, then the Company's application to set aside the demand is out of time. It is also common ground that if that demand was served on or after 23 July 2019, then the Company's application to set aside the demand is within time and the Court has jurisdiction to determine it. The Company contends that the demand was served on 30 July 2019 or shortly thereafter.

Relevant statutory provisions

The relevant statutory provisions, s 109X(1)(a) of the Corporations Act, s 29 of the Acts Interpretation Act 1901 (Cth) and s 160 of the Evidence Act 1995 (NSW), have been considered in a number of cases.
Section 109X(1)(a) of the Corporations Act provides that a document may be served on a company by, among other means, leaving it at, or posting it to, the company's registered office.
Section 29 of the Acts Interpretation Act provides: 29 Meaning of service by post (1) Where an Act authorises or requires any document to be served by post, whether the expression "serve" or the expression "give" or "send" or any other expression is used, then the service shall be deemed to be effected by properly addressing, prepaying and posting the document as a letter and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post. (2) This section does not affect the operation of section 160 of the Evidence Act 1995.
Section 160 of the Evidence Act provides: 160 Postal articles (1) It is presumed (unless evidence sufficient to raise doubt about the presumption is adduced) that a postal article sent by prepaid post addressed to a person at a specified address in Australia or in an external Territory was received at that address on the seventh working day after having been posted. ... (3) In this section: "working day" means a day that is not: (a) a Saturday or a Sunday, or (b) a public holiday or a bank holiday in the place to which the postal article was addressed.
It should be noted that s 160 of the Evidence Act was amended with effect from 17 April 2018 by the Justice Legislation Amendment Act 2018 (No 4) (NSW), Sch 1.8, as follows: Section 160 Postal articles Omit "fourth" from section 160 (1). Insert instead "seventh". Explanatory note The proposed amendment provides that a postal article is presumed to have been received 7 working days after it is sent, rather than 4 working days, as a consequence of changes to Australia Post delivery times.
It is now accepted, following the decision of White J in Scope Data Systems Pty Ltd v David Goman as Representative of the Partnership BDO Nelson Parkhill (2007) 70 NSWLR 176; [2007] NSWSC 278 (Scope Data Systems v Gorman) that s 160 of the Evidence Act applies to the service of a statutory demand: Sydney Constructions & Developments Pty Ltd v Reynolds Private Wealth Pty Ltd [2016] NSWSC 1104 at [7] (Barrett AJA); Workers Compensation Nominal Insurer v Lozito-Strada Pty Ltd [2013] FCA 625 at [6] (Jacobson J); Re Ege Foods Australia Pty Ltd [2014] NSWSC 983 (Ege) at [15] (Brereton J); In the matter of Edifice Australia Pty Ltd [2017] NSWSC 1620 at [11] (Black J); Re Shaolin Temple Foundation (Australia) Ltd [2016] NSWSC 804 at [4] (Black J).
In Scope Data Systems v Goman, White J summarised the interaction of the statutory presumptions in s 29 of the Acts Interpretation Act and s 160 of the Evidence Act at [38]: [38] In my view, the position is as follows. If the evidence establishes the time at which the article is delivered to the postal address, then that is the time at which service is taken to be effected. If the evidence does not establish the time at which delivery was effected, then, unless the contrary is proved, delivery is deemed to have been effected in the ordinary course of post. What that is is a question of fact to be proved by evidence. In the absence of evidence on the topic, and in the absence of any presumption, there will be no proof that the article was delivered at a particular time. If it is established that the article was not delivered in the ordinary course of post, but the evidence does not establish when it was delivered, then again there will be no evidence as to the time of delivery. In either case, s 160 of the Commonwealth Evidence Act (applicable to federal courts), or s 160 of the New South Wales Evidence Act (applicable to New South Wales courts), affords a presumption as to when the article is to be taken to have been delivered. The presumption may assist in proving when delivery was made in the ordinary course of post. If the evidence shows that the article was not delivered in the ordinary course of post, the presumption may assist in proof of when the document was delivered.
Reference should also be made to the remarks of Barrett AJA in Sydney Constructions & Developments Pty Ltd v Reynolds Private Wealth Pty Ltd at [9]-[11] concerning the legal and evidentiary burden of proof in cases such as the present: [9] It may readily be accepted that the fact of service of the statutory demand is essential to the existence of the s 459G jurisdiction and that the burden of proving all necessary matters, including such service, rests with the plaintiff: see Derma Pharmaceuticals Pty Ltd v HSBC Bank Australia Ltd [2005] SASC 48; (2005) 188 FLR 373 at [28], Five G Pty Ltd v Pinacle Funding Group Pty Ltd [2008] NSWSC 228; 216 FLR 188 at [10]; D B Mahaffy and Associates Pty Ltd v Mahaffy [2010] NSWSC 881 at [39]. In the ordinary course, the filing of the s 459G application itself implies a representation by the plaintiff that it was served with the statutory demand. This is because, as Mandie J observed in Emhill Pty Ltd v Bonsoc Pty Ltd [2004] VSC 322; (2004) 50 ACSR 305, "the plaintiff cannot seek an order pursuant to s 459G(1) of the Act setting aside a statutory demand where it wishes to say that it has not been served with the demand". [10] It is only if the defendant disputes jurisdiction that the plaintiff faces a need to deal with the question of service of the statutory demand. But in seeking to discharge the burden that then rests upon it with respect to proof of service by post, the plaintiff is entitled simply to rely on the statutory presumption as to the time of receipt unless confronted by what s 160(1) of the Evidence Act describes as "evidence sufficient to raise doubt about the presumption". It is only if the defendant, in questioning jurisdiction, adduces evidence that has some tendency to prove that receipt occurred otherwise than on the fourth business day referred to in s 160(1) that it becomes incumbent upon the plaintiff to adduce evidence. Only then do the factual position and the question of the time of receipt fall to be determined by reference to evidence presented by the parties. [11] It was submitted on behalf of the defendant that, in the absence of evidence from the plaintiff as to the time of delivery, principles akin to those underlying the decision in Jones v Dunkel [1959] HCA 8; 101 CLR 298 operate adversely to the plaintiff. That cannot be so. Those principles allow an inference already available on the facts to be drawn with greater confidence when a party able to prove the true facts fails to do so. In the present case, the only inference available as to the time of receipt of the statutory demand is that which comes from the s 160(1) presumption, there being no evidence to create doubt of the kind referred to in the section. To the extent that absence of evidence from either side on the subject may be relevant (and I do not think it is), that absence merely leaves intact the inference sourced in the statutory presumption. It does not in any way undermine that inference.
In Deputy Commissioner of Taxation v Josway Hospitality Pty Ltd [2018] FCA 466 at [2(c)], McKerracher J observed that proof of non-receipt at a place, as distinct from non-receipt by a person, is likely to prove non-delivery at that place, citing Scope Data Systems v Goman at [49] (White J).

