CGI Information Systems & Management Consults Pty Ltd v Apra Consulting Pty Ltd

APPLICATION TO TENDER BUNDLE OF DOCUMENTS

1. HIS HONOUR: The defendant seeks leave to tender a bundle of some 33 documents, mainly email correspondence, which he contends will demonstrate that he was rendering services as General Manager, in response to the plaintiff's contention that he never did so. The potential relevance of the material is not in issue, although given the nature of the application before the Court I have doubts as to its ultimate decisiveness.
2. The defendant needs leave to rely on this material because it was served at the last minute. As was rightly pointed out in submissions on the earlier motion, this material might well have been able to be dealt with had it been served as late as last Friday; when it was in the defendant's solicitors' possession; but it was not served until yesterday, and the plaintiff is, quite reasonably, just not in a position to deal with it now.
3. In circumstances where, in response to notices to attend for cross-examination, the plaintiff has procured the attendance of witnesses from overseas, I do not see why the defendant should be granted the indulgence of relying on this belated material when it is so late and there is no satisfactory explanation as to why it is late, and the likely consequence of admitting it would be to necessitate an adjournment.
4. I refuse leave to tender the tender bundle.

APPLICATION TO SET ASIDE CREDITOR'S STATUTORY DEMAND

1. HIS HONOUR: By originating process filed on 24 May 2016, the plaintiff Antaeus Group Pty Limited seeks an order setting aside the statutory demand dated 2 May 2016 served on it by the defendant Jian Guo Yuan. The creditor's statutory demand itself demanded payment of the amount of $240,376.79, described in the schedule to the demand as "unpaid salary due from the company to the creditor for the period 15 July 2011 to 2 May 2016, $240,376.79". The demand was verified by Mr Yuan's affidavit of 2 May 2016, in which he said: (1) Following the agreement between myself and the directors of the debtor company from 15 July 2011 I was employed by the debtor company as general manager entitled to an annual salary of $50,000 Australian before tax. (2) Annexed hereto and marked with the letter A is a true copy of the minutes of a meeting of a debtor company held on 13 September 2011 confirming a resolution that I be employed as general manager of the debtor company from 15 July 2011 and entitled to an annual salary of $50,000 Australian before tax. The said minutes are described in the Mandarin language. (3) Annexed hereto and marked with the letter B is a true copy of a translation of the said minutes from the Mandarin language to the English language.
2. The plaintiff applies pursuant to (CTH) Corporations Act 2001, s 459G, to have the demand set aside on grounds that there is a genuine dispute as to the existence of the debt. The defendant contends that the application was not duly made under s 459G, as it was not served within the prescribed 21-day period. Accordingly, the issues which require resolution are, first, whether the application was duly made within the 21-day period; and, secondly, whether there is a genuine dispute as to the existence of the debt the subject of the demand.

Whether application duly made within 21-day period

1. The question of service itself involves two subsidiary questions: first, when was the demand served on the plaintiff (which describes the start of the 21-day period); and secondly, when was the originating process and supporting affidavit served on the defendant (which must be within the 21-day period).

Service of demand

1. The evidence of service of the demand is somewhat dubious as no one deposes to having personally posted an envelope containing the statutory demand. There is evidence of the defendant, on information and belief from his solicitor, that his solicitor did so at 1.50pm on 2 May 2016. A copy of the Express Post envelope which is said to have been posted is annexed, together with the tracking confirmation; but save for inadmissible hearsay assertion there is no evidence as to what was in the envelope. However, given that the plaintiff accepts that it in due course received the creditor's statutory demand and verifying affidavit, I will infer that the envelope contained the statutory demand and supporting affidavit.
2. Absent evidence to the contrary, service of a document sent by post is presumed to have taken place on the fourth day after posting. The only evidence tendered on the issue is an Express Post tracking document, the number on which accords with that which was apparently affixed to the envelope. The tracking document was printed on 23 May 2016, and contains the following information: Summary: Delivered. Details: (Line 1) 5/3/2016 2: 20:38am delivered Alexandria, NSW delivered. Line 2) 5/2/2016 5: 14:46pm in transit Alexandria, NSW with Australia Post for delivery today.
3. The defendant submitted that what I have described as Line 1, together with the summary statement "Delivered", proves that the document was delivered to the registered office on 5 March 2016. There is no evidence to explain what the entries on the tracking document mean, and it is left to the Court to draw inferences from or interpret it. It seems to me that Line 1 means at least that the document was delivered to the Alexandria Post Office - that is to say, Alexandria in New South Wales - at 2.20am on 5 March 2016. It does not say that it was delivered to the precise address to which it was addressed at any time on that day. It is certainly improbable in the extreme that it was delivered to the address at 2.20am on 5 March.
4. One conceivable interpretation of the document is that it was delivered later that day, but the document is equivocal in that respect. I do not think the document is sufficient to displace the presumption that the course of post saw the document delivered four days after it was posted. To the contrary, it seems to me that this document is insufficient to prove that it was delivered to that address at an earlier time.
5. Accordingly, absent any evidence as to the ordinary course of post, (NSW) Evidence Act 1995, s 160, applies to presume delivery on the fourth working day after the document was posted - namely, on 6 May 2016. On that footing, the 21-day period expired on 27 May 2016. If, however, service was effected on 3 May - as the defendant says - then the 21-day period would have expired on 24 May 2016.

