Supreme Court New South Wales Medium Neutral Citation: In the Matter of Harbour Radio Pty Ltd [2012] NSWSC 1290 Hearing dates: 2 October 2012 Decision date: 02 October 2012 Jurisdiction: Equity Division - Corporations List Before: Brereton J Decision: Originating process dismissed Catchwords: CORPORATIONS - creditor's statutory demand - application to set aside creditor's statutory demand - whether genuine dispute exists as to indebtedness - construction of contractual term giving rise to indebtedness Legislation Cited: (Cth) Corporations Act 2001, s 459G, 459H, 459J Cases Cited: Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 Soudan Lane Pty Limited v Glen Bradshaw t/ as Pacific Coast Digital [2007] NSWSC 772 Central City Pty Limited v Montevento Holdings Pty Limited [2011] WASCA 5 Spencer Constructions Pty Limited v G & M Aldridge Pty Limited [1997] FCA 681; (1997) 76 FCR 452 Giacci Holdings Pty Limited v Giacci [2007] WASCA 187 Kirrak Pty Limited v Compass Scaffolding & Plant Hire Pty Limited [2007] NSWSC 1002 Chadwick Industries (South Coast) Pty Limited v Condesing Vaporisers Pty Limited (1994) 13 ACSR 37 Roadships Logistics Limited v Tree [2007] NSWSC 1084; (2007) 64 ACSR 671 Delnorth Pty Ltd v State Bank of New South Wales (1995) 17 ACSR 379 BBX Holdings Ltd v American Home Assurance Co [2007] NSWSC 549 BMDI Tuta Health Care Pty Ltd v CME Medical Australia Ltd [2011] NSWSC 50 Hill v CA Parsons & Co Ltd [1972] 1 Ch 305 Birrell v Australian National Airlines Commission (1984) 5 FCR 447 State of New South Wales v Paige [2002] NSWCA 235; (2002) 60 NSWLR 371 Category: Principal judgment Parties: Harbour Radio Pty Ltd (Plaintiff) Steve Vizard (Defendant) Representation: Counsel: Mr C Colquhoun (Plaintiff) Mr D L Cook (Defendant) Solicitors: Watson Mangioni Lawyers Pty Ltd (Plaintiff) Holding Redlich (Defendant) File Number(s): 12/187353 Judgment (ex tempore) 1HIS HONOUR: By originating process filed on 14 June 2012, the plaintiff Harbour Radio Pty Limited, the proprietor of radio station 2GB, claims an order pursuant to the (Cth) Corporations Act 2001, s 459G, or section 459H, or section 459J, setting aside a creditor's statutory demand dated 24 May 2012 and served on it by the defendant, Stephen William Vizard, on or about that date. The demand claimed a debt of $247,500, which was described in the Schedule as follows: Unpaid Tax Invoice Number 1122 dated 12 April 2012 in relation to Midpoint Interim Top-Up Payment for the first 6 months of Year 3, payable upon termination of Services Agreement by the company on 5 April 2012 pursuant to notice from the company dated 6 March 2012. $225,000 plus $22,500 GST Total Amount: $247,500 2On 3 March 2010, Mr Vizard and Mr Russell Tate, the Executive Chairman of the plaintiff executed a document entitled "Harbour Radio Pty Limited (2GB) Offer of Services Agreement" ("the Service Agreement") for a term of three years commencing on 8 March 2010, whereby Mr Vizard agreed to prepare, host and present a news talk radio programme broadcast in the Melbourne license area on weekdays in regular programmed shifts, and to provide ancillary related and incidental services. The Service Agreement provided for a sign-on fee, a base salary of $450,000 per annum (plus CPI in each of the second and third years of the term) and an incentive amount, being a fixed payment in the first year of the term, and a share of a bonus pool (described as the "Melbourne revenue share", together with a "Live Read Revenue Share") in subsequent years. 3However, a clause entitled "Top-Up Payment" provided as follows: Top-Up Payment (a) Following expiry of the first 6 month period of the second and third years of the Term, if your aggregate gross receipts (prior to statutory deductions and superannuation contributions) under this agreement for the respective 6 month period is less than the amount equal to 50% of the aggregate of the Base Salary of the relevant year PLUS $450,000, the Company will pay you a top-up payment (less statutory deductions) equal to the shortfall. (b) Following the expiry of the second and third years of the Term, to the extent that your aggregate gross receipts (prior to statutory deductions and superannuation contributions) under this agreement (including any payment to you under paragraph (a)) for the respective 12 month period is less than the aggregate of Base Salary of the relevant year PLUS $450,000, 2GB will pay you a top-up payment (less statutory deductions) equal to the shortfall. (c) If in respect of the first 6 month period of the second and third years of the Term you receive a payment under paragraph (a) (Midpoint Interim Guarantee Payment) and during the second 6 month period of the respective year your aggregate gross receipts (prior to statutory deductions and superannuation contributions) (including the Midpoint Interim Guarantee Payment) in respect of that year exceed the aggregate of Base Salary of the relevant year PLUS $450,000, then notwithstanding any other provision of this agreement, 2GB is entitled to offset and retain to 2GB's own account any further entitlement you may have under this agreement relating to the relevant year to the extent of the amount the Midpoint Interim Guarantee Payment (with the intent that the Midpoint Interim Guarantee Payment is recouped by 2GB out of your entitlements in relation to the second 6 month period if your gross receipts (prior to statutory deductions and superannuation contributions) during the relevant year exceed the aggregate of Base Salary of the relevant year PLUS $450,000. 