Australia Post Terms and Conditions

Management relied upon the Australia Post Terms and Conditions as at July 2019 as a deemed contract between it and Australia Post for the delivery of mail, in particular, by express post: Australian Postal Corporation Act 1989 (Cth), s 32(1)(b).
Reference was made to the following definitions in the Terms and Conditions: Delivery includes the following: … (iv) an article addressed to a person receiving mail at premises other than private residential premises is deemed to be delivered by: (a) placing it in a receptacle established at those premises for receipt of articles; Express Post article means an article lodged for carriage by the Express Post service.
The Terms and Conditions contain the following delivery obligations and service standards: 16.1 Australia Post will use its best endeavours to deliver articles in accordance with these terms and conditions and Appendix 2. 39.1 Australia Post guarantees delivery of Express Post articles within specified times between specified places, when the article is lodged for carriage within Australia by the specified posting times published by Australia Post. 40.1 Where an Express Post article is not delivered within a time specified by Australia Post for that delivery and the provisions of clauses 40.2 and 40.3 have been satisfied, Australia Post will provide to the customer a replacement Express Post envelope or Express Post container or an Express Post Platinum container or the postage paid on the carriage of an Express Post parcel or an Express Post Platinum parcel will be refunded to the person who paid it.
Appendix 2 headed "Street Mail Service - Conditions of Delivery" provides that Australia Post delivers only into mail boxes in an approved location. For premises with multiple delivery points, the approved location is a single group of mail boxes on the boundary of the property with a footpath or public road. For multi-storey residential or commercial buildings, the approved location is as for premises with multi-delivery points. The method of delivery to commercial or professional addresses for multi-storey buildings is the same as for single storey buildings, relevantly, by delivery to a mail box or a single group of mail boxes that meet Australia Post's standards for size, location and numbering.
Documents obtained by Management's solicitor from the Australia Post website concerning express post letters state that the specified times for delivery from the Sydney CBD to the Gosford region, which includes Erina, is one business day.

