New South Wales Supreme Court CITATION : Junior Mining v Platcher [2002] NSWSC 343 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 1645 of 2002 HEARING DATE(S) : 19/04/02 JUDGMENT DATE : 22 April 2002 PARTIES : Junior Mining (Operations ) Pty Limited v Allan Platcher & Associates Pty Limited JUDGMENT OF : Master Macready at 1 COUNSEL : Mr S. Goodman for plaintiff Mr C.R. Newlinds for defendant SOLICITORS : Tzovara Legal for plaintiff Harris Wheeler for defendant CATCHWORDS : Corporations Law. Application to set aside a statutory demand under s 459G of the Corporations Law. Demand set aside. No matter of principle. DECISION : Paragraph 16 - 1 - THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION MASTER MACREADY MONDAY 22 APRIL 2002 001645/02 - JUNIOR MINING (OPERATIONS) PTY LIMITED v ALLAN PLATCHER & ASSOCIATES PTY LIMITED JUDGMENT 1 MASTER: This is an application under section 459G to set aside a statutory demand dated 4 February 2002 for a sum of $521,287.65. The demand arose out of a proposal for a joint venture in sapphire mining. The plaintiff operated a mine whose infrastructure was to be increased and the defendant was an investor. 2 The parties executed a deed dated 18 May 2001, which they drew up apparently without the benefit of lawyers. The deed contained a number of provisions, the more important for present purposes being as follows: " DEED OF SETTLEMENT made this 18th day of May, 2001 between the following parties:- 1. JUNIOR MINING (OPERATIONS) PTY LIMITED (ACN 081 347 891) of Lot 1057 Rubyvale Road, Sapphire in the State of Queensland 2. ALLAN PLATCHER & ASSOCIATES of 12 Langford Road, Dural in the State of New South Wales FOR THE PURPOSE OF INVESTING IN QSM THE PARTIES AGREE AS FOLLOWS:- Both AEP and its nominees and JMO/QSM agree that all information relating to AEP and its nominees and JMO/QSM is to remain confidential. 1. AEP or its nominees to purchase 25% of QSM for a consideration of $500,000.00. 2. Advance of $500,000.00 is considered a Loan from AEP or its nominees for 3 month review period. This $500,000.00 Loan from AEP to be used as Working Capital of the Business. 3. At the conclusion of the 3 month review period AEP or its nominees have the option to:- a) Convert the same into 25% equity of QSM, or b) Convert the same into 25% Joint Venture with QSM. 4. Interest on $500,000.00 to be charged at 6% per annum secured by Assets and Licenses. 5. AEP or its nominees be granted the First Right of Refusal to increase their Shareholding to 33 1/3% of QSM, which would require a further payment of $165,000.00 should Cluff Resources not exercise its Option. 6. Should AEP not be satisfied with the Business QSM to refund all monies paid by AEP within 3 months. Interest is to continue at 6% per annum. All Security to remain in place until Loan fully repaid. During the review phase, these conditions to apply:- a) AEP or its nominees to act in the temporary role as Consultant to QSM, all costs and disbursements to be borne by QSM. No salary payable to AEP or its nominees; b) AEP's Accountant JCO Pty Ltd and Bob Hayne to have continued access to records and observe QSM production. 7. QSM/JMO will consider selling AEP or its nominees 50% of its interest in the Cluff/JMO Joint Venture for a consideration of $150,000.00 on the proviso that:- a) JMO is able to sell AEP or its nominees this share, and b) AEP or its nominees purchase 25% equity in QSM. Following the review phase:- a) AEP or its nominees will provide a further loan of $700,000.00 to JMO after the initial 3 month review phase, to be paid in full within 6 months. If the $700,000.00 loan is not received at the end of 6 months JMO has 3 months in which to repay the initial $500,000.00 loan, together with Interest calculated at 6% per annum; b) After payment in full of $700,000.00 loan AEP or its nominees will acquire 25% or 33 1/3% interest in QSM by converting debt to equity." 3 It is to be noted that QSM is a related party to the plaintiff. QSM was not a party to the deed. 4 The advance of $500,000 was made according to the plaintiff by various installments, the last of them being $25,000 paid on 18 September 2001 after the three-month initial period. They were used to upgrade the plant as intended by the parties. 