Service of originating process and supporting affidavit

1. The second subsidiary question is, when was the originating process and supporting affidavit served on the defendant. There were a number of attempts at service. First, Tian Zhou Yan attended at Unit 1007, 2-14 Kings Cross Road, Potts Point, at 5.15pm and 5.30pm on 24 May, but was on the first occasion unable to access Unit 1007 and could not find a place to leave the documents outside the suite, nor a mail box, nor a concierge with whom the documents might have been left. Returning again at 5.30pm, it was not possible to access the lift of the building. Accordingly, there was no service on that occasion. The address at Unit 1007, 2-14 Kings Cross Road, was the address for service specified in the creditor's statutory demand. It may be unfortunate that the process server did not take the step of affixing the documents to the door of Unit 1007, as there would then have been service at the specified address, for service and the matter would have been beyond argument thereafter.
2. However, still on 24 May 2016, at about 6.30pm, the originating process and supporting affidavit were placed in the letterbox of Unit 160, 120-140 Pyrmont Road, Pyrmont, which is the defendant's ordinary place of residence. (NSW) Interpretation Act 1987, s 28A, provides that where service of a document is required, it may be served by leaving it at the person's ordinary place of residence. The prevailing view is that s 28A applies to an originating process under Corporations Act, s 459G: see World Square Realty Pty Ltd [2013] NSWSC 307 at [15]. In any event, it is clear that personal service of such an application is not required, even where the creditor is a natural person, because of the requirement that an address for service be provided.
3. Moreover, on 24 May 2016 at 11.10pm Adelaide time (which would be 11.40pm Sydney time, if it be relevant), the defendant received by email a letter enclosing the originating process and supporting affidavit; and while he says that he had difficulty in opening and reading them, he does not say that he was unable to open or read them. In any event, the covering letter made clear that the originating process and supporting affidavit were enclosed. On any view, he was on notice from that time, on 24 May, of the application and affidavit and could, if he wished, have taken steps to access the application and supporting affidavit.
4. If, contrary to my principal view that personal service is not required and s 28A is available, the (NSW) Uniform Civil Procedure Rules 2005 have the effect that personal service is required, nonetheless I would be satisfied for the purposes of those rules that steps had been taken, otherwise than by service in accordance with the rules, to bring the documents to the attention of the defendant, and I would therefore make an order under UCPR Pt 10, r 14(3), directing that the originating process be taken to have been served on the defendant on 24 May 2016. Accordingly, even if, contrary to my principal view that the demand was not served until 6 May, it was actually served on 3 May, nonetheless the application and supporting affidavit were still served within the 21-day period on 24 May.
5. I should say that a submission was initially made, but I think ultimately not pressed, that there was not effective service for the purposes of s 459G because service of the supporting affidavit was not proved. The affidavit of Tian Zhou Yan on any view shows that the affidavit of Hong Fei Lei of 24 May 2016, as well as the originating process, was served on each occasion.
6. Accordingly, the application was duly made under s 459G.