The evidence of delivery

The evidence established posting of the demand in a pre-paid envelope addressed to the registered office of the Company, by express post, by the demand being placed in the post box marked "express post" on the corner of King and Castlereagh Streets, Sydney, on 19 July 2019. Mr Tim Orliziki, the solicitor who signed the demand on behalf of Management, deposed that the pre-paid envelope containing the demand also contained a sticker with a tracking number ending "090". Mr Orlizki deposed that an online search of the Australia Post website on 14 August 2019 showed that the envelope containing tracking number "090" was delivered to "ERINA" on 22 July 2019 at 11.19 am.
Management relied upon a combination of the second limb of s 29(1) of the Acts Interpretation Act and the Australia Post Terms and Conditions for the submission that the express post envelope would have been delivered in the ordinary course of post by the promised time for delivery by Australia Post. As indicated, for express post articles delivered from the Sydney CBD to Erina, the promised time of delivery is within one business day, which in this case is 22 July 2019.
However, as Robb J observed in In the matter of Futre Developments Pty Ltd [2014] NSWSC 1712 (Futre Developments) at [45], Australia Post's promised time for delivery does not, without more, prove when delivery would have occurred in the ordinary course of post. And, there is no evidence as to the ordinary course of post with respect to express post as between the Sydney CBD and Erina. The agreed timetable for delivery in the Australia Post Terms and Conditions is more a statement of "aspiration" than a statement of fact: Futre Development at [32].
Next, Management relied upon the record of delivery recorded in the tracking receipt issued by Australia Post as proof of the actual date of delivery of the express post envelope containing the demand. Management submitted that the tracking record issued by Australia Post for item "090" proved delivery of the express post envelope to the registered office of the Company on 22 July 2019 at 11.29 am.
In Re Shaolin Temple Foundation (Australia) Ltd at [6], Black J observed with reference to the analysis of Robb J in Futre Developments of Australia Post's contractual provisions in respect of the delivery of mail: … in a particular case, where evidence of fact is led as to a delay in delivery of mail, and that evidence of fact is accepted, then at least one possible inference will be error or delay on the part of Australia Post, although no doubt other inferences may also be available. … I do not understand his Honour to be suggesting that a tracking receipt issued by Australia Post is determinative, in a manner that displaces other factual enquiry.
Here there is no evidence from any employee of Australia Post that directly proved where and how the express post envelope was delivered. The notation on the Australia Post website does not specify that the express post envelope was placed into the receptacle established at the Company's premises for receipt of articles: see [26] below. And there is no evidence of Australia Post's practice in respect of recording the delivery of express post items or to explain the significance of the reference to "Erina" in the tracking record on which Management relies: In the matter of Edifice Australia Pty Ltd at [12] (Black J).
Insofar as the Company relied upon the statutory presumption as to the time of receipt in s 160 of the Evidence Act, Management submitted that there is "evidence sufficient to raise a doubt about the presumption". In Deputy Commissioner of Taxation v Josway Hospitality Pty Ltd at [2(d)], McKerracher J said: … While such evidence needs to be sufficient to create a doubt, it does not need to be proof to the civil standard of fact finding at trial as to actual non-delivery. A 'doubt' ought not to be assimilated with proof or demonstration: Deputy Commissioner of Taxation v Manta's on the Beach Pty Ltd (2012) 88 ATR 193 per Logan J (at [12]).
I am satisfied that the Australia Post tracking receipt raises a 'doubt' about the statutory presumption that the express post envelope was received at the Company's mailbox outside its registered office on the seventh working day after it was posted, being 30 July 2019 based on posting on 19 July 2019.

