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Pioneer Construction Materials Pty Ltd v Schoch[2007] QDC 143

Pioneer Construction Materials Pty Ltd v Schoch[2007] QDC 143

 

DISTRICT COURT OF QUEENSLAND

 

CITATION:

Pioneer Construction Materials Pty Ltd v Schoch and Ors [2007] QDC 143

PARTIES:

PIONEER CONSTRUCTION MATERIALS PTY LTD

Plaintiff

V

WILLIAM MATTHEW SCHOCH

First Defendant

AND

MARTIN RONALD PERKINS

Second Defendant

AND

TERENCE MICHAEL BYRNE

Third Defendant

AND

RICHARD BOWYER THIELE

Fourth Defendant

AND

JAMES CHARLES MASSARD

Fifth Defendant

FILE NO/S:

BD3175/03

DIVISION:

 

PROCEEDING:

Application

ORIGINATING COURT:

District Court, Brisbane

DELIVERED ON:

25 May 2007

DELIVERED AT:

Brisbane

HEARING DATE:

8 September 2006

JUDGE:

McGill DCJ

ORDER:

Judgment that the counterclaim of the first, second third and fifth defendants against the plaintiff and an additional defendant by counterclaim be dismissed with costs; order that all or parts of the defence of the first, second, third and fifth defendants be struck out; application otherwise dismissed.

CATCHWORDS:

CORPORATIONS LAW – Directors’ liabilities – insolvent trading – when debts incurred – whether company insolvent – whether statutory defences available – summary judgment refused.

TRADE PRACTICES – Misleading and deceptive conduct – representations as to amounts due and payable, and as to time to pay – whether misleading – whether any loss shown – summary judgment.

Corporations Act 2001 (C’w’th) ss 588G, 588M, 588H(2), (3), (5), 1317S, 1318.

COUNSEL:

M. J. Luchich for the plaintiff

L. D. Bowden for the first, second, third, and fifth defendants

SOLICITORS:

Patane Lawyers for the plaintiff

The first, second, third, and fifth defendants were not represented

  1. [1]
    In this action, the plaintiff seeks to recover a debt from a number of individuals, who were directors of a company which incurred the debt at the time it was incurred, which company has subsequently gone into liquidation. The claim is brought pursuant to s 588M of the Corporations Act 2001 (“the Act”), on the basis that the company was insolvent at the time the debt was incurred.  The application was not pursued against the fourth defendant; the other defendants are disputing liability under that Act, and have also counterclaimed under the Trade Practices Act 1974, alleging breaches of ss 51A, 52, 53(g) and 69 against the plaintiff, and also seeking relief pursuant to s 75B against another defendant by counterclaim, a person who is alleged to have been knowingly involved in the contraventions by the plaintiff.
  1. [2]
    By this application, the plaintiff seeks summary judgment in its action against the defendants under rule 292, and the plaintiff and the other defendant to the counterclaim seek summary judgment on the counterclaim pursuant to rule 293, or in the alternative that the defence and counterclaim of the defendants be struck out under rule 171, or that parts of the defence and counterclaim be struck out under rule 162.
  1. [3]
    Section 588G of the Act provides that if a company is insolvent at a time when the company incurs a debt, or becomes insolvent by incurring that debt, and at the time there are reasonable grounds for suspecting that the company is insolvent or would so become insolvent, a director of the company at the time who is aware that there are such grounds for suspecting, or where a reasonable person in the position of that director would be so aware, contravenes the section by failing to prevent the company from incurring the debt.  By s 588M, a creditor may recover from that director as a debt due to the creditor an amount equal to the amount of the loss or damage suffered by the creditor because of the company’s insolvency, so long as the debt was wholly or partly unsecured when the loss or damage was suffered and the company is being wound up, and (s 588R) the creditor has the written consent of the company’s liquidator to begin the proceedings.  It is alleged and proved that that consent has been given in the present case.[1]  The District Court has jurisdiction to entertain a claim under s 588M, such jurisdiction being conferred by ss 58AA(2) and 1337E of the Act, this being a civil matter which is not a superior court matter, because there is no indication that it is to be brought only in the Federal or Supreme or Family Courts.
  1. [4]
    The plaintiff had a credit agreement with the company Seafood Online.Com Ltd (“the company”) pursuant to which the plaintiff supplied goods on a running account to the company between 7 October and 26 December 2000.[2]  It is alleged but not admitted that there is an amount of $160,841.42 unpaid in respect of that supply of goods; it is not disputed that the company remains indebted to the plaintiff in that sum.[3]  The company went into voluntary administration on 22 February 2001, and that became a liquidation by a resolution of the company’s creditors on 1 March 2002.  However, the other matters necessary to show a right of recovery under the section are either not admitted on the pleadings, or denied.