4Under the heading "Termination", the Service Agreement provided as follows: Termination 2GB will have the right to terminate within 30 days notice in either of the following 2 circumstances. These rights are additional to and separate from 2GB's rights of termination that are included in the long form agreement concluded between the parties pursuant to their negotiation obligations set out below. (a) Close of Business After the first 12 months of the Term, if 2GB or any related entity ceases to provide radio programming for broadcast in Melbourne. If 2GB terminates under this right, 2GB will pay you a separation payment calculated as follows: - If 2GB terminates in the first 6 months of the relevant year of the Term, it will pay you that amount that would have been payable at the end of the 6 month period by way of interim top-up payment; or - If 2GB terminates in the second 6 months of the relevant year of the Term, it will pay you that amount that would have been payable at the end of the 12 month period by way of interim top-up payment; PLUS - In either case, in relation to the remainder of the Term, the total amount of the Base Salary that would have been payable to you for the remaining period of the Term. (b) Performance After the first 12 months of the Term, if in respect of any 3 consecutive survey periods, BOTH of the following conditions are satisfied and 2GB exercises its right of termination within 30 days of the release of the 3rd survey results: - the average audience share of your regularly scheduled program shift is less than 55% of the average audience share for the preceding program shift during the same period; and - the average audience share of your regularly scheduled program shift is less than a 3% share. If 2GB terminates under this right, no separation payment is payable. However, you are entitled to retain all amounts paid to you under this agreement before the date of termination and you are entitled to recover from 2GB all amounts that have fallen due and payable to you as at the date of termination. 5As will be seen from the opening words of that clause, the Service Agreement contemplated that the parties would enter into a "Long Form Agreement". There is no doubt, however, that the Service Agreement - being the short form agreement - was intended to be legally binding, and indeed it concluded with the words "Your acceptance of this offer will give rise to a binding agreement between you and 2GB". The parties are in dispute as to whether the Long Form Agreement was ever finalised and concluded: Mr Vizard contends that it was, and Harbour Radio disputes that that was so. 6On 6 March 2012, Harbour Radio sent Mr Vizard a letter in the following terms: Termination of Services Agreement Close of Business As you would not doubt already be aware, on Friday 2 March 2012: - the directors of Melbourne Radio Operations Pty Limited (MRO) appointed administrators; - the administrators of MRO ceased the business of MRO, being the business of providing a radio station for broadcast by Malbend Pty Limited. Accordingly, Harbour Radio Pty Limited (2GB) has now ceased to provide radio programming for broadcast in Melbourne. Under your services agreement with 2GB (concluded 3 March 2010 on the terms and conditions set out in the letter dated 3 March 2010 from me to you), 2GB hereby confirms termination of your services agreement with 30 days notice for the reason that 2GB has ceased to provide radio programming for broadcast in Melbourne. 2GB releases you immediately from performance of your duties during the 30 day notice period. Because 2GB terminates in the second 6 months of the second year of the Term, you are entitled to a separation payment consisting of the following: 1. the amount that is payable at the end of the 12 month period ending 7 March 2012 by way of final top-up payment; and 2. in relation to the remainder of the Term, being the final 1 year period, the total amount of the Base Salary that would have been payable to you for the remaining period of the Term. As you know, we have paid you in advance the first component of this separation payment, being the final top-up payment for the 12 month period ending 7 march 2012. Accordingly, the total separation payment owing to you is $478,096, being the total amount of the Base Salary that would have been payable to you for the remaining 12 month period of the Term. Would you please confirm your acceptance of this separation payment by return email, and we will arrange payment by EFT to your nominated bank account. 