New South Wales Supreme Court CITATION : Daleville Pty Ltd v Progressive Realty Property Marketing & Management Pty Ltd [2006] NSWSC 637 This decision has been amended. Please see the end of the judgment for a list of the amendments. HEARING DATE(S) : 23/06/06 JUDGMENT DATE : 23 June 2006 JURISDICTION : Equity Division Corporations List JUDGMENT OF : Barrett J EX TEMPORE JUDGMENT DATE : 06/23/2006 DECISION : Statutory demand set aside CATCHWORDS : CORPORATIONS - winding up - creditors statutory demand - whether genuine dispute as to existence or amount of alleged debt - no question of principle LEGISLATION CITED : Corporations Act 2001 (Cth), ss. 459E(3), 459G, 459H(1)(a), 459H(3) CASES CITED : Solarite Air Conditioning Pty Ltd v York International Australia Pty Ltd [2002] NSWSC 411 PARTIES : Daleville Pty Limited - Plaintiff Progressive Realty Property Marketing & Management Pty Ltd - Defendant FILE NUMBER(S) : SC 1358/06 COUNSEL : Mr B. Neild - Plaintiff Mr S.A. Wells - Defendant SOLICITORS : David Begg & Associates - Plaintiff McMahons National Lawyers - Defendant IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST BARRETT J FRIDAY 23 JUNE 2006 1358/06 DALEVILLE PTY LTD v PROGRESSIVE REALTY PROPERTY MARKETING & MANAGEMENT PTY LTD JUDGMENT 1 By an originating process filed on 8 February 2006, the plaintiff makes application under s.459G of the Corporations Act 2001 (Cth) for an order setting aside a statutory demand served on it by the defendant. That is Order 1 in the originating process. The plaintiff also seeks, as Order 2, an order that the defendant pay the plaintiff's costs. 2 The plaintiff maintains that there is a genuine dispute as to the existence or amount of the alleged debt, that being, under s.459H(1)(a), a ground which, if established as to whole of the demanded sum, must lead to an order under s.459H(3) that the statutory demand be set aside. 3 The statutory demand is dated 20 January 2006. It claims a sum of $92,000 described as follows: "Amount owed by the company to the creditor for sales commission pursuant to the terms of sales inspection report and selling agency agreement granting selling rights from 2 April 2003." 4 There is thus a claim for a simple contract debt said, in the s.459E(3) affidavit accompanying the statutory demand, to be due and payable. That affidavit refers to four sales and an amount of $23,000 commission for each sale, thus making up the demanded total of $92,000. The defendant's position, reflected in the statutory demand, is thus obviously that commission became payable in respect of each sale separately. 5 The plaintiff accepts that, in April 2003, it became party to a written contract under which the defendant was to provide real estate agency services in connection with the sale of units in the plaintiff's residential development at 33 - 47 Goold Street, Chippendale. Annexed to the affidavit of Mr Roberts (a director of the plaintiff) sworn 8 February 2006, which is the affidavit in support of the originating process, is a copy of what he says is the relevant written agreement made in April 2003. It is said to consist of two pages. 6 The defendant's position, however, is that only one of the apparent pages of the document referred to by Mr Roberts in his affidavit is relevant to the state of account between the plaintiff and the defendant. 7 I should explain the way in which the document propounded by the plaintiff is constructed. There is one page consisting of a printed form headed "Sales Inspection Report and Selling Agency Agreement" in which blanks have been completed in handwriting. This clearly is, or forms part of, an agreement between the plaintiff and the defendant. Their names appear in unmistakeable terms in the blanks reserved for "Principal" and "Agent" respectively. The printed form thus completed carries the signature of Mr Roberts on behalf of the plaintiff and the signature of one Doja (plus an impression of the common seal) in relation to the defendant. 8 There is then, on the plaintiff's case, a second page bearing the same signatures as the first page, but with the signature of Doja above the words "Progressive Investments" and no reference anywhere to the name of the defendant. The so called second page is typewritten and refers to "Total commission payable to Progressive Investments for sale of all 27 apartments". 9 The printed form contains under the heading "Agent Remuneration" the following: "The agent shall be entitled to a fee of $624,000 for all 27 units (GST inclusive) if, during the agency period they effectively introduce a purchaser to the property who subsequently enters into a binding contract." The property is described in the printed form as "Various units at 33-47 Goold Street, Chippendale." 10 The typewritten page is headed "Sales Agreement for 33 – 47 Goold Street, Chippendale". Its three operative paragraphs read as follows: "Total commission payable to Progressive Investments for sale of all 27 apartments is $624,000. $100,000 is payable to Progressive Investments on exchange of all 27 apartments. (A minimum of ten bank guarantee deposits is required.) The balance of $524,000 is payable to Progressive Investments on settlement of all 27 apartments." 11 On the evidence before me, there is a significant unresolved question about the status of the typewritten sheet said by the plaintiff to be the second page. It is by no means clear whether the typewritten page is or forms part of the agreement between the plaintiff and the defendant or whether, on the other hand, it embodies some separate agreement between the plaintiff and the entity therein described as "Progressive Investments" or, as the plaintiff would have it, it is an element of what is really a tripartite agreement among the plaintiff, the defendant and "Progressive Investments" under which the defendant was to provide agency services to the plaintiff, which was to pay commission not to the defendant but to "Progressive Investments". 