C-Mac Industries (Aust) Pty Ltd v Juan Carlos Inverernizzi & Ors

Judgment (EX Tempore) 1HIS HONOUR: By originating process filed on 7 November 2012, the plaintiff Carbon Polymers Limited ("CBP") makes application pursuant to (Cth) Corporations Act 2001, s 459G, for an order setting aside pursuant to ss 459H and 459J a statutory demand dated 18 October and served on 19 October 2012 by the defendant Tyre Recycling Group Pty Limited ("TRG"), which demand claimed a total of $248,427.64, comprised of an amount said to be owing pursuant to an Asset Sale Agreement dated 25 August 2011 of $550,000 plus GST, being a total of $605,000, plus interest said to be owing under an amendment agreement to 18 October 2012, amounting to $27,278.18, plus an amount for temporary fencing costs said to be due under the amendment agreement to 18 October 2012, amounting to $1,686.45, plus interest pursuant to the amendment agreement to 18 October 2012, said to amount to $24,463.01, all being a total of $658,427.64, less payments to date of $410,000. As will be apparent from that description, the claimed debt arises under an Asset Sale Agreement made on 25 August 2011 and an amendment thereto made on 2 November 2011 to which I now turn. 2By the Asset Sale Agreement, TRG agreed to sell and CBP agreed to purchase certain assets defined as intellectual property, business relationships, and tyre recycling plant for a purchase price of $550,000 plus GST. Clause 1.1 of the Asset Sale Agreement contained a number of relevant definitions, as follows: "Completion" means the completion of the sale and purchase of the Assets under Clause 3; "Completion Date" means 45 days from the date of the deposit being 12 October 2011; "Deposit Date" means the deposit made by the Purchaser on the 6 September 2011 into the bank account of the Vendor 3Clause 3.1 provided that completion shall occur at 12 noon on the completion date at the offices of the purchaser, or such other time and/or place as the parties may agree in writing. Clause 3.2 provided that at completion the purchaser shall pay the vendor the purchase price. Clause 3.3 provided that at completion the vendor will deliver to the purchaser any documents required to transfer the intellectual property and any documents required to transfer the plant and equipment. Clause 3.4 provided that title to the assets passes to the purchaser on completion and that possession of the assets and risk related to the assets passes to the purchaser on completion. 4The plaintiff paid the deposit under the agreement of $10,000 to TRG on 6 September 2011. In those circumstances, the completion date, in accordance with the definition to which I have referred, was 12 October 2011. Completion did not take place on that date or for that matter at all. On 2 November 2011, the parties entered into the amendment agreement. Relevantly, it recited that it was an amendment to the agreement of 25 August 2011. Clause 1 provided that if completion had not occurred at 12 noon on 21 October 2011, then TRG would be entitled to receive payment of interest from CBP at the rate of 10% per annum from 21 October 2011 to the actual date of final completion, the amount to be added to the final settlement price on final completion and interest to accrue on a daily basis. 5Clause 2 provided that if completion had not occurred at 12 noon on 21 October 2011 and the subject items remained stored at specified premises, then CBP would pay the cost of rent for that storage, being $2,291.66 per month inclusive of GST, and $141.68 per month inclusive of GST for temporary fencing. Clause 3, which was headed "Final Completion", provided that the purchaser will use its best endeavours to finalise completion and will keep the vendor notified of the progress in finalising debt facilities to enable final completion. 6Subsequently, on 6 December 2011, CBP paid TRG $250,000 on account of the purchase price. On 8 December 2011, CBP paid TRG a further $150,000 on account of the purchase price. Arrangements were made for completion to occur on 31 August 2012, but this did not occur. On 7 September 2012, CBP notified TRG that it had scheduled completion for 1 October 2012, but completion did not occur on that date. On 8 October 2012, the solicitors for TRG wrote to CBP demanding payment of the balance purchase price then outstanding, including interest, amounting in all to $249,370.80, by 12 October 2012. 7CBP replied on 22 October 2012, denying that they were in default under the Asset Sale Agreement as amended and asserting that it would be in a position to settle the balance soon. On the same day, TRG served the creditors statutory demand to which I have referred. 