The Company's evidence concerning actual receipt of the express post envelope

In support of its contention of actual delivery of the demand on 31 July or 1 August 2019, the Company relied upon affidavit evidence of Mr Steven Crowe, an accountant and director of the Company, and Mr Ashim Gautam, an accountant employed by the Company. Both Mr Crowe and Mr Gautam were cross-examined. I accept their evidence.
Mr Crowe gave evidence of the location and physical structure of the nine letter boxes mounted into the common, exterior planter-box brickwork outside the office building where the Company's registered office is located. There are eight tenants and the Company occupies unit 3. He said that prior to 10 July 2019, the letter boxes, including the Company's letter box, had been subject to vandalism, lock breaking and theft.
Both Mr Crowe and Mr Gautam gave evidence of a history of misdelivered mail. Mr Crowe said that sometimes mail addressed to the Company was placed in the letterbox for a vacant suite and had not arrived at the Company's office for over a month. Mr Gautam said that on average once a week he found mail in the company's letterbox intended for other tenants of the building or addressed to persons or companies he did not recognise.
The Company maintains a post office box at Terrigal, where most of its mail is received. The Company's system for dealing with mail received at the building letterbox is as follows: the building letterbox is checked by Mr Crowe or an employee each morning. Mr Gautam is the primary person who clears the letterbox daily. With few exceptions, he collects the mail every day from the letterbox between 10.15 am and at the latest 11 am, as the mail is delivered by that time. The mail (unopened) is delivered to Mr Crowe personally in his office and if he is not present the mail is placed on his chair for him to open when he arrives. Mr Crowe opens the mail and distributes it to the relevant employee. The office staff does not open the mail. If Mr Crowe is out of the office for any extended period, such as a week, the letterbox mail accumulates on his chair unopened until he returns to the office.
With respect to receipt of the express post envelope containing the demand, the evidence establishes the following.
First, there was no express post envelope in the letterbox when Mr Gautam collected the mail from the Company's letterbox on 19 and 22 July 2019. As to 22 July 2019, Mr Gautam properly acknowledged in cross-examination that in accordance with his usual practice, he would have inspected the letterbox prior to 11.19 am, being the time recorded on the tracking receipt. Mr Gautam said he collected the mail from the letterbox on each working day between 23 July and 7 August 2019, although once, or possibly twice, it was collected by Ms Alana Wrigley, a secretary employed by the Company. He conceded in cross-examination that one of those occasions "could" have been 23 July 2019.
Second, Mr Crowe checked the letterbox on 24 July 2019 before 10 am and did not find any express post envelope.
Third, there was no express post envelope mail on Mr Crowe's chair or otherwise left for him on 22 to 26 July 2019 or 29 to 31 July 2019, when he attended the office on those days. Mr Crowe travelled to Darwin on 1 August 2019 returning on 6 August 2019. On 7 August 2019 he arrived at the office at about 7.30 am and there were ten letters on his chair, one of which included an express post envelope which he opened and found the demand.
Fourth, Mr Gautam first saw an express post envelope in the Company's mail collected from the letterbox while Mr Crowe was absent from the office between 2 and 6 August 2019, although he could not recall the exact date. He said the express post envelope remained unopened and was placed on Mr Crowe's chair with other mail for his return. In cross-examination, Mr Gautam agreed that he did not collect an express post envelope from the letterbox and that it would have been collected by either Ms Wrigley or another staff member, Mr Brad Anthonesz.
Fifth, on 7 August 2019 Mr Crowe read the date on the cover letter from Kent Attorneys, being 19 July 2019 and sought to investigate when the demand had reached the letter box by an internet search of "check Express Post delivery". He found the Australia Post website and entered the tracking number on the envelope ending "090". After his initial search produced an error, he obtained a result which indicated "delivered/Erina NSW/22 Jul/11:19am". He then conducted a further search of the webpage "tracking history" and wrote the words, "Aust Post - delivered 22/7/19" on the top of the letter from Kent Attorneys. He said he immediately scanned the demand, including the cover letter, to create a PDF copy and emailed it to the Company's solicitor at about 2.28 pm on 7 August 2019. Mr Crowe gave evidence of his subjective belief, which I accept, that he wrote the date "22/7/19" on Kent Attorneys' letter because he was looking at the Australia Post tracking website at the time and noticed its reference to "delivery".
Whilst Mr Crowe said in his first affidavit sworn 12 August 2019 that he received the demand in the Company's mail on 24 July 2019 (par 2), he corrected this in his second affidavit sworn 16 September 2019. Mr Crowe said that he had used the date "24/7/19" as a reference point because the morning of that day was the last time he had checked the letterbox before seeing the demand on 7 August 2019, and he could not rule out the possibility that the demand had been placed into the letterbox later on 24 July 2019 after he had already checked the letterbox. He said he should have been more accurate and said in his first affidavit "not earlier than 24 July" because he had overlooked the possibility of the demand's arrival whilst he was in Darwin (par 34).