Whether there is genuine dispute as to existence of debt

1. I turn to the question of genuine dispute. The test for whether a genuine dispute has been raised has been expressed in varying terminology, such as that the dispute raised is "not plainly vexatious or frivolous", or that it "may have substance" or - and this is probably the most frequently used - that it involves "a plausible contention requiring investigation". It is similar to the test that applies on an application for summary judgment [see Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 787]. An often cited explanation of the test is to be found in the judgment of Barrett J (as his Honour then was) in CGI Information Systems & Management Consults Pty Ltd v Apra Consulting Pty Ltd [2003] NSWSC 728; (2003) 47 ACSR 100 (at [16]): The task faced by the company challenging a statutory demand on the genuine dispute ground is by no means a difficult or demanding one. The company will fail in that task only if it is found upon the hearing of its s 459G application that the contentions upon which it seeks to rely in mounting its challenge are so devoid in substance that no further investigation is warranted. 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.
2. So to summarise, the test that the plaintiff must surmount is an undemanding one. All the plaintiff has to do is to show that on but one issue there is a plausible contention warranting further investigation, and it is only if the plaintiff's case is so transparently devoid of substance that no further investigation is warranted that it will fail.
3. In that context, it is useful first to understand the defendant's case. The defendant contends that it was agreed between the company and him that he would be employed as its general manager from 15 July 2011 on a salary of $50,000 per annum. He says that that agreement is evidenced by a minute of a meeting of directors of the company - to which I have already referred in passing and to which I will return - which was conveyed to him by an email from Mr Guohua Lei of 23 September 2011, and which he accepted by performing work for the company as its general manager thereafter. He says that the email forwarding the minute was sent in the context of conversations between him and Mr Lei to the effect that Mr Lei said that the arrangement, that he would get 10% of the company and a salary of AUS$50,000 per annum as general manager, was settled, and that he thereafter did work as general manager. The plaintiff's case against that is that although there was a directors' meeting on 13 September 2011, there was no resolution of that meeting, and the minute was only a draft prepared by one of the interested parties to which Mr Lei says he never agreed; that the draft minute was forwarded to Mr Yuan, not by way of an offer capable of immediate acceptance, but by way of information because Mr Yuan was in any event a director of the company; that the conversations which Mr Yuan says occurred at the time of the email did not occur; that while there were some discussions between the other directors and Mr Yuan about his appointment, no resolution or any agreement was ever reached; and that Mr Yuan was never appointed and never worked as general manager, but that Hong Fei Lei was appointed and worked as general manager.
4. It suffices from that summary to show that there was plainly, and is plainly, a dispute as to the existence of the debt. The question is whether the dispute is a genuine one, in the sense to which I have adverted. As it seems to me, the defendant's case - even before one comes to the plaintiff's rebuttal of it - is not one which is manifestly strong. Even if there were a resolution of the directors' meeting in question, that does not establish a contract between the company and the defendant. There needs to be an offer and acceptance. Even assuming that there was a resolution, the conveyance of that to the defendant who, on any view, was at the time a director but had not been present at the meeting, is equivocal. It was by an email which itself made no comment to the effect that this was an offer capable of acceptance, and that email was the last in a chain which showed that there were elements which were still being checked and confirmed. There was no evidence, other than the disputed conversations, of acceptance in terms of any such offer; in particular, there is no responsive email, and there is no other correspondence apparently accepting the offer. There is no written contract of employment, which is notable in circumstances where there is evidence that the company entered into formal written contracts of employment with employees of lesser status than the general manager. There is extraordinarily slight evidence that the defendant ever did any work for the company. Even the emails (which were tendered through cross-examination and were produced in the proceedings at a very belated stage, such that the plaintiff was disabled from investigating them or, for example, rebutting them by producing a bundle of emails which might have shown something different) do not show the defendant doing any work as general manager. True he was an addressee on emails from various consultants and agents, as was Mr Hong Fei Lei; and true the emails in question (which may well have only been some of a wider class) were usually although not exclusively addressed to the defendant as prime addressee and Mr Lei as a "cc" addressee; but that is entirely consistent with the defendant's status as a director and, in any event, all it demonstrates is that the consultants or others who sent those emails chose to address them to the defendant; they do not demonstrate the defendant doing any work. This is significant, because one would have thought that had the defendant done any work as general manager for the company, it would have been easy for him to produce documentary records showing at least some of the work that he had done, as opposed to merely receiving emails from others, which even he does not say in his evidence that he read.