7It will be seen that in that letter, Harbour Radio contends that it terminated in the second six months of the second-year of the term. Mr Vizard's claim, reflected on the creditor's statutory demand and in the correspondence that preceded it, is that the termination occurred in the first six months of the third-year of the term, so as to entitle him to the "Interim Top-Up Payment" in respect of that six-month period. There is no dispute that if in fact the relevant date is in the first six months of the third-year of the term, Mr Vizard is entitled to such a payment, nor as to the quantum of that payment, which is the amount claimed in the creditor's statutory demand. The sole dispute is whether the relevant date for determining his entitlement fell in the second six months of the second-year or the first six months of the third-year. 8The test as to whether there is a genuine dispute for the purposes of section 459H is now well established and has often been described. For present purposes, I adopt what was said by McLelland CJ in Eq in Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, 787, namely: 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" (...), or "a patently feeble legal argument or an assertion of facts unsupported by evidence" (...). 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 [citations omitted]. 9See also Soudan Lane Pty Limited v Glen Bradshaw t/as Pacific Coast Digital [2007] NSWSC 772, [5]; Central City Pty Limited v Montevento Holdings Pty Limited [2011] WASCA 5, [9]. 10As has often been said, the dispute must be "bona fide and truly exist in fact", on grounds that are "real and not spurious, hypothetical, illusory or misconceived" [Spencer Constructions Pty Limited v G&M Aldridge Pty Limited [1997] FCA 681; (1997) 76 FCR 452, 464; Giacci Holdings Pty Limited v Giacci [2007] WASCA 187, [4]; Kirrak Pty Limited v Compass Scaffolding & Plant Hire Pty Limited [2007] NSWSC 1002, [3]]. The dispute must not be vexatious or frivolous [Chadwick Industries (South Coast) Pty Limited v Condesing Vaporisers Pty Limited (1994) 13 ACSR 37, [39]]. The dispute will be genuine unless it is "so devoid of substance that no further investigation is warranted" [Roadships Logistics Limited v Tree [2007] NSWSC 1084; (2007) 64 ACSR 671, [24]]. 11In this case, two bases for disputing the claimed indebtedness were raised. The first was a dispute as to whether Mr Vizard contended that the indebtedness arose under the Service Agreement, or the Long Form Agreement. As I understand Mr Vizard's position, it is that he contended that the Long Form Agreement had been concluded as a result of the negotiations and conduct of the parties, and that it defined the relationship between the parties, having superseded the (short form) Service Agreement. However, accepting that the Service Agreement was intended to be legally binding unless or until replaced by the Long Form Agreement, and accepting that there was a dispute as to whether the Long Form Agreement was, as he alleged, concluded, he conceded that if it could be shown that there was a genuine dispute as to the indebtedness under the Service Agreement properly construed, then it would follow that there was a genuine dispute as to the indebtedness generally. In other words, he accepted that if the indebtedness arose only, if at all, under the Long Form Agreement, there was a genuine dispute, but he submitted that he did not need to resort to the Long Form Agreement, because under either agreement, properly construed, the indebtedness fell due. 12The plaintiff's case was that if there was a dispute as to the source of the indebtedness, it followed that there must be a dispute as to the existence of the indebtedness. I reject this argument. It will often be the case that the same indebtedness can be attributed to a number of sources. For example, indebtedness may arise under a contract on various grounds referred to in it, where one party undertakes to pay a sum to another party on the happening of a number of different events. A creditor may contend that all or some of those events have happened. The other party may contend that none of the events relied on by the creditor have occurred, but admit that another ground entitling the creditor to payment has occurred. In those circumstances, although there would be a dispute as to the source of the indebtedness, there would be no dispute as its existence. 13Similarly, if, in the circumstances of this case, Harbour Radio admitted that there was indebtedness under the Service Agreement, but disputed that there was a binding Long Form Agreement, and Mr Vizard contended that there was indebtedness under the Long Form Agreement and that it encapsulated the legal relations between the parties, while there would be a dispute as to the source of the indebtedness, there would be no dispute as to its existence. 