Management submitted that this explanation given by Mr Crowe was unsatisfactory. I do not agree. I accept Mr Crowe's evidence that if he had received the demand on 24 July 2019 or any other time before he departed for Darwin on 1 August 2019, he would have immediately forwarded it with instructions to the Company's solicitors, seeking to set it aside. Mr Crowe was an accountant experienced in receiving statutory demands as the Company was the registered office for other companies and his practice was to immediately to bring such demands to the attention of officeholders of those companies when received. I reject the submission by Management that Mr Crowe might be a sanguine sort of person, or might leave things to the last minute. This suggestion was not put to him in cross-examination, and it is contrary to Mr Crowe's evidence as to his practice in dealing with statutory demands, which I accept.
Management next submitted that, given the concession by Mr Gautam that Ms Wrigley could have collected the mail from the letterbox on 23 July 2019, the evidence adduced by the Company did not exclude the possibility that this is what occurred, and that there was a breakdown in the Company's practice for collection of mail on that day, specifically, that Ms Wrigley misplaced or held onto the express post envelope until early August 2019 when it was first seen by Mr Gautam on the chair in Mr Crowe's office. I do not accept this submission.
First, whilst Mr Gautam acknowledged that Ms Wrigley "could" have collected the mail from the Company's letterbox on 23 July 2019, given his evidence that he collected the mail on each day from 23 July 2019 to 1 August 2019, except on one or two occasions, the probabilities are more likely that Mr Gautam collected the mail on 23 July 2019.
Second, assuming that Ms Wrigley rather than Mr Gautam collected the mail from the Company's letterbox on 23 July 2019, it is entirely speculative for Management to suggest that there was a breakdown in the Company's practice on that day, and that Ms Wrigley misplaced or held onto the mail for a period of nearly 10 days before placing the express post envelope on Mr Crowe's chair on or about 2 August 2019. That view of the evidence seems to me to be highly contrived.
Third, I reject the suggestion put to Mr Crowe in cross-examination that Ms Wrigley, who left the Company's employment on 2 September 2109, was sacked or that there was any issue in relation to her performance. The implicit premise of these questions was that Ms Wrigley had collected the express post envelope on 23 July 2019, but had misplaced or held onto it for about 10 days. I accept Mr Crowe's evidence that Ms Wrigley left the Company's employment because she was made redundant. Although she was not called by the Company to give evidence, there is no basis for inferring that, if Ms Wrigley rather than Mr Gautam collected the mail from the Company's letterbox on 23 July 2019, that Ms Wrigley did not follow the Company's usual practice and place any mail on Mr Crowe's office chair on that day. As mentioned, Mr Crowe's evidence, which I accept, is that no express post envelope was placed on his chair or otherwise given to him on either 23 or 24 July 2019.
Given the evidence of the Company's practice in respect of the collection of mail from the letterbox outside its registered office, the evidence of a history of misdelivered mail to the letterbox outside the Company's registered office, the evidence of Mr Crowe that no express post envelope was placed on his chair or otherwise given to him on either 22, 23 or 24 July 2019, or on any other day before he left for Darwin on 1 August 2019, and the evidence of Mr Gautam that he first observed the express post envelope on Mr Crowe's chair with other mail sometime between 2 and 6 August 2019, I am satisfied that Ms Wrigley collected the express post envelope from the Company's letterbox, most probably on 1 or 2 August 2019, and not on 23 July 2019, as suggested by Management.
I am satisfied that that the Company has adduced evidence which establishes non-receipt at a place, namely the letterbox maintained by the Company outside its registered office on 22 or 23 July 2019, and that the probabilities are that it is more likely that the express post envelope was delivered to the Company's letterbox on or about 1 or 2 August 2019. Accordingly, the s 459G application is within time.
One further matter should be mentioned. The Company submitted that service of a demand by post is analogous to what is required before a document may be effectively served on a company by "leaving" it at the company's registered office". In James v Ash Electrical Services Pty Ltd (2008) 73 NSWLR 95; [2008] NSWSC 1112, Barrett J held at [22]-[24] that, if a document is required to be left at the company's registered office, then the document may not be properly served by being left at the registered office, if it is placed in a letterbox that is not actually part of the premises that constitute the registered office. See also In the matter of Carbon and Energy Reductions Pty Ltd [2014] NSWSC 923 (Bergin CJ in Eq). The position is different where the document is served by posting to the registered office as allowed by s 109X(1)(a) of the Corporations Act: see Partners of Piper Alderman v Sharjade Pty Limited [2011] NSWSC 6 at [15]-[20] (Barrett J); Futre Developments at [42], [49]-[52] (Robb J).

