Europecars Pty Ltd v Century International Ltd

EX TEMPORE REASONS FOR JUDGMENT 1 This is an application under s 459G of the Corporations Law to set aside a statutory demand. The demand was initially for a sum of rather more than Ł100,000 sterling. 2 The debt claimed in the demand is said to have arisen in this way. The respondent, which is a company incorporated in the United Kingdom and operates principally there, though with associated businesses in other countries as well, carries on a business of renting cars to holiday makers. The applicant, in accordance with arrangements made between it and the respondent, arranged bookings in Australia for the renting of cars from the respondent by Australian tourists. The applicant appears to have invoiced its customers for the amount of hire and provided to the customers vouchers, which were in turn presented to the respondent. The respondent then billed the applicant for the amount payable for the hire of the cars. 3 In addition there were some other arrangements between the applicant and the respondent which can be summarised for present purposes as follows. The respondent agreed to make payments or allow credits to the applicant for particular promotional activities undertaken by the applicant in relation to the services offered to tourists by the respondent. Additionally, the applicant was entitled to payments or credits in respect of bookings made with the respondent, or associated businesses, by other agencies introduced to the respondent by the applicant, one of those agencies being an agency which has been described by the initials CRC. 4 Of the debt claimed by the respondent in the statutory demand, a substantial amount is agreed. There are, however, four particular components of the amount claimed which are not agreed. Three of them have not been the subject of any particular argument before me; they were claims for relatively small amounts; the fourth, however, has been the subject of evidence and considerable argument: it is an amount of Ł32,231, described as a reconciliation to 31 May 1998. Additionally, the applicant says that the statutory demand does not, but should, make allowance for four separate sums of Ł10,000 (possibly, in the case of the last of them, a sum rather greater than Ł10,000, though there are some obscurities about that). 5 Three of the amounts of Ł10,000 claimed arise from credits for promotions of the kinds to which I have referred. The fourth is an amount of, or on account of, commission due for bookings made through CRC. In turn, the respondent concedes that it has now recovered from other sources sums in total reducing the amount owing to Ł41,070. 6 Accordingly, if the applicant makes good its assertion that there is a genuine dispute in relation to the sum of Ł32,231, and if in addition it makes good its claim that it is entitled to payments or credits amounting to Ł40,000, which ought to be offset against the debt claimed in the statutory demand, then the consequence will be that the Court must set aside the demand, being satisfied that there is a genuine dispute as to the Ł32,231 and an offsetting claim of Ł40,000 or perhaps slightly more, so that the substantiated amount is no greater than nil, indeed, is a negative amount. 7 I must therefore consider the evidence and submissions in relation both to the amount claimed to be the subject of a genuine dispute and to the four allegedly offsetting claims. In doing so, I must bear in mind that it is for the applicant to satisfy me as to each of the limbs, that is to say, genuine dispute and offsetting amount, in accordance with the tests which have been considered in a number of authorities, several of which are summarised in the decision of the Full Court to which each of the parties referred me, Spencer Constructions Pty Limited v G. & M. Aldridge Pty Limited (1997) 24 ACSR 353. 8 Particularly, the Full Court appears to have accepted formulations such as that of the then Chief Judge in Equity in the Supreme Court of New South Wales in Eyota Pty Limited v Hanawe Pty Limited (1994) 12 ACSR 785 at 787, that the expression "genuine dispute" connotes a plausible contention requiring investigation and raises much the same sort of considerations as the serious question to be tried criterion which arises on an application for an interlocutory injunction or for the extension or removal of a caveat. 9 This does not mean that the court will accept uncritically, as giving rise to a genuine dispute, every statement and affidavit however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent or inherently improbable in itself. 10 However, in considering applications such as the present, the court will not determine contested issues of fact or law which have a significant or substantial basis. 11 With those propositions in mind, I turn to the two groups of matters in contention. First, the Ł32,231. The claim for the amount specified in the statutory demand was initially supported by an affidavit dated 14 October 1998 sworn by the managing director of the respondent, Mr Robert Brendan Burrowes. To that affidavit there was annexed a schedule setting out the way in which the amount claimed to be due was calculated. That was responded to by the managing director of the applicant, Mr Pryor, by his affidavit of 26 November 1998; Mr Pryor exhibited to his affidavit a copy of the schedule annexed to Mr Burrowes' affidavit and indicated on that copy those amounts with which he claimed not to agree. Among those was the Ł32,231. As to that, he said only this: "Now exhibited to me is a summary sheet showing where I disagree with the charges levied. Basically the respondent performed and billed us for reconciliations which he had no idea as to the methodology employed. We dispute the bill." 12 To that Mr Burrowes replied in an affidavit of 14 January 1999 in which he provided an itemisation of the sum Ł32,231 claimed. The itemisation is detailed and extends over about two and a quarter pages. It lists, by reference number and name and date of commencement of hiring, a series of particular car hire transactions, the total amount due in respect of which adds up in fact to Ł33,230.50, that is, about Ł1000 more than the amount actually claimed. 