14Nor is any abuse or misuse of the creditor's statutory demand procedure involved in this respect. All Mr Vizard is doing is contending that there is an undisputed, or not genuinely disputed, indebtedness to him, which might arise on any number of alternative bases. No question of approbation or reprobation arises by his accepting, for the purposes of the present proceeding, that the case will turn on the construction of the Service Agreement. Accordingly, I reject the first ground of attack on the creditor's statutory demand. 15The second basis for raising a dispute, was a dispute as to the construction of the words "if 2GB terminates" in the relevant part of the termination clause. As to questions of construction, it is accepted that, at least where the question is a relatively simple one, the Court may determine such a question on a s 459G application, in order to conclude, in effect, whether the dispute truly exists or there are reasonable grounds for it [Delnorth Pty Ltd v State Bank of New South Wales (1995) 17 ACSR 379, 384; BBX Holdings Ltd v American Home Assurance Co [2007] NSWSC 549, [4]-[5]; BMDI Tuta Health Care Pty Ltd v CME Medical Australia Ltd [2011] NSWSC 50, [37], in which, although ultimately deciding that that was not an appropriate case in which to determine the question, Barrett J, as his Honour then was, acknowledged that it was no doubt true that in some cases on a s 459G application, the Court may and should determine a question of construction]. 16In this case, the fundamental question is whether, in the first two bullet points of subclause (a) of the termination clause of the Service Agreement, the reference to "if 2GB terminates in the first 6 months of the relevant year" or "the second 6 months of the relevant year" is a reference to the date on which thirty days notice of termination is given, or the date on which the contract comes to an end by expiry of that notice. 17When a contract is terminable by notice for a specified period, a valid notice operates according to its terms to bring the contract to an end when the notice expires. This issue has most often arisen in the context of contracts of employment [see, for example, Hill v CA Parsons & Co Ltd [1972] 1 Ch 305, 313-4 (Lord Denning MR); Birrell v Australian National Airlines Commission (1984) 5 FCR 447, 457]. A notice once given cannot, with perhaps the slightest of exceptions, be retracted. It is the exercise of a unilateral right, and once given can only be withdrawn with the consent of both parties [Birrell v Australian National Airlines Commission, 457-458; see also State of New South Wales v Paige [2002] NSWCA 235; (2002) 60 NSWLR 371, [283]]. Thus, it is not correct to speak of the right of termination not being exercised, or exercisable, until thirty days notice has been given. It is not notice of intention to terminate, but notice of termination that takes effect upon its expiry. 18In the context of this case, the right became exercisable once 2GB or any related entity ceased to provide radio programming for broadcast in Melbourne. However, if the right were exercised, the termination took effect only on the expiration of the thirty days notice provided for by that clause. Similarly, under subclause (b) of the termination clause, the right became exercisable on the release of the third survey results referred to in that clause, but the termination did not take effect until the expiration of thirty days from the date on which the notice was given. 19The plaintiff advanced, in Mr Colquhoun's written and oral submissions, a number of arguments said to support the construction that the plaintiff favoured, namely, that the reference to "if 2GB terminates" was in fact a reference to the date on which 2GB elected to terminate by giving notice of termination. The first argument was that the reference that the phrase "if 2GB terminates" was shorthand for the phrase "if 2GB terminates under this right". To that extent, the argument I think is correct, and was not disputed by Mr Cook for the defendant. But this was then extended to argue that the words "if 2GB terminates under this right" focused attention on the relevant act as being the act of 2GB "in exercising its right of termination", as opposed to the effect of such an act upon the Service Agreement. I think there is a very simple explanation for why the Service Agreement, in both subclause (a) and subclause (b), refers to "if 2GB terminates" rather than "if this Agreement is terminated", and that is because only 2GB was given a right of termination under that clause. 20The second argument was that the right to terminate arises only if, after the first twelve months of the Term, 2GB or a related entity ceases to provide radio programming for broadcasting in Melbourne, and that once the right to terminate so arises, 2GB has a choice. It is said that it is 2GB's decision whether to exercise its right referred to in the phrase "if 2GB terminates", but I do not see why this follows. 