New South Wales Supreme Court CITATION : Contact Centres Australia Pty Ltd v John Wright [2006] NSWSC 1205 HEARING DATE(S) : 20/10/06 JUDGMENT DATE : 20 October 2006 JURISDICTION : Equity Division Corporations List JUDGMENT OF : White J EX TEMPORE JUDGMENT DATE : 10/20/2006 DECISION : 1. Make an order in accordance with paragraph 1 of the originating process; 2. order that the defendant pay the plaintiff's costs. CATCHWORDS : CORPORATIONS – Winding up – Winding up in insolvency – Statutory demand – Application to set aside statutory demand – Defendant served plaintiff with statutory demand – Defendant alleged debt for outstanding and unpaid after-tax salary – Plaintiff alleged no debt owing because defendant had provided no services – Whether genuine dispute that plaintiff indebted to defendant – Assessing genuineness – Where dispute genuine – Application granted. LEGISLATION CITED : Corporations Act 2001 (Cth) Eyota Pty Ltd v Hanave Pty Ltd [1994] 12 ACSR 785 Solarite Air Conditioning Pty Ltd v York International Australia Pty Limited [2002] NSWSC 411 CASES CITED : Automatic Fire Sprinklers Pty Limited v Watson (1946) 72 CLR 435 Graywinter Properties Pty Limited v Gas and Fuel Corporation Superannuation Fund (1996) 21 ACSR 581 Processed Machinery Australia Pty Ltd v ACN 057 260 590 [2002] NSWSC 45 Inland Revenue Commissioner v Duke of Westminster [1936] AC 1 Contact Centres Australia Pty Ltd PARTIES : v John Wright FILE NUMBER(S) : SC 3544/06 COUNSEL : Plaintiff: S A Wells Defendant: P Doyle Gray SOLICITORS : Plaintiff: Kemp Strang Defendant: Price & Company IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST WHITE J Friday, 20 October 2006 3544/06 Contact Centres Australia Pty Ltd v John Wright JUDGMENT 1 HIS HONOUR: This is an application under s 459G of the Corporations Act 2001 (Cth) to set aside a statutory demand served on the plaintiff on 14 June 2006. The defendant, by the demand, claimed to be owed a debt of $22,369 for outstanding and unpaid after tax salary from 20 February 2006 to 11 June 2006. The demand was dated 13 June 2006. 2 The question which arises on the present application, in terms of s 459H(1)(a), is whether there is a genuine dispute between the plaintiff, Contact Centres Australia ("CCA"), company and the defendant about the existence or amount of the debt to which that demand relates. 3 Two grounds of dispute were relied upon by counsel for the plaintiff. First, the plaintiff disputes that the defendant was employed by it. Accordingly, it says if - which it denies - there is any amount owed for the period from 20 February 2006, that debt is not owed to the defendant. It says that any such debt would be owed to the company with which the defendant is associated, Contact Centres Holdings Pty Limited (CCH). It says that by an agreement between the plaintiff and CCH, it was agreed that CCH would provide services to it through the defendant. 4 The second ground of dispute upon which counsel for the plaintiff relied was that no wages or salary could be due, because no services were provided by the defendant to it after 20 February 2006. 5 Extensive affidavits have been filed by both parties and there is a sharp conflict in the evidence. However, the principles upon which the application is to be decided are not in dispute. The question to be decided is not whether the defendant was employed by the plaintiff and is entitled to salary. The question is whether there is a genuine dispute that he was so employed and is so entitled. 6 The relevant test has been put in various ways. In this application, the test which is perhaps most apposite is that of McLelland CJ in Eq in Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, where his Honour said (at 787): " It is, however, necessary to consider the meaning of the expression 'genuine dispute' where it occurs in s 450 h . In my opinion that expression 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. 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." 7 The present application is not one in which to resolve disputed questions of fact. 8 In Solarite Air Conditioning Pty Ltd v York International Australia Pty Limited [2002] NSWSC 411, Barrett J said (at [23]): " [23] 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 s459G 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. " 9 As his Honour said, it is sufficient in order for the company to establish a genuine dispute that such a dispute is identified upon one ground (assuming it to be a ground which the company is permitted to advance). It will be sufficient for the plaintiff to succeed on either of the grounds it raises. 10 I will deal with the second ground first. For this purpose, I will assume that the defendant was an employee of the plaintiff in February 2006. It is common ground that the defendant did not perform work for the plaintiff during the period covered by the demand. The defendant says he was prevented from doing so by the conduct of the plaintiff company and those in charge of it. Nonetheless, the defendant says his contract of employment was not terminated, but continued. He says that he remained willing to provide his services and offered to do so. However, he says he was unable to do so because he was excluded from the office, and prevented from working from home by the disconnection, or the disruption, of the internet line from his home to the plaintiff's office. He says that that disruption or disconnection was brought about by the conduct of the plaintiff. 