Insolvency

  1. [5]
    The first issue is whether the company was in fact insolvent during the relevant period. The plaintiff’s case is that the company was insolvent from at least 30 September 2000, as shown by a report prepared by an accountant.[4]  The defendants dispute this and say the company was in fact solvent, but in the alternative assert that the debt was incurred on 26 April 2000, at a time when it is not suggested that the company was insolvent.  It seems to me that logically the first issue is as to when the debt was incurred.

Background

  1. [6]
    The background to the dispute is set out in the affidavit of the first defendant filed 5 April 2006; it is convenient for the purposes of the summary judgment application to proceed on the basis that the background circumstances set out in that affidavit are correct.  The company was originally an unlisted public company, which acquired a parcel of land lying between the Bruce Highway and the coast north of Bowen, using the company’s own funds.  The company proposed to build a large fish farm on the land, involving the construction of a number of growing tanks, a sea water canal, and associated equipment and buildings including a large pumping station.  Between 1985 and 1999 the project was planned and the necessary approvals were obtained.  At the end of 1999, a public float generated an amount of over $16 million, intended to cover construction costs of $9 million and working capital of about $5 million, after paying the costs of the issue.  The first defendant believed that as a result of the float the company had funds on hand to absorb construction costs increases up to $2 million.  The company incurred cost overruns in earthworks during the construction, as a result of wet weather at the time.
  1. [7]
    The fifth defendant was the Chief Executive of the company. On 14 March 2000 he signed a contract with a builder for the construction of the fish hatchery for a lump sum of just under $1 million.[5]  The builder contracted with the plaintiff to install a concrete batching plant on the construction site to supply wet concrete.  There were also some negotiations between the company’s construction manager and the plaintiff in relation to the purchase of concrete to be used by the company for building the fish growout tanks, which was not to be the subject of any construction contract.
  1. [8]
    Following negotiations, the plaintiff sent an offer to supply concrete, of various kinds, at particular prices, subject to various conditions including that “payment of all accounts will be made 14 days after supply ie payment for concrete supplied during the last half of a month will be paid on the 15th of the next month and concrete supplied during the first half of the month will be paid on the 30th of that month.”[6]  The rates would only apply from the date of acceptance in writing.[7]  Acceptance was to be received by 5 June, or the offer would be withdrawn.  On 6 June, the plaintiff sent a further facsimile advising that because the submission had not been accepted the plant would be removed from the site once they had completed work for the other contractor.[8]
  1. [9]
    There was a response to this on 6 June which included a counteroffer as to price and hours of supply and offering payment with invoices to be supplied every second Monday with payment by Friday of the same week, but otherwise accepted the terms set out in the earlier fax.[9]  The plaintiff sent a further facsimile on 7 June acknowledging receipt of the facsimile the previous day and referring to a telephone conversation, and accepting the terms offered in the facsimile of 6 June 2000, including in relation to payment;[10] that was accepted by a facsimile from the managing director of the company on 8 June 2000.[11]  According to the fifth defendant’s affidavit (para 27), he was aware that written and verbal terms included that the plaintiff was to be the supplier of concrete for the project, all site requirements as ordered were to be supplied, the plaintiff would keep the batching plant on site, and the plaintiff had a right to monetary damages if the company refused to accept delivery.  He did not allege that there was any obligation to purchase any particular amount of concrete, or to purchase concrete at any particular time.[12]
  1. [10]
    The company had previously completed an application for commercial credit dated 27 April 2000[13].  The document is an application for a credit account which involves an agreement to be bound by the general credit terms and conditions.  There was no amount specified as estimated monthly purchases, and there was no express agreement either on the part of the company to order any particular amount of concrete, or on the part of the plaintiff to supply any particular amount of concrete.  There was an agreement to pay within any credit period agreed in writing.
  1. [11]
    It was submitted on behalf of the defendants that the question of when the debt was incurred “does not depend upon strict legal analysis but turns on when, in substance and commercial reality, the company is exposed to the relevant liability.”[14]  Reference was also made to the proposition supported by Leigh‑Mardon Pty Ltd v Wawn (1995) 17 ACSR 741 at 750, that when goods are ordered which are to be specially manufactured and will not be saleable elsewhere, so that to refuse delivery would be a breach of contract sounding in damages approximating to the full price of the goods, the debt is incurred by placing the order and binding the company to it, or possibly by not cancelling the order at a time before the damages flowing from such cancellation would be of a similar order to the price of the goods.
  1. [12]
    Even assuming in favour of the defendants that the company had agreed not to purchase concrete from anyone else, and to the extent that it wanted concrete it was bound to purchase it from the plaintiff, there was no express obligation on the defendant to purchase a particular quantity of concrete, nor was there any express obligation to pay for any particular quantity of concrete in respect of any particular period. No such term is alleged by the fifth defendant, and there are no circumstances which could possibly give rise to the implication of such a term. It was not even a case where the plaintiff had constructed a plant on the site in anticipation of the supply of concrete to the company, where there might be a restitutionary claim if ultimately the concrete was not supplied to the company; in this case, the plant was constructed in order to supply someone else, who was supplied and whose concrete was presumably paid for, and the position was simply that the plant would have been removed had this arrangement not been made.
  1. [13]
    It seems to me clear from the evidence that is currently before me that in substance and in commercial reality no debt was incurred in relation to any particular concrete until the company actually took delivery of that concrete.[15]  In my opinion, it is clear on this evidence that the relevant debt was incurred at the time of delivery of the concrete, and not in or about June 2000 or earlier, and the defendant’s submissions on this point provide no basis for refusing summary judgment.

