Oxley v Fieldstone [2002] NSWSC 110 (1 March 2002)

Last Updated: 19 March 2002

NEW SOUTH WALES SUPREME COURT

CITATION: Oxley v Fieldstone [2002] NSWSC 110



CURRENT JURISDICTION: Equity Division
Corporations List

FILE NUMBER(S): 4914/01

HEARING DATE{S): 25/02/02

JUDGMENT DATE: 01/03/2002

PARTIES:
Oxley Corporate Finance Pty Limited - Plaintiff
Fieldstone Pty Limited - Defendant

JUDGMENT OF: Barrett J

LOWER COURT JURISDICTION: Not Applicable

LOWER COURT FILE NUMBER(S): Not Applicable

LOWER COURT JUDICIAL OFFICER: Not Applicable

COUNSEL:
Mr T.G.R. Parker - Plaintiff
Mr J.K. Chippindall - Defendant

SOLICITORS:
Allens Arthur Robinson - Plaintiff
Marshalls - Defendant


CATCHWORDS:
CORPORATIONS - winding up - statutory demand - genuine dispute - demand set aside

ACTS CITED:
Corporations Act 2001 (Cth)

DECISION:
Statutory demand set aside.


JUDGMENT:

- 8 -
IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

FRIDAY, 1 MARCH 2002


4914/01 – OXLEY CORPORATE FINANCE PTY LIMITED v FIELDSTONE PTY LIMITED

JUDGMENT

1 The plaintiff, Oxley Corporate Finance Pty Limited (“Oxley”), applies under s.459G of the Corporations Act 2001 (Cth) for an order setting aside a statutory demand served on it by the defendant, Fieldstone Pty Limited (“Fieldstone”). The statutory demand is dated 17 September 2001 and was served on or shortly after that date. It claims a debt of $97,067.00 described as for “consultancy services provided by the Creditor [Fieldstone] to the Company [Oxley] at the Company’s request between 1 June 2000 and 31 August 2000”.

2 The consultancy services referred to were provided by Fieldstone through Mr Michael Brown. There are in evidence six invoices rendered by Fieldstone to Oxley for such services. One of them ($7,050.00) was paid. The other five (for $52,676.00, $14,552.50, $13,035.00, $10,203.50 and $6,600.00 – the total of $97,067.00 referred to in the statutory demand) remain unpaid.

3 Mr Brown’s services were provided by Fieldstone to Oxley in the period following termination of a joint venture which had previously existed between those companies or, perhaps more accurately, between companies in the corporate group to which they respectively belonged, the joint venture having been formed in 1993 on the basis that the activities with which it was concerned extended also to associated companies of the joint venture parties themselves. At all events, it is accepted, as I understand it, that Oxley and Fieldstone were involved in the joint venture and, more importantly, in the arrangements which attended its termination.

4 The termination was effected by a deed dated 29 May 2000 the parties to which were, on the one hand, Fieldstone and an associated company and, on the other, Oxley and an associated company. At the centre of the termination arrangements lay a transfer by the Oxley parties to the Fieldstone parties of their interest in the business of the joint venture – in other words, one of the joint venture parties bought out the other. The contractual mechanisms included the production of “completion accounts” as a medium for determining the final amount due by one party to the other to put an end to their relationship.

5 At the time of the separation, the joint venture had current an assignment involving the provision of services to or in relation to DASFLEET. Mr Brown, an Oxley employee, was working on this assignment. Effective 29 May 2000, Mr Brown resigned his employment with Oxley and became an employee of Fieldstone. According to his evidence, he sent a handwritten note to Mr Marshall of Oxley on 30 May 2000 as follows:

“I have discussed the DASFLEET work with Peter & we have agreed that I shall continue to work on this assignment (presumably as a sub-contractor to Oxley). We have agreed that Fieldstone shall be paid the full amount of my hourly charge out rate to the Commonwealth – I understand that this is $300/hr. I understand that this will be adjusted upwards for GST after 1 July 2000, and that travel and other on-costs will be reimbursed.”

6 Mr Delaney of Oxley – the “Peter” referred to in the note – denies having had such a conversation with Mr Brown. Mr Delaney also says in his affidavit:

“I never reached any agreement with Mr Brown or anyone else in the Fieldstone Group that there should be no joint venture set-offs relating to the DASFLEET work which Mr Brown was carrying out; and

I always believed that the Fieldstone Group would continue to invoice monthly for the DASFLEET work being carried out by Mr Brown at an hourly rate negotiated between Mr Brown and myself. I believed this would form part of the reconciliation of all invoices and outstanding amounts between the Oxley Group and the Fieldstone Group.”

7 There are thus conflicting accounts of the nature of the contractual rights and obligations concerning payment for services rendered by Mr Brown and, in particular, their interaction with the provisions of the deed of May 2000.

8 On 1 September 2000, Oxley wrote to Fieldstone setting out what it considered to be a “complete reconciliation” of financial adjustments between the parties consequent upon their separation and based on what Oxley regarded as the completion accounts provided for in the deed. Fieldstone’s response on 5 September 2000 through its solicitors was that the accounts Oxley had used were not in truth the completion accounts because that status could be achieved only through the effluxion of time without query or objection, whereas Fieldstone had, by letter dated 29 August 2000 and faxed (and probably also hand delivered) on that day, indicated that there were a number of matters in the accounts “which I expect we will need to take further”. The deadline for queries and objections was 31 August 2000. Mr Delaney of Oxley (to whom the letter of 29 August 2000 was addressed) gave evidence that he did not receive it until early September 2000, that is, after the relevant deadline had passed. The Fieldstone response of 5 September 2000 also said that the invoices for Mr Brown’s services were not part of the adjustment based on the completion accounts.

