By originating process filed on 9 March 2023, the plaintiff, Rio Dorado Limited (ACN 148 175 991) (Rio), applies to set aside a statutory demand issued and served by the defendant, 70:20:10 Forum Pty Ltd (ACN 158 131 938) (Forum), on 16 February 2023.
The statutory demand relates to an alleged debt of $67,049.16 that is described in the schedule to the demand and in the affidavit accompanying the demand as comprising:
1. the following amounts owing to Forum for consulting services to Rio in respect of which Forum issued the following invoices to Rio:
1. invoice BC0043 issued on 31 May 2021 in the amount of $40,700.00;
2. invoice BC0044 issued on 31 December 2021 in the amount of $4,606.25;
3. invoice BC0047 issued on 31 March 2022 in the amount of $15,262.50; and
4. invoice BC0048 issued on 30 June 2022 in the amount of $4,125.00; and
1. claims for reimbursement of the following expenses incurred by Forum in the course of providing the consulting services:
1. expenses totalling $539.07 incurred during the period from 15 April 2022 to 23 June 2022;
2. expenses totalling $1,576.34 incurred during the period from 2 July 2021 to 26 September 2021; and
3. expenses totalling $239.99 incurred during the period from 17 June 2021 to 26 June 2021.
Rio seeks an order setting aside the demand under s 459H(1)(a) of the Corporations Act 2001 (Cth) on the basis that:
1. there is a genuine dispute about whether any debt in respect of the consulting services is presently due and payable;
2. there is also a genuine dispute about the amount owing in respect of the consulting services; and
3. there is a genuine dispute about whether the debt in respect of expenses is presently due and payable.
At the hearing on 24 May 2023, Rio read affidavits of Mr Gary Mares sworn on 8 March 2023 and 19 May 2023. Mr Mares is a director of Rio. Forum read an affidavit of its sole director, Ms Heather Rutherford, affirmed on 6 May 2023.
It is common ground that Ms Rutherford began providing consulting services to Rio, through Forum, in August 2020. The terms on which those services were to be provided were not reduced to writing.
Mr Mares has given evidence that he participated in a Zoom conference with Ms Rutherford and Mr Franco Belli (another consultant to Rio) on 19 August 2020. According to Mr Mares, a conversation to the following effect took place during that conference:
"[Mares]: Payment of your invoices, expenses and any loans advanced will be paid once we achieve a successful capital raising, IPO and we are listed on the ASX.
Rutherford: I understand.
Belli: Yes, of course."
Mr Mares refers to the following exchange of WhatsApp messages between himself and Ms Rutherford on 20 August 2020:
"Rutherford: No expense until you get $ and flick the switch? No changes in how you do things (tech wise) until then also?"
Mares: "Keep a record of your time so we can sort things out when we get the $$$."
Mr Mares has deposed that Rio has not yet achieved a successful capital raising, has not undertaken an initial public offering, and is not listed on the Australian Stock Exchange.
Ms Rutherford has given evidence denying that she had a conversation with Mr Mares and Mr Belli in the terms that Mr Mares claims on 19 August 2020, or at any other time. According to Ms Rutherford's evidence, the agreement for her to provide consulting services to Rio was struck during an earlier conversation that she had with Mr Belli on 7 August 2020. Ms Rutherford has also given evidence that she knew that it may take years for Rio to be listed, and that the listing might not be achieved. She has deposed that, as a single mother with no other source of income, she would never have agreed to undertake work for Rio and incur expenses in doing so on the basis that she might never be paid.
Mr Mares has given evidence to the effect that Forum's invoices for Ms Rutherford's consulting services were issued only after Rio requested the invoices for the purpose of finalising its accounting records and BAS returns. Ms Rutherford has not given any evidence explaining why Forum waited until 31 May 2021 before issuing its first invoice for her consulting services, but has deposed that she repeatedly asked for those invoices to be paid after they were issued. Ms Rutherford emphasises that each of the invoices had a due date for payment within one month after the date of the invoice, and says that Rio never raised any complaint or dispute about those due dates. However, on Ms Rutherford's own evidence, she continued providing the consulting services until 7 July 2022, notwithstanding that the invoices had not been paid.
Ms Rutherford has exhibited to her affidavit what she describes as the full transcript of WhatsApp messages that she exchanged with Mr Mares during the period from 18 February 2020 to 23 March 2022. The transcript is 131 pages of closely typed text.
Ms Rutherford has given evidence that the message that she sent to Mr Mares on 20 August 2020 - "No expense until you get $ and flick the switch? No changes in how you do things (tech wise) until then also?" - related to the cost of upgrading Rio's technology, and not to Forum's consulting fees. The transcript of messages exhibited to Ms Rutherford's affidavit supports this aspect of her evidence.
Ms Rutherford has not given any evidence about Mr Mares' message on 20 August 2020, that she should "Keep a record of your time so we can sort things out when we get the $$$." The transcript exhibited to her affidavit records her response to that message: "My time is minimal … but thanks". It is not clear from the surrounding messages whether "the $$$" referred to in Mr Mares' message is a reference to the capital to be raised through an initial public offering or other means, or to some other source of funds anticipated to be received by Rio in the shorter term.