Is the plaintiff a secured creditor?

  1. [14]
    There was a further point taken on behalf of the defendants: that the plaintiff’s debt was not unsecured, because clause 4(a) of the general credit terms in the credit agreement provided that “the customer agrees to charge in favour of Pioneer by way of a fixed charge all books of account, financial records, goodwill, documents of title and current and later acquired real and intellectual property, and by way of a floating charge the whole of the customer’s other undertakings, property and assets with payment of all moneys owed to Pioneer by the customer.”  It was submitted that this was sufficient to constitute an equitable charge, and reliance was placed on AVCO Financial Services Pty Ltd v White [1977] VR 561; Clark v Raymor (Brisbane) Pty Ltd [1982] Qd R 790 at 795; Corozo Pty Ltd v Total Australia Pty Ltd [1988] 2 Qd R 366. 
  1. [15]
    I accept that it is at least arguable that this did create an equitable charge, but it was clearly one which was within s 262 of the Act, and there is no evidence that notice of the charge was given as required by s 263. In these circumstances, the company being in liquidation, the charge is void as against the liquidator: s 266. So far as the property of the company is concerned, the plaintiff has no valid and enforceable charge, and so is in the position of an unsecured creditor. There is therefore no substance to this argument.

Insolvency

  1. [16]
    The next issue raised on behalf of the defendants was as to the solvency of the company. The plaintiff relied on a report by a forensic accountant, Mr Smith, who on the basis of the company’s accounting records determined that as at 30 September 2000 the company had an excess of debts due and payable over resources available to pay them of over $293,000, and that thereafter the debts increased to be over $1 million as at 21 October 2000, over $2 million as at 31 December 2000, and over $2.5 million by 22 February 2001.[16]  The analysis was essentially based on accounting data kept by the company in its accounting records, an examination of some source documents such as bank statements, and the examination of creditors’ proofs of debt lodged with the liquidators.  The company’s liabilities to trade creditors were treated as being due and payable only when credit terms expired.  The accountant noted that amounts payable to the Australian Taxation Office were generally paid (or offset) by the appropriate times, but that no superannuation contributions were made in respect of employees after 7 November 2000, although this was not taken into account because strictly speaking there was no obligation to remit these funds until after 30 June 2001.  The cash available to the company declined from over $1 million on 30 September 2000 to just over $5,000 on 31 December 2000.  During this period, the trade creditors increased from over $1.36 million to over $2 million.
  1. [17]
    The first defendant in his affidavit filed 5 April 2006 took issue with Mr Smith’s report in two particular respects:  paras 49-53.  The first was a failure to take into account shares which were held by a wholly owned subsidiary of the company, purchased with money lent by the company to that subsidiary.  The first defendant said that those shares were a resource readily available because if necessary they could be sold and the loan to the company repaid, and said that that did in fact occur during October 2000 when the shares were sold and approximately $1.7 million was paid to the company’s account, which was then used to discharge creditors.
  1. [18]
    Counsel for the plaintiff submitted that the repayment of the loan had been taken into account by Mr Smith.  On p 14 of his report in paragraphs 63 and 64 he said:

