Climate Change Technologies Pty Ltd v Golden Cowrie Holdings Pty Ltd

Background to the dispute 10 In order to provide the setting to this decision, it is necessary to set out some further background. 11 In about April 2016, Climate and Golden Cowrie entered into an oral contract for the rendering of research and development services by a Mr Condren to Climate. An affidavit from Mr Warburton, a director of Climate, which the DDR had accepted, indicated that the oral contract included terms that Golden Cowrie would: (1) supply the services of Mr Condren to Climate; (2) charge Climate an hourly rate of $69.27 plus GST in respect of the services performed by Mr Condren; (3) invoice Climate based on a 38 hour week commitment; (4) issue invoices to Climate on a monthly basis in respect of the services of Mr Condren provided during that month, and those invoices would become due and payable by Climate within seven days of issue. 12 The contract between Climate and Golden Cowrie had continued until terminated by Golden Cowrie on 14 October 2016. Golden Cowrie had issued invoices to Climate in respect of the months of June, July, August and September 2016 and Climate paid those invoices (totalling $48,644.20) in the manner contemplated by the oral contract. 13 Following the termination of the contract, Golden Cowrie issued a series of invoices to Climate, as follows: (1) on 15 October 2016, Invoice No 65 (dated 15 October 2016) in the sum of $9,143.64 (GST inclusive) for "R&D Labour September 120 hours @ $69.27/Hr"; (2) on 20 October 2016, an amended Invoice No 65 (dated 15 October 2016) to change the month to which the invoice referred from September to October 2016. The amount claimed remained at $9,143.64 (GST inclusive); (3) on 20 October 2016, Invoice No 66 (dated 20 October 2016) in the sum of $110,000 (GST inclusive) for "R&D contractor payment"; and (4) on 15 November 2016, a further version of Invoice No 65 (dated 15 October 2016) in the sum of $11,734.37 (GST inclusive) for: (a) "R&D Labour October 120 hours @ $69.27/Hr"; (b) "R&D Labour August 14 hours @ $69.27/Hr (as yet uncharged)"; and (c) "R&D Labour September 20 hours @ $69.27/Hr (as yet uncharged)". 14 For present purposes, the invoice for the amount $110,000 can be put to one side. It did not form any part of the debt which was the subject of the Statutory Demand. 15 During November 2016, the solicitors for Climate exchanged correspondence with Mr Condren regarding Golden Cowrie's claims. These included the following: by letter dated 2 November 2016, Climate's solicitors pointed out that Golden Cowrie's termination of the contract on 14 October 2016 meant that it had no entitlement to payment after that date and invited the submission of a revised invoice for the nine business days during October prior to Golden Cowrie's termination of services. The solicitors also foreshadowed a claim by Climate against Golden Cowrie by reason of the latter's termination of the contract without notice; on 13 November 2016, Mr Condren sent to Climate directly further copies of the invoices of 15 October 2016 ($9,143.64) and of 20 October 2016 ($110,000); Climate's lawyers responded to Mr Condren on 14 November 2016 referring him (relevantly) to their letter to him of 14 November 2016; by letter dated 15 November 2016, Mr Condren foreshadowed revising the 15 October 2016 invoice "to reflect the unpaid hours that were worked and not yet charged" and said that he would be pursuing Invoice No 66 (for $110,000). Mr Condren attached to that email a tax invoice dated 15 October 2016 showing that a total of $11,734.37 was due; by letter dated 21 November 2016, Climate's solicitors informed Mr Condren that it did not accept that he had worked 120 hours in October 2016 before the termination of the agreement on 14 October. The solicitors also noted that "the hours claimed contradict the agreed arrangement … that [Golden Cowrie] would invoice [Climate] a maximum of 38 hours per week". They invited Golden Cowrie to issue a revised invoice for work performed in October 2016, and questioned why the additional hours now claimed by Golden Cowrie for August and September 2016 had not been included in the previous invoices issued for those months. The solicitors requested timesheets or other evidence to support the claim for the additional hours. Climate's solicitors concluded their letter by saying: Our client wishes to resolve this matter amicably to the extent possible and is disappointed with the uncooperative approach you have taken to date. If it becomes necessary for our client to incur further legal costs in defending unsubstantiated claims it will seek to recover these costs from you and/or [Golden Cowrie]. 16 It seems there was no further communication between the parties until Golden Cowrie served the Statutory Demand on 4 May 2017. The debts which were the subject of the Statutory Demand are those set out in the version of Invoice No 65 provided to Climate on 15 November 2016. 17 Climate's solicitors sent a letter to Golden Cowrie's solicitors on 17 May 2017 containing an offer with the following elements: (1) Climate to pay Golden Cowrie, within seven days of acceptance of the proposal and delivery of a revised tax invoice reflecting these terms, the sum of $5,211.88 (inclusive of GST); (2) Golden Cowrie and Mr Condren to release Climate and its officers, agents and employees from any and all claims relating to the amounts claimed in the Statutory Demand; (3) Golden Cowrie to withdraw the demand immediately. Climate also made an alternative proposal but it was not suggested that it was material for present purposes. 18 Climate's offer of 17 May 2017 was open for acceptance to close of business on 19 May 2017. Golden Cowrie did not accept the offer and it thereby lapsed. As already noted, Climate then commenced the setting aside proceedings of the Statutory Demand on 25 May 2017. 