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

Solicitors: Dentons Australia (Plaintiff) Walker Hedges & Co (Defendant) File Number(s): 2020/23540

Nature of the application and background

1. By Originating Process filed on 23 January 2020, Garawin Pty Ltd ("Garawin") applies to set aside a creditor's statutory demand ("Demand") dated 18 December 2019, served by Mr Sleiman on Garawin. The Demand claims that Garawin owes Mr Sleiman the amount of $20,000, being the amount of a debt described in a schedule. The schedule in turn describes the debt as follows: "Liquidated debt due for payment pursuant to Loan Agreement dated 20 September 2017 between [Mr Sleiman] and [Garawin] and being an amount comprising the principal sum of $20,000 advanced by [Mr Sleiman] to [Garawin] pursuant to the Loan Agreement dated 20 September 2017."
2. It appears that there is no document that could be described as a "Loan Agreement dated 20 September 2017", although Mr Sleiman refers in affidavit evidence to which I will return to a conversation with a representative of another entity, Modog Pty Ltd ("Modog"), in mid-September 2017.
3. The application to set aside the creditor's statutory demand is in narrow scope and has been handled with efficiency and expedition by Mr Weinberger, who appears for Garawin, and Mr Davis who appears for Mr Sleiman. Counsel are to be commended for that approach, where they have both recognised that the amount claimed by Mr Sleiman is not large, at least by the standards of proceedings generally brought in this Court, although this application had to be brought in this Court because of the character of an application to set aside a creditor's statutory demand.
4. I will refer briefly to the background, although ultimately, as will emerge, the area of dispute is only an aspect of that background. In March 2016, Modog as head contractor entered into a subcontract with ZS Constructions (Queenscliff) Pty Ltd ("ZS") in respect of the construction of units at Mosman, NSW. A third party purchased one of the apartments from the developer, and a barbecue was to be installed, in an apparently elaborate form, in that unit under the subcontract. It appears that the purchaser of that apartment was not prepared to settle on the purchase until that barbecue had been installed or a retention amount put up. In mid-September 2017, a conversation took place, of which differing versions are in evidence, between Mr Sleiman and Mr Rickard of Modog as to the position in respect of that barbecue's retention amount, and involving a request that ZS, on one version, or Mr Sleiman, on another version, put up an amount by way of retention, on one version, or by way of loan, on another version, in respect of the amount that was in issue in respect of the barbecue. I will refer further to the relevant conversations and associated emails below. It appears that, subsequently, issues arose in respect of suggested defects in the property; Mr Sleiman denied liability for the defects on behalf of ZS; and Modog incurred expenses, allegedly to rectify the defects. Garawin initially also raised an offsetting claim in response to the Demand, although Mr Weinberger has not pressed that claim on its behalf.
5. Turning now to the relevant evidence, Garawin relies on the affidavit dated 23 January 2020 of Mr Moore, a director of Garawin, which refers to the background to the development generally, and, in particular, to the suggested defects in respect of the development. Mr Sleiman in turn relies on his affidavit dated 12 March 2020, which sets out, in paragraph 6, his version of the conversation relating to the loan which he contends was made by him personally to Garawin. On his account of the conversation, it commenced with a reference to a problem in respect of the relevant building contract, and a request by Mr Rickard that Mr Sleiman lend "us" - which may refer to Modog or Garawin, or possibly Mr Moore - some money. Mr Sleiman then expresses surprise at the request; there is a reference to the fact that the purchaser of the relevant unit would not settle because the barbecue had not yet been installed. On Mr Sleiman's account, a loan was requested so that a retention amount could be provided to the purchaser; Mr Sleiman then characterises the relevant transaction as a "personal loan" to help Mr Moore out; Mr Rickard is said to accept that characterisation; and Mr Sleiman expresses the view that he only really wishes to lend money to Mr Moore personally. Mr Rickard responds that Mr Sleiman can lend the money to Garawin, which is Mr Moore's trust company and Mr Sleiman, on his account, then responds that: "Okay. I can get my hands on $20,000.00 and I am happy to lend it to Garawin to help [Mr Moore] out. Send me Garawin's bank accounts and I will get the money sent through."
6. By an affidavit in reply dated 1 April 2020, Mr Rickard offers a somewhat different account of the conversation. On Mr Rickard's account, it started with a complaint by Mr Rickard that the barbecue had not been installed by ZS and the buyer of the relevant unit would not settle without a retention of $20,000, and with a request, or demand, that ZS put up the retention monies, because it had not completed the works and delayed the project. On Mr Rickard's account of that conversation, Mr Sleiman protested, but ultimately responded that Mr Rickard should send an email requesting the retention and bank account details and Mr Sleiman would, implicitly on behalf of ZS, send through the funds. That, plainly, is a quite different version of that conversation to Mr Sleiman's version.
7. By a further affidavit dated 23 June 2020, Mr Sleiman responded to Mr Rickard's account of that conversation, explaining in paragraph 2, in what are ultimately observations in the nature of submission, why he contended it was implausible, by reference to a large volume of correspondence which sought to demonstrate that ZS was not at fault in respect of the installation of the barbecue, which had been delayed by reason of other matters, including changes in the design of the barbecue which were not ZS's responsibility. I express no view as to the correctness or otherwise of that evidence, and note that there appears to be a significant dispute, at least in the background, as to liability in respect of the delay in the installation of the barbecue, and does not advance the proposition as to which version of the conversation is true, because it would be perfectly plausible that Modog, as head contractor, might in fact have demanded a retention payment from ZS as subcontractor, even if that demand was not justified in the circumstances.
8. Returning to the surrounding correspondence, Mr Rickard then sent an email dated 20 September 2017 to Mr Sleiman relating to the demand for payment, as follows: "If you could please put $20,000 into Garawin's account to cover the retention of funds required by the [purchaser] for the installation of the BBQ. You will get the funds back once the BBQ has been installed."
9. Mr Sleiman responds, crisply, "Done". It seems to me that this exchange of emails is equivocal, in the circumstances. It plainly requests a payment to Garawin, rather than to Modog as head contractor, but it describes that payment as to cover the retention of funds required by the purchaser and not as a loan. It contains a statement that Mr Sleiman, or ZS, will get the funds back once the barbecue has been installed, but that may refer to the satisfactory installation of the barbecue, leaving room for debate as to whether ZS achieved that outcome. The introductory word "you" is ambiguous, as to whether the payment was to be made by ZS, or Mr Sleiman personally, and the fact that Mr Rickard corresponded with Mr Sleiman is neutral in that respect, since the latter was the director of ZS.
10. Mr Davis, who appears for Mr Sleiman, in turn relies on the description of the payment in the bank transfer made by Mr Sleiman, which characterised the transaction as involving a loan to Garawin, and the fact that Garawin's bank statement in turn recorded that characterisation, likely, because that was the way in which Mr Sleiman had described it when making the transfer. There is no suggestion that Garawin then entered into a debate about the characterisation Mr Sleiman had given to the transaction, but that does not necessarily demonstrate agreement with it since, having received the money, Garawin may be perfectly content to leave that question for another day.
11. Mr Davis also draws attention to an email dated 27 February 2018 from Mr Sleiman dealing with a number of monetary dealings between ZS, or Mr Sleiman, or other companies on the one hand and Mr Moore or his associated companies on the other, which stated, inter alia: "...I kindly ask when you are able to pay out all moneys owed to Chris and myself...and as agreed and the $20K I loaned Garawin for the settlement of [relevant unit] - within the next two weeks is ideal."
12. Mr Davis rightly points out that that characterisation is also consistent with the characterisation which Mr Sleiman gives to the transaction in the conversation of which he gives evidence and in the record of the bank transaction to which I have referred, but it has the difficulty that it is no more than Mr Sleiman's characterisation given to the transaction several months after the event, rather than an acceptance by Garawin of the accuracy of that characterisation.