“On 1/7/2000 the balance of the company’s load to Good Fortune Bay was $2,638,166.  The accounts record a large number of repayments during November 2000 which reduced the balance of the account to $964,705 on 11/1/2001.  I have not included an amount for loan-Good Fortune Bay because the realisable amounts that were collected during November 2000 are reflected in the cash balance at the end of the month.”

  1. [19]
    This is consistent with the repayment of $1,673,461, which is similar to the figure referred to by the first defendant. The first defendant did not suggest that anything further was recoverable once those shares had been sold, so presumably the amount shown as the balance as at the end of November 2000 was not available as a resource to the company, so that there is no reason to doubt Mr Smith’s opinion in relation to the state of the company as at 30 November 2000 and as at 31 December 2000 on this ground.  On the other hand, it does appear that his figures for the state of the company as at 30 September 2000 and as at 31 October 2000 (assuming that the repayment occurred when he said in November rather than in October) did not take these amounts into account, because the amounts listed as resources in his various tables comparing resources and debts due and payable as at the four different dates, for example in paragraph 101, correspond to the amounts listed as cash at bank in paragraph 86.  Furthermore, in paragraph 42 he indicated the loan to Good Fortune Bay was regarded as not available “during the relevant months”.
  1. [20]
    It is not immediately apparent to me why such amount as was recoverable was not available to the company as at 30 September 2000, and (assuming it had not already been recovered and paid away to other creditors) as at 31 October.  It seems to me that this argument does cast some doubt on the reliability of that part of Mr Smith’s opinion where he concluded that the company was insolvent as at 30 September 2000 and as at 31 October 2000.  In itself, however, it does not cast any doubt on the other conclusions drawn by him, except in the indirect sense that it might tend to make one generally less confident of the reliability of anything that he said.