5 The defendant relied upon clause 6 to claim that the moneys were presently due and payable. It said that by a letter of 6 August 2001 it expressed its dissatisfaction with the investment and project, that letter was in these terms: "6th August 2001 Dear George, I have been asked by the National Australia Bank (NAB) to request confirmation from you that Junior Mining has been notified on the 28th of June 2001 (telephone call to Mr Elias Christianos and yourself) that Allan Platcher & Associates will not be going ahead with our investment in QSM. As per clause 6 of our agreement APA requests repayment of funds invested as soon as possible. I understand from numerous discussions with yourself and Ellie that this refund will be met within the next two weeks. In the meanwhile I have also been asked by the NAB to organise a charge over the Assets of JM and QSM. They have contacted my solicitor directly and requested this charge. I was hoping we would have avoided any unnecessary formality but it is now unavoidable. I greatly appreciate your and Ellie's help to refund the amount owing. Sue and I regret we will not be able to participate in the future of your exciting venture but wish you the best of luck and fortune. Yours sincerely" 6 The plaintiff for its part relied on clause 7(a) suggesting that the loan of $500,000 was not repayable until 18 May 2002, as the $700,000 was not advanced. 7 The plaintiff's position changed a number of times. Before action in a solicitor's letter, points were taken about the enforceability of the agreement and the fact that QSM was not a party. 8 In the evidence-in-chief he took the stance which I have set out above. The defendant's evidence then produced a letter of 6 August 2001 which prompted further evidence in reply. That caused a different position to be taken. It prompts one to consider carefully whether the dispute is genuine. I think probably the most useful summation of a genuine dispute is that given by McLelland CJ in Equity in Eyota Pty Limited v Hanave Pty Limited (1994) 12 ACLC 669. At page 671 his Honour made the following comments in respect of the expression "Genuine dispute": "It is, however, necessary to consider the meaning of the expression `genuine dispute' where it occurs in s.459H. In my opinion that expression connotes a plausible contention requiring investigation, and raises much the same sort of considerations s 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' not having `sufficient prima facie plausibility to merit further investigation as to (its) truth' (cf Eng Mee Yong v Letchumanan (1980) AC 331 at 341), or `a patently feeble legal argument, or an assertion of facts unsupported by evidence' (cf South Australia v Wall (1980) 24 SASR 189 at 194). 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. In Mibor Investments (at ACLC 1066; ACSR 366-7) Hayne J said, after referring to the state of the law prior to the enactment of Division 3 of Part 5.4 of the Corporations Law, and to the terms of Division 3: `These matters, taken in combination, suggest that at least in most cases, it is not expected that the Court will embark upon any extended inquiry in order to determine whether there is a genuine dispute between the parties and certainly will not attempt to weigh the merits of that dispute. All that the legislation requires is that the Court conclude that there is a dispute and that it is a genuine dispute.'" 9 In June 2001, the defendant first raised concerns about production figures with the plaintiff. The defendant was expecting 2,000 cubic metres per day and this was not achieved in May. 10 The affidavits of the two relevant parties revealed quite different accounts of what they wanted and each obviously omitted part of the story. 11 There is no doubt that the letter of 6 August itself could amount to an expression of dissatisfaction within the terms of clause 6. This was also said to have occurred in a conversation on 28 June 2001. 12 The question which concerns me is whether the evidence given by the plaintiff could be said to rebut this proposition or set up some estoppel. The plaintiff's evidence in reply in this regard was as follows: "6. In relation to paragraph 8, I reiterate paragraphs 11 and 12 of my affidavit of 22 February 2002. The new plant was commissioned in September 2001, three months behind schedule. This was because the defendant did not provide the initial funds within the time-frame agreed under the agreement of 18 May 2001. An initial amount of $50,000.00 was paid on or about 10 May 2001, with further amounts of $250,000.00 paid on or about 18 May 2001, and $100,000.00 on or about 1 June 2001. This left a balance of $100,000.00. At or around that time, Mr Platcher telephoned me and said: `I am unable to pay