Genuine dispute

The approach which the Court should take to the assessment of a genuine dispute is well established. The task of the Court in relation to an argument that the debt does not exist is to consider whether there is a "plausible contention requiring investigation": Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 787 (McLelland CJ in Eq). The plaintiff will fail only if its contentions are found to be so devoid of substance that no further investigation is warranted.
The authorities emphasise the summary nature of the issue before the Court on a s 459G application: Britten-Norman Pty Ltd v Analysis and Technology Australia Pty Ltd (2013) 85 NSWLR 601; [2013] NSWCA 344 at [30]-[31] and [39]-[55], a case concerning the allied ground of an offsetting claim under s 459H(1)(b); Ligon 158 Pty Ltd v Huber [2016] NSWCA 330 at [10]. Similar statements of principle appear in the decision of the Court of Appeal in Victoria in Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (in liq) [2015] VSCA 330 at [47]-[48].
Where the basis for the alleged dispute is a legal argument or a question of construction which is not "patently feeble" and there are clearly arguable alternatives as to the correct outcome, the Court should not, upon a s 459G application, attempt to reach a definitive resolution: Drillsearch Energy Ltd v Carling Capital Partners Pty Ltd [2009] NSWSC 1192 at [46] (Barrett J) citing Wellnora Pty Ltd v Fiorentino [2008] NSWSC 483; (2008) 66 ACSR 229 at [50], in turn citing the joint judgment of Brooking and Charles JJA in Spacorp Australia Pty Ltd v Myer Stores Ltd [2001] VSCA 89; (2001) 19 ACLC 1270 at [4]. See also Broadspectrum (Australia) Pty Ltd v Centauri Business Services Pty Ltd [2016] NSWSC 1045 at [22] (Barrett AJA).

The alleged agreement

It is necessary to say something first about the background to the alleged agreement relied upon by Management. The Company provided accounting-type services to Site Engineering Solutions Pty Ltd (SES), including account management and the handling of funds received by SES and payable by SES to third parties, including Management. Following the winding up of Management on or about 5 June 2016, Mr Crowe was publicly examined by the liquidator of Management in November 2017 and again in May 2019. It seems that those examinations were directed to the issue of whether the Company had used part of the monies received from SES for purposes other than which the payments were made, including payment of professional or other fees owing to the Company and payment of monies to a related entity.
After the examination in May 2019, there were settlement discussions between Mr Crowe and the liquidator, Mr Angus Gordon. Without intending to be exhaustive, reference should be made to the following significant communications: 1. On 3 June 2019, Mr Crowe sent an email to the liquidator making an offer on behalf of three entities, including the Company, as follows: The offer is to settle all claims in relation to the matter of K M Management Services for an amount of $130,000. Payable in 14 days from acceptance and documentation. The settlement document will require confidentiality. 1. This offer was discussed in a telephone conversation between Mr Crowe and the liquidator on 6 June 2019. The liquidator says that at the conclusion of the discussion, he told Mr Crowe that he would instruct his solicitor, Mr Rodney Kent, "to draft a settlement agreement reflecting our agreement". The liquidator then sent an email to Mr Crowe at 11.23 am on 6 June 2019 stating that "the offer needs to be $220,000"; recording his understanding that the Company could raise $130,000 within 14 days of 3 June 2019 and suggesting that this amount be paid by the close of business on 11 June 2019 and the balance of $90,000 paid "over 3-6 months provided I have appropriate security subject to suitable terms". The email recorded that the liquidator was prepared to agree to the request for confidentiality on the basis that the clause was drafted by his solicitor, Mr Kent. The email concluded: As you would appreciate, until a settlement is agreed upon, your Public Examination has not been deferred and you are required to attend on 13 June 2019. 1. Mr Crowe gave evidence that he had a further telephone discussion with the liquidator on 6 June 2019 and also replied to the liquidator by email on that date at 2.48 pm as follows: Refer to our conversation and agree to $130k, plus 6 months for $90k. Other terms agreed subject to documents. 1. On 11 June 2019, the liquidator sent an email to Mr Crowe attaching "the final draft [deed] that represents the settlement terms" and indicated that a caveat and mortgage document had been drafted, which the liquidator "will quickly have a look at before shooting off". The email continued: As you will see from the draft agreement I will do what is needed or get Rodney to note to the court on Thursday an agreement has been reached in respect of your PE, and the initial instalment paid and received. 1. The terms of the draft deed relevantly included:

a promise by the Company, Mr Crowe and Crowe Properties Pty Ltd (Crowe Properties), to pay the settlement sum of $220,000 by payment of $130,000 upon execution, or exchange of duly executed counterparts of the deed, and $90,000 on or before 6 December 2019 (cl 3.1(a));
a promise by Crowe Properties to consent to Management lodging a caveat in respect of the property at Erina owned by Crowe Properties (cl 4.3);
releases conditional upon receipt of the full amount of $220,000 (cl 5);
a promise by the liquidator "as soon as practicable after entering into this deed to do all things necessary to vacate the public examinations" (cl 6.1(a));
an acknowledgment by the parties that the deed recorded the entire agreement between the parties about its subject matter (cl 15.1). 1. On 12 June 2019 at 10.50 am, the liquidator sent an email to Mr Crowe attaching the mortgage, and requested that it be signed and witnessed. The email noted that in order for the liquidator to not require Mr Crowe's attendance the following day at the public examination, evidence of the first instalment was required and if not, Mr Crowe was required to attend the public examination. 2. On 12 June 2019 at 12.39 pm, Mr Crowe sent an email to the liquidator attaching a copy of a remittance for $75,000 to Management's bank account, noting that the "balance will come later today". 3. On 13 June 2019, the liquidator sent an email at 7.57 am to Mr Crowe "confirming receipt of $75,000 out of $130,000 owing" and sought confirmation that the balance of $55,000 would be paid "today". Mr Crowe responded by email at 7.59 am stating that "the balance of $55,000 will be paid today, at approx 9 am before client transfers money". The liquidator replied by email at 8.37 am that he would stand over the public examination for a further seven days, given that Mr Crowe had advised that $55,000 would be paid "sometime this morning". 4. Text messages were exchanged between the liquidator and Mr Crowe later on 13 June 2019 concerning non-payment of $55,000. 5. On 14 June 2019 at 10.28 am, the liquidator sent an email to Mr Crowe noting that the $55,000 had not been received overnight and stating that "the settlement required the signed deed of settlement and mortgage be returned". 6. The liquidator sent a further email at 11.00 am seeking an indication as to whether the Company was "proceeding to send the $55,000", or whether it sought "the return of the $75,000 already paid". Mr Crowe responded at 11.18 am that he was waiting on legal advice from his solicitor, Mr Ziman, and he would pursue Mr Ziman for advice. The liquidator replied by email to Mr Crowe at 11.35 am stating: Steven - it is up to you as to whether you want the settlement to proceed or not … Anyway, like I said, I believe that there is a binding settlement agreement as stated below. …

On 14 June 2019, Mr Crowe decided not to transfer any more money to Management. He says that he formed the view that the amount paid to Management under an earlier settlement with SES and the $75,000 which the Company had paid was more than it was entitled to receive.