Availability of bank finance

  1. [21]
    The second matter raised by the first defendant was that Mr Smith’s analysis did not take into account the company’s ability to raise money by way of mortgage or pledge.  Mr Smith’s report does not appear to address the question of whether the company had a capacity to raise money by borrowing against its assets.  The plaintiff’s submission in response to this argument is that there is no evidence of the company’s ability successfully to borrow funds in the period 7 October 2000 to 26 December 2000, but that is not really an answer to the proposition advanced by the first defendant.  An absence of evidence of a capacity to raise money in this way is not the equivalent of evidence of an inability to raise money in this way, and in principle if a loan of money could have been obtained in a reasonably short time, secured against assets otherwise available, then it is not immediately obvious why this was not a matter properly taken into account in assessing the question of solvency.  Mr Smith’s reference to assets is really limited to saying that assets would not be taken into account if they could not be quickly realised or their realisation would destroy the business of the company, but that does not address the question of whether money could be borrowed on the basis of a security over such assets.
  1. [22]
    There is some evidence of attempts made by the company to borrow money during the last three months of 2000. The company had been seeking finance by way of a sale and lease back of plant and equipment from the Commonwealth Bank, seeking a total of $4.3 million.[17]  The first defendant has deposed to an expectation that the application would be successful, and on the face of it it may have been reasonable to proceed on the basis that that application was likely to be successful and to provide a source of continuing funding for construction work.  The period relied on by the plaintiff in relation to the insolvency begins on 7 October, that is immediately after the refusal of that application was communicated to the company.  The plaintiff relies on minutes of a director’s meeting on 19 October 2000[18] as amounting to recognition by the directors that no funding would be forthcoming from a bank until the company had cash flow.  However, the third defendant has sworn[19] that on 6 October 2000 he applied to another bank for loan facilities and that representatives of that bank visited him at his offices of the company (he does not say when) and he provided full information, and they appeared keen to take on the application.  However, they required a valuation to be obtained, which he says was not available until shortly after 22 November 2000.  There was also concern about cash flow, and there was a hold up in the production of cash flow forecasts, presumably being prepared by or for the company.  He has sworn that at all material times he was confident this loan would be approved, and indeed ultimately it was but not until after[20] the directors of the company had appointed an administrator, whereupon the bank’s willingness to provide finance, understandably, disappeared.
  1. [23]
    I appreciate that insolvency is something which has to be assessed as a matter of commercial reality,[21] and bearing in mind moneys which can be realised from assets in a relatively short time.[22]  It is, however, difficulty to see how the prospect that a large loan might, or even would, be forthcoming from a bank at some time after information required by the bank, which was not immediately available and which the company knew, or presumably fairly soon discovered, would take some time to generate,[23] could realistically be taken into account as part of the resources available to a company to pay its debts which were due and payable.  If the only issue in relation to solvency were whether the prospect of this large loan at best at some indeterminate time in the future meant that company was not insolvent during the relevant period, I doubt whether the plaintiff would have any difficulty in showing insolvency.
  1. [24]
    It seems to me, however, the issue is not that simple. On the face of Mr Smith’s report, the deficiency as at 30 September was less than $300,000.  Admittedly, by 31 October it was substantially more than that, but the deficiency even then was still well under $2.4 million.  The fact that the company cannot, or at least cannot quickly, borrow $2.4 million does not mean that the company would have been unable as at 30 September 2000 to borrow $300,000 in a reasonably short period of time if it had attempted to do so.  It is also by no means conclusive on the question of whether the company could have borrowed $1.5 million at the end of October 2000 if it had seriously tried to do so.  Overall, the position it seems to me is that there is at the moment no clear evidence of an absence of a capacity to borrow money on the security of otherwise unencumbered assets, at least at the beginning of the relevant period.
  1. [25]
    On the evidence currently available, I suspect the company became insolvent during the relevant period, if it were not already insolvent at the start, but I do not consider that on the evidence presently available it is sufficiently clear that it was insolvent during the whole of the period to justify giving summary judgment on the basis that the company was insolvent during the whole of the period.[24]  The plaintiff did not seek to advance a case for summary judgment for part of the claim on the basis that the company was shown to be insolvent after any other particular date within this period.
  1. [26]
    There is also the difficulty that the plaintiff’s material does not prove that the amount which the defendants admit is owing by the company to the plaintiff came to be owing as a result of concrete delivered during the period relied on, 7 October 2000 to 26 December 2000.  The plaintiff relied on a schedule of transactions and a bundle of invoices[25] but the difficulty with this material is that the invoices and the schedule do not provide a delivery date for the concrete.  The invoices have dates and they refer to other documents which have dates, but it is not clear whether the other dates (which are usually but not always earlier than the date on the invoice) are dates of delivery or simply, as they say, dates referring to other documents, perhaps generated after delivery, which are not in evidence. 
  1. [27]
    Although the invoices are all dated during the relevant period, the first invoice refers to documents dated 3 October 2000, for a total of $6,494.88, which suggest that the invoice includes concrete delivered on or before 3 October, that is outside the period relied on by the plaintiff.  The same applies to the following invoice, which has three items of the same date totalling $1,804.65.  Again, on the face of it, this invoice refers to concrete sold and delivered prior to the date relied on by the plaintiff.
  1. [28]
    Also included in CAB‑1 is a document dated 18 December 2000 for an amount of $46,744.87.  This is actually a credit adjustment note, and although Exhibit CAB‑1 does not say so (at least in a way that I can understand), it is an amount which has to be deducted in order to make the total of the other amounts correspond to the amount of the plaintiff’s claim.  This refers in turn to two invoices:  60032542, which is dated 28 October 2000 and is earlier in CAB‑2, but is for a different amount from the amount for which apparently credit was given by this document, and to invoice 60042311, which was dated 11 November 2000 and was also for a different amount from the amount stated in this credit adjustment note.  There is a further complication that Exhibit CAB‑2 includes two invoices, both dated 1 December 2000, for a total of $3,810.87, for which there are also two documents described as “cancel invoice”, which correspond in amount.
  1. [29]
    The difficulty with all of this is that it is not clear from this material just what concrete was actually sold and delivered during the relevant period, although it does look likely that most of it was. In circumstances where there is an issue as to whether concrete of this value was sold and delivered during the relevant period, this was a matter the plaintiff had to prove, and it seems to me that this evidence does not prove it. There is also the difficulty that the applicable interest rate under the contract from time to time has not been proved,[26] and legal expenses are claimed as payable under the credit agreement, although that document is ambiguous as to whether such expenses are payable.  In view of all this, and in circumstances where there is a triable issue about solvency in respect of at least the beginning of the period, on both of the grounds relied on by the defendants, it is not appropriate to give summary judgment under r 292.

