Rescom Asia Pacific Pty Ltd v Reapfield Property Consultants Pte Ltd [2014] VSC 41

Supreme Court of Victoria|2014-02-13|Before: RANDALL AsJ

CORPORATIONS - Corporations Act 2001 (Cth) - Setting aside statutory demand - Genuine dispute about breach of a commission agreement giving rise to an offsetting claim - s 459H - failure to produce an agreement which might have assisted in determining whether there is 'a serious question to be tried' or 'an issue deserving of a hearing' or 'a plausible contention requiring investigation', and which might have assisted in the quantification of any such claim.

2 The defendant was engaged as the sole marketing agent in Singapore with respect to a Melbourne property ('Property'). The vendor was another company by the name of TP Melbourne Pty Ltd ('TP Melbourne'). The plaintiff was the underwriter of the development.

3 The engagement of the defendant was constituted by a marketing agreement dated 28 March 2013 ('Agreement'). The terms of the Agreement came about after various negotiations about the commission, rental guarantees and other benefits. I have not had regard to those prior negotiations as the Agreement is encapsulated in the written agreement being the Agreement.

• the defendant would receive a commission rate equal to 5% of the transacted price (transacted price is not defined).

• the defendant would use all due care, skill and due diligence to market the Property and achieve maximum sales (in volume rather than price) of the Property.

• the plaintiff would recognise and remunerate the full commission to the defendant for sale to purchasers that were recommended by the defendant, or for purchasers that had visited the exhibitions organised by the defendant. (There was no requirement that the defendant obtain any unconditional offers).

• a paragraph titled 'Conditions', which I will set out in full below. The word 'vendor' has been previously used in the Agreement and crossed out in the second paragraph to refer to the underwriter. I assume that the parties turned their minds to the use of the word 'vendor' (TP Melbourne) or the use of the word 'underwriter' (the plaintiff) in the Agreement. Accordingly, there is an obligation on the 'vendor' or if that word has not been altered by mistake, an obligation upon the 'underwriter', to provide documents as provided in the clause, which provides that:

The vendor shall provide the following to [the defendant] to facilitate in its sales activities:

(1) Exclusive sale of the units stated in the price schedule in Annexure A of this agreement till 22nd April 2013;

(2) Selling at the price stated in the price schedule in Annexure A of this agreement;

(3) Vendor to offer purchasers reimbursement of their legal fees up to AUD1,750 and stamp duty for each deal prior to settlement;

(4) Vendor to provide sales brochures, contracts, soft copies of images and information needed to facilitate the sale.

The conditions as set out do not impose any obligation upon the defendant. The clause relates to the various provisions by the vendor (the underwriter). The plaintiff's counsel submitted that the condition (2) constituted an obligation upon the defendant to sell at the agreed priced.

• a 'price schedule' attached in Annexure A of the Agreement.

5 There is a dispute about the identity of Annexure A to the Agreement. There were two schedules, one that referred to lower apartment prices, and another that is said to have set out revised lists of prices, which were $691,000 or greater. I do not need to determine which schedule was incorporated into the Agreement for the purposes of this exercise to determine whether there is a genuine claim in respect of the matters raised.

6 In TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd,[1] Dodds-Streeton J said:

As the terms of s 4594 of the Corporations Act and the authorities make clear, the company is required, in this context, only to establish a genuine dispute or offsetting claim. It is required to evidence the assertions relevant to the alleged dispute or offsetting claim only to the extent necessary for that primary task. The dispute or offsetting claim should have a sufficient objective existence and prima facie plausibility to distinguish it from merely spurious claim, bluster or assertion, and sufficient factual particularity to exclude the merely fanciful or futile. As counsel for the appellant conceded however, it is not necessary for the company to advance, at this stage, a fully evidenced claim. Something 'between mere assertion and the proof that would be necessary in a court of law' may suffice.

7 Accordingly, I am prepared to accept for this application, that the higher price list was provided and the properties were sold at the lower prices. This, however, is not the end of the matter.

8 Counsel for the plaintiff submitted that by virtue of the failure to attain the higher prices, and by virtue of the arrangements that the plaintiff had with TP Melbourne, it was exposed to a claim by TP Melbourne pursuant to the underwriting agreement. Alternatively, if the plaintiff were not exposed, it had its own cross-claim or offsetting claim with respect to the sum of $691,000 (less adjustments), being a greater amount than it could have been remunerated by TP Melbourne. On that basis, the plaintiff did not need to demonstrate that any particular level of sales was required. I note that the claim for the loss of opportunity to receive the greater amount was not raised until after the 21-day period.