8Although the s 459G affidavit raised numerous other grounds, some of them are not pressed, and in substance the case really requires consideration only of two issues: first, whether the debt claimed was "due and payable" at the time when the demand was served; and, secondly, whether there was in existence at that date any relevant debt at all. 9The s 459G affidavit, sworn by Andrew Dowling Howard on 7 September 2012, contains the following relevant provisions, 6. Carbon Polymers can demonstrate a genuine dispute of timing of the repayment of the debt and disputes owing all monies to Tyre Recycling Group Pty Ltd ... 11. CBP and TRG are parties to an Asset Sale Agreement dated 25 August 2011 (the 1st Deed). This is evidenced by Exhibit D. 12. CBP and TRG are parties to an Amendment to an Asset Sale Agreement dated 2 November 2011 (the 2nd Deed). This is evidenced by Exhibit E. 13. CBP has maintained the position of disputing the timing of the debt to TRG. TRG have known of the existence of a dispute regarding this timing and the amount. 14. Any non-payment of the debt obligation by CPB to TRG will accrue as per the clause of the 2nd deed. This is evidenced by Exhibit E. ... 16. TRG has not complied with Clause 3.3 of the first Deed as it has not delivered all the assets described in the agreement. This is evidenced by Exhibit D ... 18. Until Final Completion under the 2nd Deed, TRG holds security over the assets totalling $550,000. This is evidenced by Exhibits D and E. 10The second sentence of paragraph 13, and the first sentence of paragraph 18 were received as evidence only to describe the scope of the dispute, and not as evidence of the truth of the assertions made. 11On any view, paragraph 13 of the affidavit raises a dispute as to the timing of the debt. For the defendant it was argued that the affidavit did not raise a dispute as to whether the debt existed at all on the basis subsequently elaborated in submissions, namely that, the agreement not having been completed, there was no debt in respect of the purchase price but only at best a claim for damages for breach of contract (which ordinarily would reflect the difference between the price in the contract and the resale value of the subject property). On that basis, it was submitted that that argument was not available to the plaintiff on the Graywinter principle. 12The Court of Appeal has most recently discussed the Graywinter principle in Infratel Networks Pty Ltd v Gundry's Telco & Rigging Pty Ltd [2012] NSWCA 365, where Young AJA cited with approval the summary of Ward J, as her Honour then was, in Hopetoun Kembla Investments Pty Limited v JPR Legal Pty Limited [2011] NSWSC 1343, to the effect that while mere assertions were insufficient, the vital question was whether expressly or by reasonably available inference the grounds of challenge to the statutory demand were sufficiently identified in the affidavit. 13It has not infrequently been accepted that in cases where the dispute depends on the construction of an agreement, the dispute will sufficiently be raised by annexure of the relevant agreement to the s 459G affidavit. 14The mere annexure of a relevant document would not suffice to give the requisite notice in many, if not most, cases. On the other hand, not much is required in the covering affidavit to raise a dispute to the effect that upon the proper construction of the annexed agreement and in the events which have happened, the debt has not become due or payable or does not exist. 15In this case, the exhibiting to the affidavit of the Asset Sale Agreement and the amendment agreement by paragraphs 11 and 12 of the s 459G affidavit, the disputing of the timing of the debt in paragraph 13, the reference to the accrual of interest in paragraph 14, and the assertion of non-delivery in paragraph 16, read in the light of paragraph 6 raising a dispute as to "all moneys", sufficiently notified the creditor that there was a dispute as to whether the amount claimed in the demand was due and owing at the date of issue of the demand upon the proper construction of the agreement and in the events which have happened, the essential event being non-delivery of the assets described in the agreement (which was one of the obligations of the creditor on completion). On that basis, it seems to me that the second as well as the first argument to which I have referred is open to the plaintiff under the Graywinter principle.