12 The plaintiff points to the fact that in each document, that is, both the printed form and the typewritten sheet, the commission is expressed to be referable to "all 27 units". That, it is said, means, as a matter of construction, that nothing becomes payable until the relevant event of sale (be it exchange of contracts or completion) has taken place in relation to all 27 units. In other words, the arrangement is of an "all or nothing" variety. 13 The plaintiff seeks to derive support for this construction from a letter dated 7 July 2003 to it, or at least to its director Mr Roberts, from "Progressive Investments Securities Pty Ltd", which of course may or may not be the "Progressive Investments" referred to in what I have called the typewritten sheet. Enclosed with that letter are invoices for commissions for "units exchanged at both Goold Street, Chippendale and Albert Street, Surry Hills". The letter reads in part as follows: "I understand the agreement on commissions has been agreed upon total exchanges, however considering the fact that with just few [sic] units left (less than 10%) and some have delayed due to unexceptional [sic] circumstances and situations beyond our control, I would request you to please pay a partial amount on these invoices enabling us a smooth and effective cashflow." That letter, as I have said, appears to be from "Progressive Investments Securities Pty Ltd". 14 This extract from the letter, the plaintiff says, carried a request for variation of the "all or nothing" commission agreement and therefore supports the "all or nothing" construction which, as the letter shows, was accepted by Progressive Investments Securities Pty Ltd. 15 Somewhat curiously, Mr Roberts purports in his affidavit to say what "the terms of the agreement" (that is, on his evidence, the agreement consisting of the printed form and the typewritten sheet) mean. He says that the agreement required payment to the defendant – not to "Progressive Investments" or anyone else - of $2,000 per unit progressively as contracts for the sale of units were exchanged, with a lump sum payment upon completion of the sale of all units of $621,000 (not, it may be noted, the $624,000 referred to in both the printed form and the typewritten sheet), less the aggregate of the $2,000 payments already made. Such an agreement is not evidenced by either of the printed form or the typewritten sheet; nor is it evidenced by the two documents together. And, as I have said, Mr Roberts does not suggest any other source of the version to which he deposes. 16 Mr Roberts further says that the plaintiff has paid $20,000 to the defendant (not "Progressive Investments") in respect of ten exchanged contracts. He refers to this as a payment "on account" and says that it was referable to $2,000 per exchange on ten exchanged contracts. He further says that the payment was made by cheque dated 11 June 2003 in favour of "Progressive Investment [sic] Securities". A cheque butt showing that name is exhibited to his second affidavit. The butt does not show the identity of the payer, that is, the person with the bank account to which the cheque-book relates. 17 The defendant sought, by a notice to produce, to obtain the relevant bank statement, that is the statement that would show payment of the cheque taken from the butt, assuming that it had been presented and paid. Nothing was produced. This, I am invited to infer, means that the account holder was not the plaintiff and that the payment of $20,000, if indeed made, was not referable to the supposed arrangement for the payment of $2,000 per exchange. 18 The defendant points, in this connection, to an invoice dated 21 June 2003, ten days after the drawing of the supposed cheque, being an invoice supposedly issued by Progressive Investments Securities Pty Ltd to the plaintiff for $20,000 described as "Commissions for exchanged units, 33-47 Goold Street, Chippendale." This is one of several invoices enclosed with the letter of 7 July 2003 to which I have already referred. It is submitted, on behalf of the defendant, that I should find that the plaintiff never paid $20,000 to the defendant by means of the supposed cheque and that, even if it is found that there is otherwise a genuine dispute as to the existence or amount of the debt referred to in the statutory demand, I should find that there is no dispute as to $20,000 of it. 19 Dealing with the plaintiff's main contentions regarding the alleged debt as a whole, the defendant makes a number of points. First and foremost, it is submitted that, as a matter of common sense, the construction for which the plaintiff contends is implausible. The agency was not expressed in the printed form to be a sole or exclusive agency. It is common ground that there were 27 units in the development and that the references in the documents to "all 27 units" are therefore references to the totality of the units available for sale. 20 There is evidence to show that other agents introduced buyers for some units in the development and that sales to those buyers were completed. That, the defendant says, tells strongly against the "all or nothing" construction for which the plaintiff contends and supports the existence of some regime of payment of commission progressively. But there is no evidence of when the other agents were introduced. It may have been after the agreement of April 2003 had been made; and there may be an argument to the effect that the reference to "all 27 units" in the April 2003 agreement implied a sole and exclusive agency. 21 It is the defendant's case that the implausibility to which I have referred and the evidence about correspondence and invoices predicated on a unit by unit commission basis, rather than the "all or nothing basis", tells so strongly against the plaintiff's contentions that there cannot be seen to be any real dispute. 