9 The submission is based on paragraph 19 of the affidavit of Leonard Ng sworn 2 October 2013. That sets out:

TP Melbourne retained the Company as the underwriter of the sale of the apartments. It was a term of the retainer was that, in the event that the total sale price of the apartments do not reach a pre-determined level, the Company would pay the difference to TP Melbourne.

10 There are then two assertions: the assertion as to why TP Melbourne did not refuse to accept offers at a lower price; and the assertion that TP Melbourne intends to recover from the plaintiff the difference between the contract prices and the prices set out in the revised list prices.

11 Mr Leonard Ng, the plaintiff's director, swore three affidavits. In his second affidavit in reply, he further stated that:

In the event that the total proceeds exceed the pre-determined level, then TP Melbourne would pay the excess amount to the Company. Further, if the total proceeds exceed the pre-determined level by a certain amount, then the excess is shared between the Company and TP Melbourne.

12 The underwriting agreement, or and any other attendant documents explaining the relationship between TP Melbourne and the plaintiff, has not been produced to the Court. The plaintiff has not explained why those documents have not been produced. That leaves me in the position where I am unable to consider the relevant terms and, particularly, the requisite predetermined level of sales and the consequences of failure to meet the same.

13 Mr Ng, in his first affidavit in reply, referred to the price list format with respect to the Malaysian market. He conceded that he might have signed a list of prices with lower prices for the Malaysian agents ('Malaysian Price List'), who were engaged by the plaintiff to market the apartments in Malaysia. The Malaysian Price List would be relevant if I needed to determine the question of which price list was provided to the defendant pursuant to the Agreement. The Malaysian Price List, which set out the lower amount, referred to the same apartments as the other price list. The conclusion to be drawn from the Malaysian activities is that the arrangements between TP Melbourne and the plaintiff included or contemplated the plaintiff's retainer of agents other than the defendant.

14 The plaintiff's retainer of the Malaysian agents, and the concession by Mr Ng that he was willing to sign a lower price list to assist the Malaysian agents, highlight the consequences of the plaintiff's failure to produce documents, which set out the arrangements between the plaintiff and TP Melbourne.

15 I accept that the description applied to the plaintiff of 'underwriter' usually refers to the requirement to meet a shortfall. In the absence of production of the relevant documents, however, I do not accept that Mr Ng's account of the arrangement between the plaintiff and TP Melbourne, is anything more than mere assertion. I am left in the dark as to the terms of arrangements between the plaintiff and TP Melbourne.

16 What is the effect of one agent 's permission to sell at a lower price? What is the effect of TP Melbourne's acceptance of offers at a lower price? What is the effect of the plaintiff's acceptance of booking sheets to which I will later refer? I cannot be expected to assume that the matrix of terms contained in documents not before me work in any particular way, or that the defendant's sale of the apartments at any particular price triggers consequences which may or may not be modified or altered, depending on how the performance of the Malaysian agent bears upon the issues.

17 Counsel for the plaintiff submitted that it was sufficient to demonstrate that there was a possibility that TP Melbourne may sue the plaintiff for a sum of $671,000 (less adjustments). Counsel relied upon Hell Colour Australia Pty Ltd v Everbest Printing Company Ltd.[2]

18 I distinguish Hell Colour. In that application before Gardiner AsJ the creditor was a printer engaged by the debtor to provide a product to a third party (UMG) on the basis of cost and a commission. There was credible evidence that there were defects in the production of Volume 8. The creditor conceded that there was a genuine dispute with respect to its claims for payment for production of Volume 8. In issue was whether there was an available offsetting claim. UMG had not paid the debtor. UMG had advised the debtor that if the debtor were to pursue either claims against it, UMG would seek to set off its damages as a result of Volume 8. The plaintiff had procured an affidavit from UMG to that effect and which also set out that UMG had ceased its relationship with the debtor.

19 Gardiner AsJ expressly, and by inference, accepted the submission:

that the lost printing claim arose "naturally" from Everbest's breach and on an application of principles in Hadley v Baxendale,[3] was in the contemplation of the parties when [the creditor] was engaged by [the debtor] to print Volume 8.[4]

Further, Gardiner AsJ considered it probable that the 'state of détente' between UMG and the debtor may pass and that there would be tripartite litigation between the parties.[5]

20 That is not the case here. There is no objective evidence to establish the terms of the agreement with TP Melbourne that counsel propounded for the plaintiff, or that reaching a predetermined value of sales was a requirement, or that any consequences flow from any such failure. It has not even been established that the retainer of the defendant has been breached; or that if there was such a breach, that the breach would constitute an event that gives rise to rights or obligations with respect to the agreement with TP Melbourne.