11 It is common ground that the defendant was absent for a period due to illness. The plaintiff says that he was absent from the office due to illness and did not return until 17 February 2006, although there is evidence, which is difficult to reconcile with that statement, to the effect he was only at the offices of the plaintiff during the month of January. 12 Be that as it may, on 28 February 2006, there was undoubtedly a meeting between the defendant, Ms Crabbe, Mr Thompson, (who are directors of the plaintiff), and a Ms Spencer. According to Ms Crabbe, she asked the defendant whether he was coming back to work and he said, "No, I am not going to keep working at CCA, no I can't". According to her, on the following day, the defendant said to Ms Crabbe that he wanted her to clarify his position and asked if he was going to be fired. According to her, she said that that was not the case, and asked him to sit down at his desk, and he refused. She deposes that the defendant received payment of all moneys due to him up to 23 February 2006, and that that is all that was due in respect of his service. 13 On 8 March 2006, the defendant wrote to Ms Crabbe and Mr Thompson complaining that they had frustrated his efforts to return to work. He said: " I am now placing you on notice that I am maintaining my ongoing employment status and intend to return to work later this morning. I will resume my role as overseeing operations in the call centre, being a part of the management team and exercising my rights as a director of CCA. I will also expect to receive my normal pay for the past week whilst you resisted my efforts to return to work. " 14 Ms Crabbe denied the allegation that she had frustrated the defendant's efforts to return to work and asserted that, on 27 or 28 February 2006, he had asked for his employment to be terminated. This, in turn, was denied by the defendant. It appears from the terms of subsequent email correspondence that, by this time, the contention was advanced by the plaintiff that the defendant had abandoned his employment. 15 On 9 March 2006, the plaintiff acknowledged that the defendant's absence from the office on 27 February would have no bearing on his employment status and that it was in the best interests of the plaintiff that he not attend the office until the matter was clarified. This was not an admission that the defendant was an employee. Nor was it an admission that, if the defendant had been an employee, he had not abandoned his employment by what was said in discussions with Ms Crabbe. However, it did convey that "until the matter [was] clarified" the defendant's presence in the office of the plaintiff was not required. 16 The plaintiff denied that it had prevented the defendant from performing services from home. It denied that it was responsible for disrupting or disconnecting the internet connection between the defendant's home computer and the plaintiff's office network. 17 In Automatic Fire Sprinklers Pty Limited v Watson (1946) 72 CLR 435, the right of an employee to receive wages was dealt with by Dixon J in the following terms. His Honour said at (465): "A contract for the establishment of the relation of master and servant falls into the same general category of agreements to pay in respect of the consideration when and so often as it is executed, and is, therefore, commonly understood as involving no liability for wages or salary unless earned by service, even though the failure to serve is a consequence of the master's wrongful act. " and (at 465): " .... The common understanding of a contract of employment at wages or salary periodically payable is that it is the service that earns the remuneration and even a wrongful discharge from the service means that wages or salary cannot be earned however ready and willing the employee may be to serve and however much he stands by his contract and declines to treat it as discharged by breach. " and (at 465): " ... His only remedy is in unliquidated damages for wrongful dismissal ." and (at 466): " ... The wages are incident to the subsisting relationship of master and servant. A master who sends his servant upon a holiday upon full pay can be sued for wages under the contract, although not on a common count for work and labour done. They also serve who only stand and wait. Difficulties, too, arise from the fact that a refusal to work on the part of a servant, who neither leaves his master's service nor is discharged, may disentitle him to wages for the period of the refusal. That is for non-fulfilment of the conditions by which wages are earned. But, broadly speaking, it is enough to say that wages are for the service reasonably demanded under a subsisting relationship of master and servant. That relationship may be ended by the servant forsaking the master or the master discharging the servant, although the act of one or the other amounts to a breach of contract. " 18 That is so, even if the act of either the employer or the employee amounting to a breach of contract, including an