New South Wales Supreme Court CITATION : Roandale Holdings Pty Ltd v Long Nominees Pty Ltd; Rossview Holdings Pty Ltd v Long Nominees Pty Ltd [2009] NSWSC 945 HEARING DATE(S) : 07/09/09 JUDGMENT DATE : 11 September 2009 JURISDICTION : Equity Division Corporations List JUDGMENT OF : Barrett J DECISION : Order that statutory demand be set aside. Order that defendant pay plaintiff's costs. CATCHWORDS : CORPORATIONS - winding up - statutory demand - application for order setting aside - whether genuine dispute as to existence of debt - not appropriate to address questions of credit upon such application - otherwise no question of principle Corporations Act 2001, s 459G, 459H(1)(a), 459H(1)(b) LEGISLATION CITED : Industrial Relations Act 1996, s 127 Payroll Tax Act 2007. clause 18(2), Schedule 2 Workers Compensation Act 1987, s 175B(4) CATEGORY : Principal judgment CASES CITED : Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 Spacorp Australia Pty Ltd v Myer Stores Ltd [2001] VSCA 89; (2001) 19 ACLC 1270 (1) Roandale Holdings Pty Limited - Plaintiff PARTIES : Long Nominees Pty Limited - Defendant (2) Rossview Holdings Pty Limited - Plaintiff Long Nominees Pty Limited - Defendant FILE NUMBER(S) : SC (1) 3778/09; (2) 3779/09 COUNSEL : Mr M W Young - Plaintiff Mr N P Guttentag - Defendant SOLICITORS : Back Schwartz Vaughan - Plaintiff Guttentag Lawyers - Defendant IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST BARRETT J FRIDAY, 11 SEPTEMBER 2009 3778/09 ROANDALE HOLDINGS PTY LIMITED v LONG NOMINEES PTY LIMITED 3779/09 ROSSVIEW HOLDINGS PTY LIMITED v LONG NOMINEES PTY LIMITED JUDGMENT 1 Two proceedings were heard together on 7 September 2009. In one case, the plaintiff is Roandale Holdings Pty Limited ("Roandale"). In the other, the plaintiff is Rossview Holdings Pty Limited ("Rossview"). The defendant in both cases is Long Nominees Pty Limited ("the defendant"). 2 Each of Roandale and Rossview makes application under s 459G of the Corporations Act 2001 (Cth) for an order setting aside a statutory demand dated 2 July 2009 served on it by the defendant on that day. While each of Roandale and Rossview was served with a statutory demand, there is only one debt (or alleged debt), being a debt said to be owed to the defendant by both Roandale and Rossview. This, coupled with the fact that the evidence in each case is the same, makes it possible to deal with the two applications together in a single judgment. 3 In the discussion that follows, references to "the plaintiff" are references to Roandale as plaintiff in one of the proceedings and to Rossview as plaintiff in the other, while references to "the co-venturer" are, in relation to the particular proceedings, references to whichever of Roandale and Rossview is not the plaintiff in those proceedings. 4 The debt the subject of the statutory demand is described as "Balance payable on Invoice Number 36/07-08 dated 1 July 2008" and is in the sum of $340,171.12. The invoice is in the sum of $422,368.65 which is itself the balance of a larger sum described as for "Building Work at Rose Bay and Coogee". 5 The plaintiff challenges the statutory demand on two grounds: first, that there is a genuine dispute as to the existence or amount of the debt (s 459H(1)(a)); and, second, that the plaintiff has an offsetting claim (s 459H(1)(b)). 6 The affidavit supporting the s 459G application is the affidavit of the plaintiff's sole director sworn on 22 July 2009. The salient matters appearing from that affidavit are as follows: 1. The plaintiff and the co-venturer are the joint owners of home unit properties at Rose Bay and Coogee. 2. Contracts between the defendant as builder and the plaintiff and co-venturer as owners were entered into in 2006 in respect of both properties. Each was a home building contract and was later varied. Copies of the building contract are exhibited to the affidavit. The contract relating to Rose Bay is dated 23 October 2006. The contract relating to Coogee is dated 15 November 2006. 3. The defendant has not provided to the plaintiff and co-venturer statements under s 127 of the Industrial Relations Act 1996, clause 18(2) of Schedule 2 to the Payroll Tax Act 2007 and s 175B(4) of the Workers Compensation Act 1987. Documents in fact provided by the affidavit and dated 3 August 2007 do not conform to the legislative requirements. 4. The building work performed by the defendant is defective. The plaintiff and co-venturer accordingly have claims for damages against the defendant. The damages are at least $420,959.88. 