13 No further evidence was filed on behalf of the applicant, nor did it seek to lead oral evidence, on that matter. The acting managing director of the respondent, Mr David Frank Griffin, who gave evidence for the respondent (Mr Burrowes being ill), was to some extent, and it is fair to say at some length, taxed in cross examination as to the schedule of transactions said to give rise to the claim for Ł32,231. Particularly, it was put to him that a number of the claims were old claims and that the document was simply "lobbed on to" the applicant. Mr Griffin was not, however, cross examined as to the correctness of any individual item in the schedule or, indeed, as to the correctness of the total amount claimed to be owing as a result of the transactions listed. It is, I suppose, possible on a benevolent construction to regard the cross examination as approaching a suggestion that there was an element of concoction involved, but if that was what was intended it was not clearly put and certainly it was not admitted. 14 It was also put to me in submissions that it was plain that Mr Griffin had not armed himself before giving evidence with precise information as to the detail of the claims made in the statutory demand. That was demonstrated, it was said (and with some justification), by his response to other matters put to him in cross‑examination. Thus, it was said, little would have been gained by questioning him on the detail of the schedule. 15 But in the end, and without considering matters put to me relating to the rule in Browne v Dunn I think I must hold that that simply will not do for the purpose of discharging the burden that rests upon the applicant. The state of the evidence is that in response to evidence that Mr Pryor disputed a particular amount on the footing that he did not know how it was calculated, Mr Burrowes provided a detailed schedule showing how it was calculated. No further evidence was given by the applicant: particularly, the applicant did not attempt to explain whether, having seen the basis of the calculation, he continued to dispute the whole amount or any particular items making up the amount. I think it inevitably follows that the applicant's evidence on this matter must be regarded as mere assertion and that I should hold that the applicant has not discharged the burden of satisfying me that, as to the item in question, there is a genuine dispute. 16 The claimed credits give rise to a rather different question. The issue involved is essentially, I think, one of law and it arises in this way. The arrangements between the parties, under which the credits became due, were entered into before April 1998, apparently in the latter part of 1997. In April 1998, the applicant transferred to a company called Auto Leisure Pty Limited all or, on another view, certain of its assets and made arrangements under which liabilities which would otherwise, after the date of transfer, have fallen upon the applicant, would instead fall upon Auto Leisure. 17 There is no dispute about the facts. It is agreed that the claimed promotional credits were indeed due under the arrangements to which I have referred; it is also agreed that, in relation to the CRC transactions, there was a credit due of at least Ł10,000. The issue between the parties is whether the applicant is entitled to the credits or whether, on the other hand, Auto Leisure, which as I understand it is now in liquidation, is entitled to them. 18 That issue is to be determined by construing the transaction (of transfer or assignment) involving the applicant, Auto Leisure and the respondent. There is no dispute as to the terms of what was agreed between those parties. Mr Pryor's evidence, which Mr Burrowes accepted, was that in a conversation between them Mr Pryor said: "Because of the hassle with Europe Cars Inter Rent and some other reasons, we now have a company, Auto Leisure Pty Limited ACN081651872. It is taking over the business. It is taking on all new liabilities and it has the benefit of all past agreements which Europe Cars made, including the commission agreements. Do you have any problem with this?" To which Mr Burrows replied: "None whatsoever, that's the way we will bill you in the future, we'll just draw a line now and treat Auto Leisure as if it is Europe Cars in the future'." 19 The other piece of evidence to which I should refer is, again, that of Mr Pryor. In explaining how it was that the transfer from the applicant to Auto Leisure occurred, he said: "I did this because a company called Europe Car Inter Rent Limited, based in Paris complained about our use of the name Europe Cars as being too close to theirs and threatened legal action. I therefore decided to transfer all assets of Europe Cars Pty Limited to Auto Leisure Pty Limited for a nominal consideration. This transfer included the benefit of agreements held by the applicant with the respondent herein." 