21Thirdly, it is said that if the parties had intended the relevant date to be the date that the Service Agreement was actually terminated, they could easily have used the language "if the agreement is terminated" instead of "if 2GB terminates". I have already explained why the words "if 2GB terminates" would have been used in the particular context of a clause that gave a right of termination only to 2GB. But the argument cuts even more strongly in the opposite direction: if the parties had intended the relevant date to be the date of election or notice, they could easily have stipulated for "if 2GB gives notice of termination", or, as they in fact did in subclause (b), where time constraints dictated that it was necessary to distinguish between exercise of a right and actual termination, they could have used the words "and 2GB exercises its right of termination within thirty days of the release...". 22This feature of the drafting is in my opinion very telling. In the first and second bullet points of subclause (a), and in the final subparagraph of subclause (b), the parties used the terminology consistently "if 2GB terminates". If those words meant what the plaintiff contends they mean, namely, "elects to terminate by giving notice", then there was no requirement to use quite different words in the opening paragraph of subclause (b). The distinction the parties drew in this respect is telling, and reflects that they understood and intended there to be a difference between "if 2GB terminates" and if "2GB exercises its right of termination". 23Fourthly, the plaintiff argued that the commercial purpose of the provision was the calculation of a separation payment, and that the plaintiff's construction meant that the separation payment was immediately ascertainable upon the exercise of the right to terminate. However, it is equally immediately ascertainable upon whichever construction of the words is adopted. This consideration favours neither construction. 24Fifthly, it was put, at least in written submissions, that it would be inconsistent with the commercial purpose of the termination provisions to construe them as meaning "if the agreement is terminated", as to do so could potentially mean that Mr Vizard would receive top-up payments for "a significant period beyond the time at which 2GB ceased to provide radio programming for broadcast in Melbourne". But that was the precise purpose of the termination provisions, namely, to ensure that he would receive a top-up payment for the six month period during which "2GB terminated". This consideration favours neither construction. The period for which he would receive top-up payments after the time of termination would typically be influenced by when that cessation occurred, relative to the accrual of each six-month period of the contract. 25The sixth argument was that subsequent negotiations between the parties showed that Mr Vizard wished to amend the Service Agreement, to make more clear that the separation payment was to be calculated having regard to the date on which "termination is effective". In my view, the admissibility of evidence of subsequent negotiations for the purposes of construing the Service Agreement is highly dubious, and, even if admissible, of no assistance whatsoever in this case. I have already referred to the important distinction drawn by the parties, in subclause (b) of the termination clause, between the concept of "if 2GB terminates" and that of "if 2GB exercises its right of termination". In addition, reading the clause as a whole, including the references to "would have been payable at the end of the six month period" in the first bullet point of subclause (a), which implicitly incorporates "but for the termination of the agreement", and the references to "the date of termination" in subclause (b) as a whole, it seems to me that the parties contemplated that the rights of Mr Vizard under the clause would be determined as at the date of termination. That is consistent with the general understanding of the word "terminate", which means brings to an end, or put an end to. 262GB terminated the relevant agreement on the date on which the thirty days notice expired. That approach is also consistent with the general position that the rights of parties under a contract of employment continue unaffected during the period of notice, and that rights to benefits continue to accrue during the notice period. 27While it seems to me that the first matter to which I have referred - the differential use by the parties of the concepts of "if 2GB terminates" and "if 2GB exercises its right of termination" in the termination clause - would suffice to dispose of the case, these other considerations reinforce the view that the construction of the provision is clear, and that the references to "if 2GB terminates in the first six months of the relevant year of the term" means "if 2GB gives a notice that expires in the first six months of the relevant year of the term so as to bring the contract to an end at that date". Once that issue of construction is resolved, there is no basis for a genuine dispute as to the indebtedness claimed in the creditor's statutory demand. 28I order that the originating process be dismissed, with costs assessed in the sum of $10,000. ********** 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. Decision last updated: 14 January 2013