act of an employer in discharging the employee, does not bring about a termination of the contract. Dixon J added (at 469): " … I think that there is nothing in the general law preventing the wrongful dismissal of a servant operating to discharge him from service, notwithstanding that he declines to accept the dismissal as absolving him from further performance, but keeps the contract open and remains ready and willing to serve. " 19 In Automatic Fire Sprinklers v Watson, the employee succeeded in obtaining remuneration by way of salary, notwithstanding that his services had been discharged by the employer. That, however, was because of orders then in force which forbad not only the termination by the employer of the employment without permission of the relevant authority, but also the employer standing the employee down or suspending him from duty (at 469-470). 20 If what Dixon J called "the common understanding of a contract of employment at wages or salary periodically payable" is applicable in the circumstances of this case, there is at least a plausible contention requiring investigation as to whether the defendant is entitled to payment of salary when it is common ground he has not performed work for the plaintiff during the period for which the salary is claimed. 21 The defendant says that his contract of employment remains on foot. The correspondence to which I have referred, and the conversations about which Ms Crabbe gave evidence, show that there is an issue as to whether he abandoned his employment. But even if his contract of employment has not been terminated, there is still the question which will require determination of whether he is entitled to wages, as distinct from unliquidated damages. Although he did not provide work, it may be that the defendant will be found to be entitled to wages for proffering services on the principle that, "they also serve who only stand and wait". But whether that is so or not will depend upon a closer investigation than can be had in these proceedings of the events of 28 February and 1 March 2006, and the events surrounding the email correspondence of 8 and 9 March 2006. 22 Hence, counsel for the defendant understandably accepted that if it were open to the plaintiff to advance this ground of dispute, and if what Dixon J described as the "common understanding of a contract of employment" was applicable in this case, there was a genuine issue as to whether the defendant was entitled to salary. 23 The defendant sought to outflank the dispute, relying upon three grounds. First, it was said, this ground is not open to the plaintiff on the principles in Graywinter Properties Pty Limited v Gas and Fuel Corporation Superannuation Fund (1996) 70 FCR 452 and Process Machinery Australia Pty Ltd (trading as DCL Engineering) v ACN 057 260 590 [2002] NSWSC 45 at [22]. 24 Secondly, counsel submitted that it is not necessarily the case that wages are only payable in return for services rendered. It is perfectly competent for parties to make a contract of employment under which payment of wages is independent of service provided (Inland Revenue Commissioners v Duke of Westminster [1936] AC 1; Automatic Fire Sprinklers Pty Limited v Watson at 465). 25 Counsel for the defendant submitted that the onus did not lie on the defendant to establish any particular terms of the defendant's employment which might have entitled him to payment of salary independently of the provision of services. He submitted that, in the absence of evidence identifying the terms of the defendant's employment, it was purely speculative to say that the defendant was only entitled to salary if he performed work for the plaintiff, either at its premises or from home. 26 Thirdly, counsel submitted that this ground lacked genuineness because it should be discerned from the plaintiff's correspondence and affidavits that its principal contention - indeed, counsel submitted, properly understood, it was the plaintiff's only contention - was that, if there were any employee, it was CCH, not the defendant, and only CCH, not the defendant, provided services to it. 27 The defendant's first contention is that the ground for disputing the debt was not raised in the supporting affidavit filed within the 21 days after service of the statutory demand, and that, in order for such a ground to be raised by the affidavit, it must be clearly delineated. These principles are well established, although it is sufficient that the area of controversy be clearly delineated by necessary inference, so it is identifiable as one or more of the grounds for disputing the statutory demand made available by ss 459H or 459J of the Corporations Act. 28 In my view, the second ground was clearly delineated in the affidavit filed by the plaintiff within the 21-day period. The evidence of Ms Crabbe, to which I referred earlier in these reasons, was contained in her affidavit of 3 July 2006. In that affidavit, which accompanied the originating process, Ms Crabbe stated, in paragraph 6: " The plaintiff denies that it owes the debt claimed in the Demand. The Defendant has never been an employee of the Plaintiff, and further did not provide any services to the Plaintiff during the period 20 February 2006 to 11 June 2006. " 29 Ms Crabbe annexed a letter from the plaintiff's solicitors, Clayton Utz, to the defendant's solicitor, Mr Price. Clayton Utz said: " [The company] disputes both the existence of the debt claimed in the Demand and the amount of any debt owing to Mr Wright. We are instructed that Mr Wright provided no services to the Company and performed no work for the Company during the period 20 February 2006 to 11 June 2006. " 30 I do not think that this ground of dispute could have been more clearly identified. 