21 In Eyota Pty Ltd v Hanave Pty Ltd, McLelland CJ in eq said:

It is, however, necessary to consider the meaning of the expression "genuine dispute" where it occurs in s450H. In my opinion that expression connotes a plausible contention requiring investigation, and raises much the same sort of consideration 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. This does not mean that the Court must accept uncritically as giving rise to a genuine dispute, every statement in an affidavit "however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be"...

But it does mean that, except in such an extreme case, a Court required to determine whether there is a genuine dispute should not embark upon an inquiry as to the credit of a witness or a deponent whose evidence is relied on as giving rise to the dispute. There is a clear difference between, on the one hand, determining whether there is a genuine dispute and, on the other hand, determining the merits of, or resolving, such a dispute.[6]

22 I have not embarked upon the exercise of assessing the credit of Mr Ng in this application to set aside a statutory demand. It is a matter of weighing the objective facts gleaned from documents, against assertion and constructed reasons given by Mr Ng to try to explain why TP Melbourne accepted offers and why the plaintiff did not complain prior to this application.

• mere assertion as to the arrangements between TP Melbourne and the plaintiff without regard to the interplay with the Malaysian agent;

• an assertion that the creditor was in breach of any arrangements set out in the retainer of 28 March 2013;

• an assertion that the plaintiff could recover either an excess remuneration or be entitled to indemnification for any shortfall.

24 In contrast, the objective evidence before the Court is contrary to the contentions put on behalf of the plaintiff and the assertions made on its behalf.

• terms of the engagement, which do not impose an obligation upon the defendant, other than to use all due care, skill and due diligence, and which do not set out any consequences of any failure on behalf of the defendant to achieve a particular price;

• any arrangement between TP Melbourne and the plaintiff also included reference to Malaysian agents;

• the lower price list was signed (bearing in mind that I am not determining which price list was provided or acted upon);

• not only did the vendor accept offers made by purchasers procured by the defendant, the plaintiff also accepted booking forms that set out the purchase price as 'accepted by underwriter' and signed on behalf of the plaintiff;

• email correspondence confirming that the plaintiff appreciated the defendant's 'good job' and that the plaintiff was in the 'midst of arranging payment as promised';

• communications by way of text between the plaintiff and the defendant accepting the invoice for the commissions claimed without complaint and, more particularly, advising that payment would be made when the plaintiff received drawdowns 'from equity partners'. The invoices had set out the prices of the properties attained.

26 This is not an application where the existence of contrary evidence casts doubt on whether there is a disputed debt or an offsetting claim as considered in Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd [2013] NSWCA 344. Further, I do not need to consider if the evidence put forward on behalf of the plaintiff is 'inherently improbable' - an expression used in Troutfarmers Australia Pty Ltd v Perpetual Nominees Ltd [2013] VSCA 176.[7]

27 This is an application where the plaintiff has not demonstrated that the offsetting claim has 'a sufficient objective existence and prima facie plausibility to distinguish it from...assertion' as referred to by Dodds-Streeton J in TR Administration.[8]

28 In any event, I further determine that the ground for loss of greater remuneration by TP Melbourne is not a claim that expands upon the grounds set out in the first complying affidavit. As it is a new ground filed outside the 21-day period it cannot be relied upon. Again, my ruling with respect to the 21-day bar highlights the consequences of the failure to produce the agreement between the plaintiff and TP Melbourne. If it had been produced, the loss of opportunity argument might have been open by way of submission. In the present circumstances the plaintiff has not demonstrated that the dispute or offsetting claim is genuinely put.

29 Further, I am unable to quantify any offsetting claim that the plaintiff might have. I cannot be satisfied that an offsetting claim might be in the order of $691,000, or any other amount, in the absence of any agreement between the plaintiff and TP Melbourne.

31 I note that I raised with the parties the issue of s 50 of the Estate Agent's Act 1980 (Vic). Prior to hearing argument on the substantive matters, I gave my reasons for determining that s 50 was not applicable.

[1] [2008] VSCA 70; (2008) 66 ACSR 67 ('TR Administration') at [71].

[2] [2010] VSC 643 ('Hell Colour').

[4] Hell Colour, [21] (footnote added).

Estate Agent's Act 1980(Vic)

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