The affidavits of Mr Mares and Ms Rutherford, and the submissions of the parties, refer to examples of other communications between them via WhatsApp and email during a period of about two years after August 2020. Some of those communications refer to expenses, loans, and reimbursements. Some of Mr Mares' communications contain statements about efforts to arrange for moneys to be paid to Ms Rutherford in the near future. Other communications refer to Ms Rutherford keeping a "log of my time and expenses" and being prepared to "handle it that way until you're ready". Each witness and each party contends that their selected communications support their contention about when the consulting fees are due and payable and when expenses are to be reimbursed. My review of the transcript of WhatsApp messages exhibited to Ms Rutherford's affidavit confirms that the meaning of the selected communications needs to be considered having regard to the context in which they were sent, including other communications exchanged at about the same time.
By way of example only, Ms Rutherford refers to a WhatsApp message that she received from Mr Mares on 5 February 2021 requesting her bank account details "so we can send some money back to you unless you want to convert it to shares". The submissions made on behalf of Forum rely on this message as inconsistent with Mr Mares' evidence that Ms Rutherford agreed that Forum would not be paid until Rio had completed its proposed capital raising or initial public offering and Australian Stock Exchange listing. However, the transcript of messages exhibited to Ms Rutherford's affidavit indicates that this message, read in context, concerns repayment of a loan of $5,000.00 that Ms Rutherford advanced to Mr Mares, Mr Belli, and Rio in about mid-January 2021 to cover various expenses that they were struggling to pay in circumstances where Rio was working to secure debt funding as soon as possible. Read in context, the message does not appear to relate to the consulting services or claims for reimbursement of expenses that are the subject of the statutory demand.
On the basis of the evidence summarised above, I am satisfied that there is a genuine dispute about whether the consulting fees and expense reimbursement claims are debts that are presently due and payable. [1] I reject Forum's submission that Mr Mares' evidence referred to at [6] above is a spurious assertion that has been constructed in response to the pressure of the statutory demand. It is at least reasonably arguable that Mr Mares' evidence is consistent with some of the contemporaneous communications that passed between him and Ms Rutherford. It is also reasonably arguable that Mr Mares' evidence is consistent with the objective fact that Forum did not issue any invoice to Rio in respect of Ms Rutherford's services until 31 May 2021, some eight months after the services commenced in August 2020, and continued providing services until July 2022 even though Rio had not paid that invoice or the subsequent invoices issued on 31 December 2021 and 31 March 2022.
Contrary to the submissions made on behalf of Forum, that is sufficient to raise a plausible contention which requires investigation that the consulting fees and expense reimbursement claims are not presently due and payable. [2] The fact that there is no one contemporaneous document that unequivocally supports Mr Mares' evidence of the terms of the oral agreement is not to the point. The factual dispute about the terms of that agreement is a genuine dispute, the resolution of which will turn on consideration of the parties' competing evidence about their conversation or conversations in which the agreement was struck. Their subsequent conduct and communications may be taken into account in resolving that dispute. [3] For the reasons already explained above, I do not accept Forum's submissions to the effect that the contemporaneous documents consistently contradict Mr Mares' evidence.
In proceedings to set aside a statutory demand, the Court is concerned only with the existence of a genuine dispute, and not with the parties' relative prospects of success in relation to the dispute. A finding of genuine dispute will be made if the applicant shows that even one issue has a sufficient degree of cogency to be arguable, even where the case to be advanced against the applicant appears to be stronger. The Court does not engage in any form of balancing exercise between the strengths of the parties' competing contentions. [4]
My conclusion that there is a genuine dispute about whether the debt is due and payable requires that the statutory demand be set aside. It is not necessary to consider Rio's contention that there is also a genuine dispute about the amount of the consulting fees charged by Forum.
There is no reason why costs should not follow the event. Those costs should be paid on the ordinary basis. The originating process sought an order that Forum pay Rio's costs on an indemnity basis, but counsel for Rio made no submissions in support of an indemnity costs order, and Forum's defence of the proceedings has not involved any conduct that might warrant an indemnity costs order being made against it.
For those reasons, the orders of the Court are as follows:
1. Order pursuant to s 459H of the Corporations Act 2001 (Cth) that the creditor's statutory demand dated 16 February 2023 issued by the defendant to the plaintiff be set aside.
2. Order the defendant to pay the plaintiff's costs of these proceedings on the ordinary basis, in such amount as may be agreed or assessed.
[2]
Endnotes
See In the matter of Essential Media and Entertainment Pty Ltd [2020] NSWSC 990 at [96]-[97] (Rees J), and the authorities there cited.
See Grandview Ausbuilder Pty Ltd v Budget Demolitions Pty Ltd (2019) 99 NSWLR 397; (2019) 136 ACSR 563; [2019] NSWCA 60 at [62]-[66] (Bell P, White JA and Sackville AJA agreeing), and the authorities there cited.
County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193 at [7]-[27] (Spigelman CJ, Beazley JA agreeing); King v Adams [2016] NSWSC 1798 at [65]-[66] (Sackar J).
Creata (Aust) Pty Ltd v Faull (2017) 125 ACSR 212; (2017) 35 ACLC 17-056; [2017] NSWCA 300 at [17] (Barrett AJA, Gleeson and White JJA agreeing), citing with approval Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (in liq) [2015] VSCA 330 at [47]-[50].
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Decision last updated: 09 June 2023
Parties
Applicant/Plaintiff:
In the matter of Rio Dorado Limited ACN 148 175 991; Rio Dorado Limited (ACN 148 175 991)