7 The affidavit goes on to give particulars of the way in which the sum of $420,959.88 is calculated. 8 Mr Garry Long, a director of the defendant, deposes that, in November 2006, the defendant entered into three contracts in relation to each of the Rose Bay project and three like agreements in relation to the Coogee project, being, first, a construction agreement with the plaintiff and the co-venturer, second, a trade contract with Glenmore Building & Industrial Services Pty Ltd (a company associated with the principals of the plaintiff and the co-venturer) and, third, a home building contract with the plaintiff and the co-venturer. The last-mentioned are the contracts exhibited to the affidavit of the plaintiff's sole director to which reference has already been made. 9 Each of the construction agreements (the first of the contracts just mentioned) was, as I have said, between the defendant of the one part and the plaintiff and co-venturer of the other part. The task to be performed by the defendant under each construction agreement is described as "manage construction of building project at" the particular address. 10 Each trade contract (the second mentioned above), being a contract between the defendant and Glenmore Building & Industrial Services Pty Ltd ("Glenmore") names the defendant as "builder" and Glenmore as "trade contractor". It is a contract under which Glenmore is to execute for the defendant work described as "complete construction of residential units at the above address as per attached costings". 11 Each of the home building contracts (the third mentioned above and also referred to in and exhibited to the affidavit of the sole director of the plaintiff) is a contract for the construction of home units by the defendant for the plaintiff and co-venturer. 12 Mr Garry Long also says in his affidavit that each of the home building contracts was a sham. More precisely, he says that it was entered into "to assist the developers [ie, the plaintiff and co-venturer] raise finance". Mr Adam Long also gave evidence about this: "On 23 October 2006 the defendant entered into a Home Building Contract purely to assist [the plaintiff and the co-venturer] ('the developers') to raise finance for the Rose Bay project. The Home Building Contract was not intended and never did it regulate the relationship between the defendant and the developers. On 15 November 2006 the defendant entered into a Home Building Contract purely to assist the developers to raise finance for the Coogee project. The Home Building Contract was not intended and never did it regulate the relationship between the defendant and the developers." 13 Mr Adam Long goes on to say in paragraph 4 of his affidavit that the variation agreements and associated deeds were later entered into "to assist the developers raise finance". He then deposes: "The agreements referred to in paragraph 4 above were not intended and never did regulate the relationship between the defendant and the developers." 14 Mr Hartley (the sole director of Rossview, who gave evidence in both matters), in an affidavit in reply, calls into question the status of each of the trade agreements. He says: "I recognise my handwriting in the body of each document completing the balances document and my signature above the words 'Trade-Contractor' where it appears on pages 56 to 58 and 64 to 67. I do not recall having completed the documents and do not know now why the agreements were completed and entered into but I can say that these documents never were put into effect." 15 Mr Hartley also says that Glenmore does not have a builder's licence and could not lawfully have entered into any contract to execute building work for the defendant. 16 It is thus made clear that the parties are in dispute as to whether two of the three supposed contracts were operative in relation to each development project. According to the defendant, the home building contracts were never intended by their parties to have effect. According to the plaintiff, the trade agreements were never put into effect. That leaves as apparently uncontroversial each construction agreement, which was an agreement between the defendant and the plaintiff and co-venturer but was not a contract for building work. Rather, each construction agreement was a contract for the provision of management services. 