the balance right now.' On 18 July, 2001 Mr Platcher requested we accept rough sapphire material from him in lieu of the remaining balance, which we agreed to. We were unable to sell this material on his behalf until 7 August, 2001, for which we only received $73,000.00 and not $100,000.00. On 18 September, 2001, Mr Platcher sent a further $25,000.00 in payment of the remaining $500,000.00. I agreed to allow the Defendant additional time to pay because I believed the Defendant still intended to invest the additional $700,000 in the plaintiff. If it be the case, I deny the assertion of Mr Platcher in paragraph 8 that the Defendant only entered into the agreement on the basis that production of the Plaintiff's mine would reach 2,000 cubic metres per day irrespective of any investment in the plaintiff by the defendant. 8. In relation to paragraph 10, I deny the first sentence. I deny the second sentence. When the defendant was unable to pay the balance of the initial sum of $500,000.00, Mr Platcher said to me words to the effect: `Please give me a bit more time to pay the balance. I am experiencing difficulties in setting up my share portfolio. I may also need time to sell some commercial property in North Sydney which will allow me to provide the additional $700,000.00. Can you give me more time beyond what is in the agreement in which to comply?' 9. At that time, I was not aware that the defendant did not intend to make the additional investment of $700,000.00. I believe that, despite what is stated in Mr Platcher's letter of 6 August 2001, the defendant was still required under the agreement to provide the further loan of $700,000.00 at any time up to the end of the six month period commencing 18 May 2001. Even after I received the letter of 6 August 2001, Mr Platcher said to me in telephone conversations on numerous occasions words to the effect: `I want to continue with my investment. I am experiencing some short term money problems and am having trouble with my Bank. Can you repay any of the money to me?' 10. In each of these conversations, I said to Mr Platcher words to the effect: `We will repay you in accordance with the terms of the agreement. Payment is not yet due. Now we have started to produce at full capacity, we should be able to make the payment on time.' 11. I also held the belief that the Defendant had a continued interest in making its investment under the agreement of 18 May 2001. It still had not paid the final balance of the original loan and did so only on 18 September 2001. Also, on other occasions during this period and later in 2001, Mr Platcher and I had discussions about other business dealings between our two companies. Further, the new plant had been commissioned in September 2001, and I had advised Mr Platcher that plant capacity had now reached 2,000 cubic metres per day. I understood from discussions with Mr Platcher during this period that his concern in writing the letter of 6 August 2001 was that this capacity had not been reached as at that date, but that the Defendant was still interested in future involvement with the Plaintiff once this capacity had been reached. 12. As to paragraph 13, I reiterate that even after I received Mr Platcher's letter of 6 August 2001, he and I undertook further discussions over this and other business dealings. On a number of occasions in August and September 2001, Mr Platcher said to me words to the effect: `I want to develop business relations with you. I am prepared to give you further time to sort things out, if you need it.'" 13 The further payment on 18 September 2001 is quite inconsistent with the stance the defendant was maintaining. So was the arrangement for the sale of material after 28 June 2001 and before 6 August 2001. 14 The plaintiff's account of the defendant's financial troubles may indicate that the letter of 6 August 2001 might have all been directed to keeping his bank happy rather than affecting his future investment in the project. There are possibilities of estoppel arising which might prevent relevance on the bare words uttered on 28 June 2001 or in the letter of 6 August 2001. 15 This mechanism, namely, the setting aside of a statutory demand is not the place to resolve these issues. Although I have some reservations about the matter, I think there is sufficient material to establish a genuine dispute. 16 Accordingly, I make orders 1 and 2 in the originating process. ********** Last Modified: 04/24/2002 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.