22 The alternative position of the defendant is that, even on Mr Roberts's own evidence about the terms of the agreement and the aspect involving $2,000 upon each exchange of contracts, there cannot be any dispute about indebtedness at the rate of $2,000 per exchange – which, the defendant says, represents $20,000 for ten exchanges (the number indicated by the evidence about a supposed payment of that amount "on account") or, at worst from the defendant's viewpoint, $8,000 for four exchanges, being the number of sales referred to in the affidavit accompanying the statutory demand itself. 23 The defendant's ultimate contention, therefore, is that there is no genuine dispute as to any part of the demanded sum of $92,080 or, alternatively, that there is no genuine dispute as to $20,000 or, alternatively, that there is no genuine dispute as to $8,000; and that, in either of the second and third events, the demand should stand for the relevant sum and be varied accordingly on the footing that the $20,000 the plaintiff says was paid to the defendant was not in truth paid at all, at least by the plaintiff to the defendant and by reference to the sales commission agreement. 24 It is unnecessary to go into the case law about the approach to be taken and the test to be applied in a case such as this where a company on which a statutory demand has been served, relies on s.459H(1)(a) and the proposition that there exists a genuine dispute as to the existence or amount of the debt the subject of the statutory demand. Both counsel adopt the same position on that matter. It is sufficient that I repeat in this case what I said in Solarite Air Conditioning Pty Ltd v York International Australia Pty Ltd [2002] NSWSC 411 at [23] after referring to earlier cases: "It is appropriate to dwell for a moment on the guidance provided by these cases. The tests of "plausible contention requiring investigation", "real and not spurious, hypothetical, illusory or misconceived" and "perception of genuineness (or lack of it)", applied in the context of a summary procedure where "it is not expected that the court will embark on any extended inquiry", mean that the task faced by a company challenging a statutory demand on the "genuine dispute" ground is by no means at all a difficult or demanding one. The company will fail in that task only if it is found upon the hearing of its s.459G application that the contentions upon which it seeks to rely in mounting its challenge are so devoid of substance that no further investigation is warranted. Once the company shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow. The court does not engage in any form of balancing exercise between the strengths of competing contentions. If it sees any factor that, on rational grounds, indicates an arguable case on the part of the company, it must find that a genuine dispute exists, even where any case apparently available to be advanced against the company seems stronger." 25 The position in the present case is that there is clearly a dispute as to the whole $92,000 and that it is clearly genuine. 26 In the first place, there are competing contentions as to whether the contract between the plaintiff and the defendant is bipartite, consisting of the printed form alone, or whether, in reality, there is a tripartite agreement consisting of both the printed form and the typewritten sheet and involving the plaintiff, the defendant and "Progressive Investments", whoever that might be. 27 Second, there are competing contentions as to the true construction of the "all 27 units" provisions and whether they evidence what I have called the "all or nothing" meaning or some progressive and proportionate meaning. 28 Third, there is the curious factor that Mr Roberts seems to ascribe to the written agreement which, on his case, is the two page version, a meaning that is not consistent with either of the possible meanings of the written terms that have been canvassed. 29 Fourth, there is evidence that Progressive Investments Securities Pty Ltd (the connection of which with the defendant is not clear), in correspondence, recognised the "all or nothing" nature of the commission arrangement and sought dispensation from it or modification of it. 30 Fifth, there is evidence that the plaintiff purported to make payments "on account" by reference to a regime not consistent with either version of the written terms; but whether that was in response to or by reference to a subsequently dated invoice enclosed with a letter dated later still is not clear. 31 Sixth, there are unanswered questions about the role of "Progressive Investments" and "Progressive Investments Securities Pty Ltd", assuming the tripartite contract theory is incorrect (and, I would say, even if it is correct). 32 Seventh, there are unanswered questions about whether $20,000 was paid in June 2003 as may be suggested by the cheque butt exhibited to Mr Roberts' affidavit and, if it was paid, there are further questions as to what it was paid for and by whom it was paid. 33 The plaintiff would fail in this case (in which it seeks no more than an order setting aside the statutory demand on the footing that a genuine dispute exists) only if the contentions upon which it relies in support of the proposition that a genuine dispute does exist are seen to be so devoid of substance that no further investigation is warranted. The plaintiff has not failed in that respect. The evidence shows that there is a myriad of issues in need of assessment and investigation and on which factual findings would have to be made before there would be any basis for concluding that the sum claimed by the statutory demand was clearly and unambiguously owing, due and payable by the plaintiff to the defendant. 34 The plaintiff has made out the case of genuine dispute. 35 I make orders 1 and 2 in the originating process. ********** 26/06/2006 - Typo - Paragraph(s) Para 2, line 2 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.