31 The defendant submitted that, on a proper construction of paragraph 13 of the later affidavit sworn by Ms Crabbe on 25 August 2006, it should be seen that the plaintiff was confining the ground of dispute to a contention that it was only CCH, and not the defendant, who provided services to the plaintiff. That paragraph was in response to two particular paragraphs of Mr Wright's affidavit. It did convey that the plaintiff contended that any services provided were provided by CCH, not by the defendant. However, the plaintiff did not thereby seek to abandon the ground identified in the affidavit filed within the 21-day period, nor could it properly have been understood to have done so. I therefore reject the first of the grounds upon which the defendant relied. 32 The possibility that the contract of employment between the plaintiff and the defendant contained special terms which may entitle the defendant to salary independently of the performance of work is just that, a mere possibility. It is the plaintiff's position that it does not employ the defendant. It introduced evidence which it said showed the relevant arrangement was between it and CCH. The terms of that arrangement were in evidence, but the defendant said, with some justification, that the manner in which the parties conducted themselves showed that the relationship was not governed by the document upon which the plaintiff relied. Assuming the correctness of the defendant's contention, we are left, in my view, with a contract of employment whose terms are to be implied, and which will be governed by the common law. If there are special terms of such a contract which entitle the defendant to wages or salary independently of the provision of work, I would expect, on this application, that evidence of such terms would be adduced by the defendant. On any view of the matter, there is a plausible contention requiring investigation as to the terms of the contract. 33 So far as appears on the material before me, if there is a contract of employment between the plaintiff and the defendant, it is one which would be governed by the common understanding to which Dixon J referred in Automatic Fire Sprinklers v Watson. Accordingly, I reject the second of the submissions of the defendant on this point. 34 The third submission covers the same ground as the first. I think it is clear from the terms of Ms Crabbe's affidavit of 3 July 2006, and from the correspondence annexed to that affidavit, that this ground of dispute is one which the plaintiff has advanced from the outset. I do not think it has resiled from it. I see no reason to doubt that it is a genuine ground. 35 For these reasons, I consider that the second ground of dispute identified by counsel for the plaintiff is made good. That being so, it is unnecessary to consider the first ground of dispute. 36 As the question of the defendant's entitlements to salary may well be considered in another Court, it is preferable I say nothing further in relation to the first ground advanced. For these reasons, I make an order in accordance with paragraph 1 of the originating process. [Counsel for the plaintiff addressed on costs.] 37 The plaintiff seeks an order that its costs be paid on an indemnity basis. It relies upon the letter from Clayton Utz to Mr Price of 19 June 2006, to which I have earlier referred. The same letter stated that "A statutory demand is not an instrument of debt collection", and that the defendant well knew that the debt was disputed. It was asserted that the service of the statutory demand was an abuse of process. The solicitors foreshadowed making an application for indemnity costs, if the demand was not withdrawn. 38 Whilst there are circumstances in which an order for indemnity costs is appropriate where proceedings are brought, or defended, in circumstances where the legal representatives of the parties should appreciate that there are no realistic prospects of success, I do not think that this is such a case. The defendant's submissions, whilst unsuccessful, were properly advanced. This is not a simple case where the defendant failed to provide services. The matter also had to be considered in the light of the email correspondence, particularly that of 9 March 2006. Whilst I have found that there is a genuine issue which requires determination, such that the statutory demand should be set aside, I think the defendant could reasonably have taken the view that the application should be defended. It is certainly not a case in which it is clear, on any view, that the defendant is not owed the debt for which demand is made. 39 I reject the application for indemnity costs. I order that the defendant pay the plaintiff's costs. ****** 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.