20 The transactions between the three parties after those events appears to have been largely consistent with the nature of the transaction suggested by the evidence. In particular, the evidence is that the respondent invoiced the applicant after these events only in respect of hirings arranged before the transfer and invoiced Auto Leisure for hirings arranged thereafter. What is in issue is whether those credits which had become due, but had not actually been paid, before the assignment and its notification to Mr Burrowes were, as a result of the transaction, due to Auto Leisure or whether the applicant remained entitled to them. 21 Given the agreement as to the facts, what arises is thus, in my view, purely a question of construction and thus a question of law, the question of construction being one of the terms of the transaction thus rather scantily evidenced. The respondent says that the terms of the transaction are clear. In Mr Pryor's own words what he did was to cause a transfer of all assets of the applicant to Auto Leisure for a nominal consideration, the transfer for good measure, again according to Mr Pryor's evidence, including the benefit of agreements held by the applicant with the respondent. 22 The respondent points also to a document headed "31 May Reconciliation", prepared apparently by Mr Pryor, and delivered or sent by him to the respondent. That document says of the promotional credits: "This is not a cash outlay to Century it is a cash outlay for Auto Leisure". The applicant on the other hand says, first, that I should pay little attention to that note, because, on a proper view of it, it was seeking to distinguish between the respondent and the group of which the applicant and Auto Leisure were members, not between the applicant and Auto Leisure. The applicant points also to the evidence of the conversation between Mr Pryor and Mr Burrowes to the effect that Auto Leisure was to take on all new liabilities and was to have the benefit of all past agreements. The applicant's solicitor relied on Mr Burrowes' reply, "That's the way we will bill you in future, we will just draw a line now and treat Auto Leisure as if it is Europecars in the future". That is to say, the applicant put to me, as the correct construction of the arrangement, that, literally, a line was to be drawn: amounts falling due in respect of transactions entered into before the date represented by the line were for the account of the applicant and amounts falling due later were for the account of Auto Leisure. 23 This is not an entirely easy question. It must be decided on the rather slight evidence before me and it is impossible not to suspect that there might have been other material available which would have made the matter clearer than it is. But I must do the best I can with that which I have, and what I have is a transaction described by the person as to who brought it about as a transfer of all assets of the applicant to Auto Leisure, including the benefit of agreements held; and one which he described in conversation with Mr Burrowes as one by which Auto Leisure was taking on all new liabilities. Thus Auto Leisure was not assuming past or existing liabilities but was obtaining the benefit of past agreements. 24 In a sense it may not be particularly to the point whether Mr Burrowes fully understood what had happened between the applicant and Auto Leisure. It may have been important that he should bill the parties correctly in the future, but the question as to who was entitled to the credits might at that stage not have been a matter of particular interest to him. The applicant submitted that an arrangement between commercial men, of the kind deposed to, ought to be construed in a commercial manner and that to construe it commercially involved the proposition that there was a ruling off, in respect both of amounts due to the applicant and in respect of those due to the respondent. 25 On the other hand, as counsel for the respondent submitted, there is nothing a priori commercially improbable about an arrangement which transfers all assets from one company to another, including amounts presently due, but under which the transferee assumes any liabilities to arise in the future. In the end, I think, I must construe the terms of the transaction as they appear in the evidence. There being nothing particularly requiring or suggesting that some other construction is appropriate to help me to construe them any other way, I think I must construe them literally; and, construed literally, the transfer was a transfer of all assets and the benefit of past agreements includes all the benefits of past agreements, including a present right under such an agreement to sue for an amount presently due. 26 There is nothing inconsistent with anything that was said by Mr Pryor which is inconsistent with that view. That being literally what he said, I think I have no alternative but to proceed on the footing that is literally what he meant. It follows that in my opinion the better view is that the entitlement to the credits passed to Auto Leisure. I cannot pretend to find that an entirely satisfying conclusion; that is simply because of the state of the evidence, but, on the evidence, I think it is the conclusion which I must reach. 27 On that basis the substance of the result must be that the application fails. But the substantiated amount, under s 459H(4) of the Corporations Law, plainly is not the full amount demanded: there are to be deducted from that amount the sums conceded by the respondent. As I understand it, it is likely that there is no serious dispute between the parties as to the precise amount to be attributed to the respondents' concessions. 28 [Discussion with the parties' legal representatives ensued]. 29 The appropriate order is a declaration that the demand had effect as from the date of service on the applicant but for a substantiated amount being Ł41,070. I so order. The applicant is to pay the respondent's costs. I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lehane.