17 The debt to which the statutory demand relates is clearly described in the relevant invoice as for "Building Work at Rose Bay and Coogee". The contention of the defendant is obviously that the plaintiff and co-venturer are indebted to the defendant accordingly, the clear implication being that the defendant did "Building Work at Rose Bay and Coogee" for the plaintiff and co-venturer, that they are liable to make payment to the defendant for that work and that they have failed to do so. 18 The defendant presumably cannot be contending that it did "Building Work at Rose Bay and Coogee" for the plaintiff and co-venturer under the home building contracts since the defendant's own evidence is that those contracts were never intended to be effective and are, in reality, shams. 19 The defendant presumably cannot be contending that it did "Building Work at Rose Bay and Coogee" for the plaintiff and co-venturer under the construction agreements since they are contracts for the provision of management services, not building work. 20 The defendant presumably cannot be contending that it did "Building Work at Rose Bay and Coogee" under the trade contracts since, although the trade contracts were for building work ("complete construction"), the plaintiff and co-venturer were not parties to the trade contract, with the result that those contracts cannot be the source of debts owing, due and payable by the plaintiff and co-venturer. 21 On the whole of the evidence, the court can see no clear basis for the defendant's contention that the plaintiff and co-venturer are liable to pay anything to the defendant for "Building Work at Rose Bay and Coogee". While the plaintiff and co-venturer, in advancing the contention that the statutory demands should be set aside, accepted the existence and force of the home building contracts and sought to raise statutory defences to the claims for payment, the defendant has itself taken the apparent stance that it does not rely on the home building contracts at all. 22 There can be no doubt that there exists, in the way and to the extent referred to in cases such as Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, a "genuine dispute" between the plaintiff and the co-venturer on the one hand and the defendant on the other as to the existence of the debt the subject of the statutory demand, that is, a debt in the stated sum for "Building Work at Rose Bay and Coogee". 23 Mr Guttentag, who appeared for the defendant, made submissions about credibility. He submitted that findings should be made on that subject. That is not an appropriate course in a s 459G matter. As McLelland CJ in Eq said in Eyota Pty Ltd v Hanave Pty Ltd (above) at 787, the court should "not embark upon an enquiry as to the credit of a witness, or a deponent whose evidence is relied on as giving rise to the dispute". The reason is made clear by observations of Brooking JA and Charles JA in Spacorp Australia Pty Ltd v Myer Stores Ltd [2001] VSCA 89; (2001) 19 ACLC 1270 at [3] and [4]: ". . . A great range of states of mind on what we might call the ultimate question — the existence of the debt — may accompany the view that there is a genuine dispute, ranging from a clear conviction that the debt does not exist to the opinion that the genuine dispute hurdle has only just been cleared. We think, if we may say so, that, except in a case in which it is as plain as a pikestaff that there is no debt (where bluntness may be in the interests of both sides), Judges should, in general at all events, in dealing, whether at first instance or on appeal, with the question of genuine dispute, be at pains to perform the admittedly delicate task of disposing of that question without expressing a view on what we have called the ultimate question. For otherwise, on an application which resembles if it is not in law an interlocutory one, things may be said which embarrass the judge before whom the ultimate question comes." 24 What their Honours called "the ultimate question" (that is, whether the plaintiff is indebted to the defendant and, if so, for how much) is not currently before me. That question can only be determined in appropriately constituted debt recovery proceedings. 25 The statutory demand will be set aside because of the existence of the genuine dispute to which I have referred. There is no need to consider the question of offsetting claim. 26 The orders of the court in each of 3778/09 and 3779/09 are as follows: 1. Order that the statutory demand dated 2 July 2009 served on the plaintiff by the defendant be set aside. 2. Order that the defendant pay the plaintiff's costs of the proceedings. ********** 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.