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[2013] NSWSC 376
Supreme Court of NSW
2013-03-19
Brereton J, Mr J
Original judgment source is linked above.
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.
First argument - time for payment not yet arrived 16I turn then to consider the first of the arguments raised, which in essence was that the time for payment of the debt had not yet arrived. The defendant's case was that the time for payment had been fixed by the amendment agreement, and in particular clause 1, supported by clause 2 and the references therein to interest accruing if completion had not occurred by 21 October 2011. 17In my view, that argument first reads into clauses 1 and 2 nuances and implications that those clauses do not support. The clauses do not impose any obligation to complete or to pay on 21 October, but simply an obligation to pay interest if completion does not take place on that date. That completion - called "final completion" - could take place at some later date is clear from clause 3 and 4. So final completion has never taken place, and in my view the obligation to make the payment referred to in clause 3.2 of the asset sale agreement arises only at completion. On that basis, the first argument to which I have referred succeeds, and (subject to the s 51(2) argument to which I shall come) the purchase price was not due and payable at the time at which the notice of demand was served. 18The defendant argued that the letter of 8 October 2012 had the effect of specifying a time for payment, but it could only specify a time for completion, and even if it were a valid and effective notice to complete for that purpose, it could only have had the consequence of requiring the performance of completion, as distinct from merely payment of the money in question, on the date specified. This is because, contrary to the submissions of the defendant, this is a case in which the obligations of the purchaser to pay the purchase price, the vendor to deliver the title documents and the passage of risk contained respectively in clauses 3.2, 3.3 and 3.4 of the asset sale agreement were interdependent.
Second argument - no debt 19One consequence is that, for the purposes of the plaintiff's second argument, in the absence of actual performance of the vendor's obligation of delivery and passage of title, the vendor's remedy was - if time had been made essential - to terminate the contract and sue for damages for breach (which ordinarily would be measured by the difference between the contract price and the available market resale price of the goods), but not the price itself as a debt. 20The defendant argued, however, that it was entitled to maintain an action for the price as a debt - and that therefore there was a debt equivalent to the price - by operation of (NSW) Sale of Goods Act 1923, s 51(2). Section 51 of the Sale of Goods Act provides as follows: Action for price (1) Where under a contract of sale the property in the goods has passed to the buyer, and the buyer wrongfully neglects or refuses to pay for the goods according to the terms of the contract, the seller may maintain an action against the buyer for the price of the goods. (2) Where under a contract of sale the price is payable on a day certain irrespective of delivery, and the buyer wrongfully neglects or refuses to pay such price, the seller may maintain an action for the price, although the property in the goods has not passed and the goods have not been appropriated to the contract. 21Under this contract, as will be apparent from the provisions to which I have referred, property in the goods would pass to the buyer only on completion, and not before completion. As completion had not taken place, and property in the goods had not passed, s 51(1) is not applicable. The defendant argued that s 51(2) was applicable, as the contract specified that the price was payable "on a date certain irrespective of delivery". That date certain irrespective of delivery was said to be 21 October 2011. However, for the reasons already advanced in connection with the first argument, I do not accept that the contract specified a "date certain". Moreover, to my mind it is clear that it did not specify a date certain "irrespective of delivery". Completion remained an event which would involve interdependent obligations of payment and delivery. Payment was due on completion interdependently with delivery. 22Reference was made to the judgment of Rolfe DCJ in C-Mac Industries (Aust) Pty Ltd v Juan Carlos Invernizzi & Ors [2008] NSWDC 88. In that case, his Honour rejected an argument that an action for the balance of the purchase price was not maintainable because it did not represent a debt, property in the goods not having passed to the debtor. His Honour referred to s 51(2) as follows: 29 I reject the submission made by counsel for the defendant that the balance of the purchase price was not a debt owed to the plaintiff by the Debtor. The plaintiff's entitlement to sue the Debtor (and, indirectly, therefore, Goldberg) is governed by the provisions of s 51(2) of the Act as follows: "Where under a contract of sale the price is payable on a day certain irrespective of delivery, and the buyer wrongfully neglects or refuses to pay such price, the seller may maintain an action for the price, although the property in the goods has not passed and the goods have not been appropriated to the contract." 30 In Minister for Supply and Development v Servicemens' Cooperative Joinery Manufacturers Limited (1951) 82 CLR 621 at 642 the High Court rejected a submission along the lines made to this Court by Goldberg's counsel, namely, that until property had passed to a buyer the seller could not sue for the purchase money and only had a remedy for damages for breach of contract. As the High Court noted and as s 51(2) of the Act provides, the parties to a sale of goods contract can make any contract they please with respect to the payment of the purchase price of the goods. If the parties provide that the price is to be paid before property passes the seller can sue for the price as soon as it becomes payable because the payment of the price is a condition precedent of the passing of property in the goods to the purchaser. 31 In the present circumstances, payment was fixed under the plaintiff's terms and conditions. Clause 3 headed "Terms of Payment" provided in (D) as follows: " ... ... note payment terms: Settlement strictly 30 days after month of purchase. If your account exceeds our terms, your orders will be held pending payment." 23As to that, in distinction to what is said in the closing sentence of paragraph 30 of his Honour's judgment, in this case the parties did not provide that the price was to be paid before property passes. Moreover, in the present case there is no provision equivalent to the term of payment referred to in paragraph 31 of his Honour's judgment. 24It follows, in my judgment, that in this case the price was not payable on a day certain irrespective of delivery, and s 51(2) does not apply. In those circumstances, the defendant's remedy was to sue for damages for non-acceptance under s 52, rather than for the price under s 51, of the Sale of Goods Act. A claim for damages under s 52 is not a liquidated debt presently due and payable at the date on which the creditor's statutory demand was issued and served. 25Somewhat curiously, the plaintiff initially invited the Court to determine the dispute rather than merely finding that there was an arguable dispute, whereas the defendant initially submitted that the Court would rarely determine the dispute. It may be that on more exhaustive consideration than has occurred on the present application, a court might reach a different view, and I do not intend by these conclusions to finally resolve these questions. It is, in any event, plain from what I have said that in my judgment there is a genuine dispute such as to require the setting aside of the creditor's statutory demand under s 459H. I need not consider the other arguments that have been advanced, including those under s 459J. 26I order that the creditor's statutory demand dated 18 October 2012 and served by the defendant on the plaintiff on 22 October 2012 be set aside. 27I order that the defendant pay the plaintiff's costs, assessed in the sum of $12,500.
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: 07 June 2013
C-Mac Industries (Aust) Pty Ltd
Juan Carlos Inverernizzi & Ors