The applicable principles and the parties' submissions

1. I now turn to the applicable principles. The Court has power to set aside a creditor's statutory demand under 459H(1)(a) of the Corporations Act 2001 (Cth) where there is a genuine dispute between the company and the issuer of the demand about the existence or amount of the debt to which the demand relates. In Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd [1997] FCA 681; (1997) 76 FCR 452 at 464, the Full Court of the Federal Court observed that a genuine dispute must be bona fide and truly exist in fact, and the grounds for the dispute must be real and not spurious, hypothetical, illusory or misconceived.
2. Mr Davis fairly recognises that the threshold to establish a genuine dispute is not high, and it is necessary to bear in mind the observations of Barrett J (as his Honour then was) in Panel Tech Industries (Australia) Pty Ltd v Australian Skyreach Equipment Pty Ltd (No 2) [2003] NSWSC 896 (at [18]) that: "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."
3. I also have regard to the decision of the Court of Appeal in Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd [2013] NSWCA 344; (2013) 85 NSWLR 601 where, the Court in summarising the case law applicable to offsetting claims, conducted a comprehensive review of the cases referable to establishing whether a genuine dispute was established. The Court emphasised that the evidence necessary for that purpose "need not conclusively prove or otherwise be incontrovertible or substantially non-contestable", and also observed (at [46]) that: "In determining whether there is evidence of a genuine dispute as to the debt, or that there is an offsetting claim, except in extreme cases, the Court is not concerned to engage in an inquiry as to the credit of the deponent of the affidavit filed in support of the application."
4. The Court also emphasised (at [47]) that the Court's role was, in such an application: "To determine whether there was plausible evidence to establish the existence of a genuine dispute, not whether the evidence was disputed or even likely to be accepted on a final hearing of any such claim."

Determination

1. It seems to me that a genuine dispute is plainly established, to the relatively low threshold required by the authorities, and notwithstanding that, on one view, Mr Sleiman may have the better side of some aspects of the dispute. First, there is a contest between the witnesses, Mr Sleiman and Mr Rickard, as to what was said, which raises issues of credit which could not be determined in an application of this kind. Neither version is strikingly implausible, in the relevant context, so this is not a case where there is merely an implausible assertion to impugn the Demand. Second, the arrangement has a considerable degree of informality, emphasised by the use of the words "you" and "us" in correspondence without identifying which entity is party to the transaction, and there is also room for debate as to whether the transaction was, in all the circumstances, a loan or some form of retention arrangement. There is also room for dispute, even on the language of the email, as to what was required for completion of the barbecue, so as to trigger the obligation for repayment.
2. This is not to say that, ultimately, Mr Sleiman would not succeed in a claim for these monies, although the alternatives as to the respective parties of the transaction plainly give rise to complexity in such a claim. It is, however, to say that such a claim would need to be determined, in a hearing on the merits, where the relevant witnesses could be cross-examined, notwithstanding that the cost of such a determination may ultimately be disproportionate to the amounts in issue. The authorities to which I have referred, and the nature of the summary process involved in an application to set aside a creditor's statutory demand, therefore require that the Demand be set aside in this case. I therefore make the following orders: 1. The statutory demand dated 18 December 2019 served by Mr Sleiman on Garawin Pty Ltd be set aside. 2. Mr Sleiman pay Garawin's costs of the application, as agreed or assessed.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 31 July 2020