9 The last factual matter to be canvassed concerns a conversation between Mr Delaney of Oxley and Mr Scalia of Fieldstone on 19 October 2000. They encountered one another by chance in a restaurant and had a short conversation. According to Mr Delaney, the conversation included the following:

SCALIA: “Don’t worry about the letter and the outstanding issues between us. We are only interested in obtaining the Joint Venture’s tax records so that we can do our statutory returns. Would you mind arranging for that information to be sent to us”.

DELANEY: “I have no problem arranging for the release of the tax information and just want to put the dispute behind us. I’ll arrange for Michael Derin to forward that information to you.”

Mr Delaney’s account of this conversation is uncontradicted. He testified to a “clear impression” that “as a result of the conversation, there had been an agreement by both companies not to pursue final adjustment payments”.

10 Three issues of significance are thus identified. First, there is a factual issue as to the conversation between Mr Brown and Mr Delaney recorded in the former’s handwritten note of 30 May 2000 and, if such a conversation took place, there is a question as to its contractual significance. Second, there is a factual issue as to the date of delivery of Fieldstone’s letter of 29 August 2000 expressing reservations about the accounts and, if that letter was delivered on or before 31 August 2000, there is a question whether the accounts put forward as the completion accounts in reality had that character. Third, there is a question as to the legal effect of the restaurant conversation uncontradicted evidence of which was given by Mr Delaney: did it, in truth, give rise to a valid and binding contract whereby each party agreed to release and forego claims against the other including, in the case of Fieldstone, claims based on the invoices for Mr Brown’s services which are the subject of the statutory demand?

11 The issue for determination in these proceedings is whether there exists a “genuine dispute” between Oxley and Fieldstone “about the existence or amount of” the debt described in the statutory demand. The “genuine dispute” concept has been the subject of discussion in many cases. It is sufficient to refer to four of them.

12 In Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] VicRp 61; [1994] 2 VR 290, Hayne J said, after referring to certain factors which identify the summary nature of the s.459G procedure:

“These matters, taken in combination, suggest that at least in most cases, it is not expected that the court will embark on 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.”

13 In Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, McLelland J said:

“It is, however, necessary to consider the meaning of the expression ‘genuine dispute’ where it occurs in s.450H. 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.”

14 The formulation preferred by Northrop, Merkel and Goldberg JJ in Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd [1997] FCA 681; (1997) 76 FCR 452 is as follows:

“In our view a ‘genuine’ dispute requires that

· the dispute be bona fide and truly exist in fact;

· the grounds for alleging the existence of a dispute are real and not spurious, hypothetical, illusory or misconceived.”

15 In Re Morris Catering (Aust) Pty Ltd (1993) 11 ACSR 601, Thomas J emphasised that it is not the task of the court, in a case such as this, to “examine the merits or settle the dispute”; and that

“beyond a perception of genuineness (or lack of it) the court has no function. It is not helpful to perceive that one party is more likely than the other to succeed.”

16 I have reservations about whether the attempts by Oxley to include the sums invoiced by Fieldstone for Mr Brown’s services in the general accounting between the parties provided for in the deed of May 2000 is justified. At the same time, however, there are sufficient uncertainties of fact about the ancillary or supplementary arrangement under which Mr Brown was to perform services after termination of the joint venture to cause those reservations to remain no more than reservations, without detracting from the reality that Oxley’s attempts are not fanciful or spurious.

17 Of quite clear significance to the “genuine dispute” inquiry, however, is the evidence of the conversation between Mr Delaney and Mr Scalia on 19 October 2000, coupled with the fact that, in the following eleven months, Fieldstone apparently took no steps at all to pursue with Oxley the debt which became the subject of the statutory demand dated 17 September 2001. Those circumstances seem to me to provide grounds on which Oxley may cogently assert a dispute about the existence of the debt which is “real and not spurious, hypothetical, illusory or misconceived”.

18 Particularly in light of the factual issues which, in the present state of the evidence, remain in an unsatisfactory state, the claim which Fieldstone considers itself to have against Oxley as briefly outlined in the statutory demand is one which ought properly to be litigated in an appropriate forum, with rights being thereby firmly established, rather than being allowed to give rise to the presumption of insolvency as a basis for winding up.

19 In terms of s.459H, I am satisfied that the “substantiated amount” is less than the “statutory minimum”, with the result that the Court must proceed in accordance with s.459H(5). It is therefore ordered that the statutory demand be set aside.

20 On the subject of costs, it was submitted on behalf of Oxley, by reference to comments of Santow J in Polaroid Australia Pty Ltd v Minicomp Pty Ltd (1997) 16 ACLC 529 and Austrac Rail Pty Ltd v Hunter Premium Funding Ltd [2001] NSWSC 654, that Fieldstone should be ordered to pay indemnity costs. His Honour there warned that, with the hurdle to be cleared by companies seeking to have statutory demands set aside being so low, creditors persisting with the defence of such applications need to consider carefully whether there are valid grounds for their taking up court time and putting the company to expense by doing so. That remains a salutary warning but, in this case, I do not consider the creditor’s insistence on putting the company to proof of its case to warrant the sanction of indemnity costs. The defendant must pay the plaintiff’s costs on the party and party basis.

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LAST UPDATED: 01/03/2002