5. It was argued that an inference should be drawn from the fact that these emails were sent to the defendant but not to the other directors, that he had a role above and beyond the other directors. Mr Guohua Lei said that Mr Yuan had originally been made a director because there was a requirement, as he understood it, to have an Australian citizen as a director, and it is likely that the relationship between Mr Yuan and Mr Guohua Lei in 2011 was quite a close one, and that Mr Yuan was well trusted by Mr Lei. He may have been the point of communication for any number of reasons. It was explained that Mr Lei junior served as the representative of Mr Lei senior in Australia, and that that explained why he was not included on emails. It is true that an explanation has not at this stage been proffered as to why Ms Xixia Han, the other director, was not included, but that issue was raised only at the heel of the hunt, and in any event it does not seem to me an inevitable inference from those circumstances that it was because Mr Yuan was known to be the general manager. Moreover, the creditor's statutory demand now admittedly includes an unjustifiable claim for the period after March 2015, since on any view Mr Yuan ceased to perform any work for the plaintiff in March 2015.
6. Mr Yuan also conceded that he never provided a tax file declaration to the company, which one would have expected in the case of an employee, and that he never used an Antaeus email account - although he had other email accounts associated with other entities - and that he never had an electronic signature block describing him as general manager or otherwise related to Antaeus.
7. All those matters taken together plainly leave open a plausible contention that he did not ever work for Antaeus. It may well be that at a contested hearing, in which Mr Yuan is the plaintiff and Antaeus is the defendant, a judge might be persuaded to infer that he did in fact act as general manager, but that is not the test before me, as follows from the authorities to which I have referred above.
8. Further, the plaintiff's evidence provides an alternative explanation.
9. First, the plaintiff contends - chiefly through the evidence of Mr Guohua Lei - that the purported minutes were a draft and did not reflect any resolution of the directors. The argument that they are not deprived of effect just because they were signed by another director who had not been present is misconceived. Formal irregularities may be disregarded, but not so as to convert into a minute of a resolution a document which does not record a resolution in the first place. The plaintiff's contention is not that the minute is an irregular document, but that there never was a resolution as recorded in it - although, as it seems to me, this is on the margin of the case, because the real issue is whether an offer was made to the defendant, not whether a resolution was passed. There is on Mr Guohua Lei's evidence - which has not been contradicted in this respect - plainly an arguable case that the "minute" does not record a resolution that was ever adopted or agreed to by the directors.
10. Secondly, Mr Lei denies that the conversations on which Mr Yuan relies ever took place. That gives rise to a contested question of fact turning on credit as to whether or not oral conversations took place, in which it is word against word of two witnesses, on which ultimately the defendant bears the onus of proof. It cannot be said that the plaintiff's contention that those conversations did not take place is implausible: it might not be accepted at trial, but it cannot be rejected on this application as implausible.
11. Thirdly, the plaintiff says that Mr Hong Fei Lei was acting as general manager at relevant times, and there is at least some contemporaneous evidence of a documentary kind - including an application to amend a development application - which tends to prove that he was acting in that capacity.
12. Fourthly, there is the suggestion that Mr Yuan was made a director due to the requirement to have an Australian citizen or resident director, which is also a plausible contention.
13. Finally, insofar as it is said that it must have been intended that he would receive some remuneration as he was not a shareholder in Antaeus though a director, an answer that was proffered was that more or less contemporaneously with these events in 2011, Mr Guohua Lei transferred his interest in another company, which until then was jointly held with Mr Yuan, to Mr Yuan, and that that was, together with the award of the construction contract for the Erskineville Road project, reward to Mr Yuan for his role.
14. Even without those considerations, it seems to me that there is a plausible contention that there was no such contract as that for which the defendant contends, and those matters raised by the plaintiff fortify it.
15. Questions of whether or not there is a genuine dispute or a manufactured dispute can also involve a subjective element, although as far as possible one looks to see objectively whether there is such a dispute. But the relevant subjective factors in this case include that for a period of more than five years since the contract was allegedly made, for a salary which one would expect to be paid weekly or fortnightly or on the outside monthly, there was no complaint made about its non-payment, even after Mr Yuan resigned as a director in March 2015. The first occasion on which the evidence reveals it having been raised was in a letter to a banker on 13 January 2016. Even then, it does not appear to have been raised with the plaintiff. In cross-examination, Mr Yuan suggested that he complained orally to Mr Guohua Lei when he resigned on 23 March 2015 as a director, but there is no documentary support for this. Then, when finally on 20 April 2016 Mr Yuan had his solicitors send a letter of demand to the plaintiff - which so far as I can tell was the first occasion on which it was raised with the plaintiff - the plaintiff immediately disputed the liability by letter of 2 May 2016. It is significant in these matters, although by no means determinative, that there is clearly a dispute even before the creditor's statutory demand was issued. In other words, the demand was issued in the face of knowledge that there was a dispute as to the debt.
16. That history, particularly the absence of any demand or claim for five years, and in the context where this was allegedly a salary, is a powerful factor. I do acknowledge that in different cultures there may be different attitudes to these matters, and that may provide an explanation; but there is at least a plausible contention that the failure to demand money payable by way of salary over a five year period is indicative that there was no genuine belief in an entitlement to any such salary.

Conclusion

1. Accordingly, while it may be that the defendant has an arguable case for the debt claimed in the creditor's statutory demand, it is by no means one that does not admit of a plausible contention.
2. The Court therefore orders that: 1. the creditor's statutory demand dated 2 May 2016 and served by the defendant on the plaintiff be set aside. 2. the defendant pay the plaintiff's costs fixed in the sum of $33,000.

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: 15 November 2016