19 In the affidavit supporting that application, Mr Warburton deposed to matters indicating the existence of a genuine dispute as to $6,522.49 of the amount demanded by Golden Cowrie. In relation to the balance, Mr Warburton deposed: [33] [Climate] is prepared to concede that a portion of the alleged debt comprising the Statutory Demand is undisputed, based upon 9 business days worked during the month of October, being the sum of $5,211.88 and, as it has previously advised [Golden Cowrie] and Mr Condren, is prepared to pay [the] same upon receipt of a revised tax invoice in that sum. 20 By letter dated 29 May 2017, Golden Cowrie's solicitors informed Climate's solicitors that they regarded the application to set aside the Statutory Demand as "an abuse of the Corporations Act 2001's (Act) and the Honourable Court's process". The solicitors accused Climate's solicitors of arranging for the application to be heard more than one month after the filing of the setting aside application and noted that the application itself had not been filed until the last of the 21 day fixed by the Corporations Act s 459(2)-(3). They suggested that Climate was engaging in "delaying tactics" due to it being insolvent and that Climate's directors were continuing to trade unlawfully. Neither the letter of 29 May 2017, nor any of the subsequent material, provided any particulars by way of justification of these assertions. Golden Cowrie's solicitors' letter concluded with a demand: (1) for payment of $5,211.88; (2) that Climate file and serve an amended originating process; (3) Climate provide evidence to Golden Cowrie of its solvency. 21 The solicitors required that these demands be complied with by 2 June 2017 "failing which we hold instructions to immediately bring winding up proceedings". 22 By letter dated 30 May 2017, Climate's solicitors refuted with accompanying detail the allegations made by the solicitors for Golden Cowrie and maintained that Climate was prepared to pay the sum of $5,211.88 "subject to our client first receiving a revised tax invoice for the correct amount". The solicitors continued: For reasons only known to your client, your client has chosen not to submit a revised tax invoice in respect of those 9 days of work. Unless and until that occurs there remains a dispute. In those circumstances it is appropriate for the application to seek an order setting aside the Statutory Demand in its entirety. 23 On 19 June 2017, Golden Cowrie's solicitors wrote again to Climate's solicitors, informing them that if Climate paid $5,211.88 by 12 noon on 23 June 2017, Golden Cowrie would consent to the setting aside application being dismissed with no order as to costs. They also said that Golden Cowrie would issue Climate with a revised invoice for $5,211.88 on payment of that amount, noting that the offer was made on the basis that Golden Cowrie did not waive its right to payment of the balance of the amount referred to in the Statutory Demand. 24 By letter dated 23 June 2017, Climate's solicitors rejected the offer of Golden Cowrie, principally because the Statutory Demand would still remain extant. Climate then made a counter proposal that it pay Golden Cowrie $5,211,88 subject to Golden Cowrie: (1) consenting to an order setting aside the statutory demand; (2) consenting to an order that it pay the costs of Climate on the application to set aside the Statutory Demand, as agreed or taxed; (3) providing Climate with a "valid" tax invoice. It said that this was required so as to allow Climate to claim an input tax credit. 25 Golden Cowrie rejected that offer with its solicitors saying in the letter of 26 June 2017: We note your comment in respect of your client still being "completely exposed" should it have accepted our client's offer. It is very clear from our letters dated 29 May 2017 and 19 June 2017 that the Defendant will not pursue the Plaintiff for the balance of the debt pursuant to its Statutory Demand and will withdraw it. To be clear, our client still maintains that the Plaintiff is liable to pay the balance, but will not seek to recover it by the statutory demand. Given you deliberately chose to serve the application on the very last day of the 21-day compliance period, the parties were prevented from reaching a sensible agreement whereby the Plaintiff would pay the undisputed amount and the Defendant would withdraw the demand upon receipt, avoiding the need to use the Court's time. We confirm that upon payment to the Defendant … of the sum of $5,211.88 by 4:00 pm on 27 June 2017, our instructions are to consent to an order to set aside the Statutory Demand with no order as to costs. 26 The assertion as to the effect of the letter dated 29 May 2017 made in the first of these paragraphs is not correct. No such proposal was made in that letter. The contention in the second paragraph as to the effect of the application having been filed on the 21st day is difficult to follow, all the more so by reason of Golden Cowrie's omission to respond to Climate's offer of 17 May 2017. I observe that this contention was repeated in the outline of submissions of Golden Cowrie filed on 27 June 2017. 27 In the hearing before the DDR, it was common ground that there was a "genuine dispute" for the purposes of s 459H of the Corporations Act in relation to the amount of $6,522.49 in the Statutory Demand. Climate contended that there was also a genuine dispute for the purposes of s 459H with respect to the balance of $5,211.88. This was so, Climate contended, because its agreement with Golden Cowrie was such that it had no liability to pay the amount of $5,211.88 unless and until Golden Cowrie issued it with an invoice for that sum. With no such invoice having been issued, there was accordingly a genuine dispute about whether it had a present liability to pay the sum of $5,211.88. 28 The DDR rejected that contention. He noted that there was no genuine dispute that Golden Cowrie had rendered services to Climate during the nine business days before the termination of the contact of 14 October 2016 and no dispute that the value of those services was at least $5,211.88. The DDR considered that Mr Warburton's evidence did not establish that the terms of the oral contact required Golden Cowrie to issue a further invoice for precisely $5,211.88 in order for that amount to become due. The DDR then concluded: I do not therefore consider that there is a genuine dispute about whether $5,211.88 is owed to Golden Cowrie. It is therefore appropriate for the Statutory Demand to be revised. The DDR then rejected a submission from Climate that any revision to the Statutory Demand should be on condition that an invoice for that amount be issued first.