Dispute as to concluded agreement

It is the Company's contention that the arrangements recited above lacked finality in two related aspects. One is that the parties did not intend to be immediately bound by the terms of the arrangement the subject of their 6 June 2016 emails and telephone discussions. The other is that the alleged agreement relied upon by Management is incomplete as to its terms.
Management contended that the parties' objective intention to conclude a binding contract is demonstrated by the language used in their communications, and importantly the payment of the $75,000 and the numerous assurances by Mr Crowe that the amount of $55,000 would be paid.
Management submitted that the case falls within the first category of cases described in Masters v Cameron: the parties had agreed upon all terms of the contract and intended to be immediately bound to performance of those terms, but at the same time proposed to have the terms restated in a form which would be fuller or more precise, but not different in effect: Masters v Cameron (1954) 91 CLR 353 at 360; [1954] HCA 72.
In Pavlovic v Universal Music Australia Pty Ltd (2015) 90 NSWLR 605; [2015] NSWCA 313 (Pavlovic), Bathurst CJ summarised the applicable principles at [15]: [15] It is well established that the question of whether the parties intended to bind themselves to a contract is to be determined objectively, having regard to the intention disclosed by the language the parties have employed: Masters v Cameron [1954] HCA 72; 91 CLR 353 at 362. In cases such as the present, which do not depend on the construction of a single document, what is involved is the objective determination of the question from the communications between the parties in their context and the parties' dealings over the time leading up to the making of the alleged contract. This involves consideration of the subject matter of the communications: Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 550. As was said by Mahoney JA and McHugh JA in Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309, that includes consideration of what the parties said or wrote (at 334, 337).
Beazley P was to similar effect at [64]-[65]: [64] Where parties have reached agreement as to all the terms of a contract, but have also agreed that a further, formal agreement is to be executed the question for determination is whether the parties intend to be immediately bound. That is to be determined objectively from the "outward manifestations" of the parties' intentions: Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; 251 CLR 640 at [35]; Mushroom Composters Pty Ltd v IS & DE Robertson Pty Ltd [2015] NSWCA 1 at [59]-[61] per Sackville AJA (with whom Macfarlan and Gleeson JJA agreed); Taylor v Johnson [1983] HCA 5; 151 CLR 422 at 428 per Mason ACJ, Murphy and Deane JJ. [65] The question, therefore, is "what each party by words and conduct would have led a reasonable person in the position of the other party to believe": see also Toll (FGCT) Pty Limited v Alphapharm Pty Limited [2004] HCA 52; 219 CLR 165 at [40] (per curiam); Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; 218 CLR 451 at [22] (per curiam); Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; 53 NSWLR 153 at [81] per Heydon JA. An agreement that is incomplete will not give rise to an enforceable contract: Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd [1982] HCA 53; 149 CLR 600 at 604 per Gibbs CJ, Murphy and Wilson JJ. (Emphasis in original.]
Recognising that it is not the task of the Court on this summary application to determine the merits of the dispute, I am well satisfied that the legal argument raised by the Company is not "patently feeble", and that there are clearly arguable alternatives as to the correct outcome: Drillsearch Energy Pty Ltd v Carling Capital Partners Pty Ltd at [46]. The Company's contentions are deserving of a hearing.
First, there is a plausible contention that the parties had not agreed on 6 June 2019 all essential terms of the alleged agreement. In particular, it is reasonably arguable that the due dates for payment were not settled and the draft deed submitted on 11 June 2019 sought to cure this uncertainty by fixing the date for payment to execution of the deed. In addition, the terms of the releases, the confidentiality obligation, and the proposed security by way of mortgage over the property of Crowe Properties had not been settled and the draft deed and the mortgage respectively also sought to cure this uncertainty.
Second, there is a plausible contention that the parties did not intend to be immediately bound by the terms of their arrangement on 6 June 2019 until a formal document recording their agreement had been executed. Among other things, a reasonable business person in the position of the liquidator and Mr Crowe would have been aware that Management had required the formality of a deed to settle an earlier dispute between the Management and SES in March 2018. Further, in the email and telephone communications on 3 and 6 June 2019, the Company had referred to the need for documentation, including specifically qualifying the Company's acceptance of the proposed "other" terms on 6 June 2019 as "subject to documents". In addition, the sums in question were not trivial, there was an apparent need for time to pay, and a consequential requirement for security which needed to be documented.
Third, there is a plausible contention that the parties' subsequent conduct is inconsistent with an intention of the parties to enter a binding agreement on 6 June 2019. It is well-established that post-contractual conduct is admissible on the question of whether a contract is formed: Pavlovic at [118]; Bundanoon Sandstone Pty Ltd v Cenric Group Pty Ltd [2019] NSWCA 87 at [131]-[134].
Here, the subsequent conduct by Management, which is arguably inconsistent with a binding agreement on 6 June 2019, comprises: (a) the liquidator required a deed to record the terms of the arrangements, which included terms that the liquidator did not promise to do anything until "after entry into this Deed" (cl 6.1); (b) the liquidator stated on 12 June 2019 that if payment of $130,000 was not made, then Mr Crowe was required to attend the examination on 13 June 2019; (c) the liquidator did not vacate Mr Crowe's public examination, as referred to in cl 6.1 of the deed, instead the examination was merely adjourned on 13 June 2019 and the liquidator subsequently sought a fresh date for the examination; and (d) the liquidator's 14 June 2019 email stressed that "the settlement requires the signed deed of settlement and mortgage be returned".
The Company has established a genuine dispute as to the existence of the debt claimed by Management based on the alleged agreement of 6 June 2019.

Conclusion and Orders

The Company has succeeded in resisting the challenge to jurisdiction and in showing that there is a genuine dispute about the existence of the debt to which the statutory demand relates.
Accordingly, the Court orders: 1. The statutory demand dated 19 July 2019 served on the plaintiff by the defendant be set aside. 2. The defendant to pay the plaintiff's costs of the proceedings.

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