Statutory defences

  1. [30]
    I will now look at the statutory defences under s 588H of the Act, or the power to excuse breaches under s 1317S or s 1318.  In relation to the defence under s 588H(2) of the Act, that depends on whether the particular defendant believed or expected the company was solvent during the period and that he had reasonable grounds for that belief or expectation.  Each of the defendants has sworn to believing the company was solvent during the relevant period[27] and none of them was cross‑examined, so there is no basis for me to reject this evidence for the purposes of this application.  However, the question of whether there existed reasonable grounds is another matter.  This raises issues similar to those concerned earlier in relation to the question of whether the company was in fact solvent.  I do not think that the expectation that at some point in the future a large amount of funds would be forthcoming from the bank necessarily provided reasonable grounds for a belief that the company was solvent.
  1. [31]
    The minutes of the directors meetings of the company, attended by the defendants, are interesting.[28]  At the meeting held on 18 February 2000, it was suggested by someone that “monthly expenditure reports could be done,” and the third defendant further suggested that the company could use it to check that expenses were not getting out of hand.  This obvious precaution was not mentioned again.  Later in the same meeting, the fifth defendant stated that construction costs could go over budget and they should be prepared for an over cost in the order of $1 million to $2 million.  At a meeting held on 17 April 2000 a director who is not a defendant asked when the company would require the extra money and was told by the fifth defendant that additional money could be required by as early as December 2000. 
  1. [32]
    At the meeting held on 18 July 2000, which was told there was about $5 million in the bank, it was said that the accountant had nearly got the end of year accounts finished and would soon be doing budgets.  Later in the same meeting, there was a reference to his “still preparing the costs to date and the revised budget.” (p 11).  At the meeting held on 30 August 2000 there was a reference to the fifth defendant’s contacting someone at the Commonwealth Bank in Townsville regarding obtaining facilities for credit.  Later in the same meeting, the third meeting advised that he had already approached another bank for funding, but it was unwilling to assist, and there was a suggestion that a third bank be approached.  The first defendant inquired whether there was any equipment which could be used as a sale and lease back, as “they would be unlikely to give us a cash alone facility for the amount of money that we are talking about.” 
  1. [33]
    At the meeting held on 19 October 2000, there was a reference to some negotiations for a share placement with an investor, and to the possibility of selling shares which were said to be worth about $1.6 million, and they were said to be looking at a sale and lease back of equipment with Westpac and another financier.  Reference was made to some other potential source of funding or investment.  Someone said, “The banks won’t be able to provide us with any funding until we’ve got a cash flow.”  There was also reference to accounts being set up to sell the shares the company held, which was to start the following week.  On the whole, these minutes do not read as if there was a settled expectation that finance from a particular source was imminent; on the contrary, they read like people who are searching, with perhaps some desperation, for any possible source of finance. 
  1. [34]
    Again, there was no reference in these minutes to expenditure that was being incurred, or to budgets for future expenditure. But the most significant feature about these minutes was that they are the last before a meeting on 13 February 2001, where something which is not obviously connected with the finance of the company was the only matter discussed.  Six days later there was another meeting which was to respond to the draft report of Jessop and Partners, who had concluded the company was insolvent.  The meeting rejected this conclusion, and the meeting resolved to continue to monitor closely fundraising activities, but otherwise the minutes read rather like a press release.  Three days later was the meeting for the appointment of an administrator.
  1. [35]
    There is also the consideration that that report of Jessop and Partners dated 16 February 2001[29] contained information which suggests that not only was the company insolvent at the time of the report, but that there had been a recognition of this for some time.  On p 3 there was the statement:

“My staff were advised that the company has been living from hand to mouth, with the managing director having not drawn his salary since October and wages only being met by “taking the hat around amongst the directors” and from GST refunds.”

It also notes an estimate of $1.6 million as costs required to complete the infrastructure, evidently well after all the money available for that purpose had been spent.  The first defendant in his affidavit[30] referred to various indicators of insolvency which he said were not present in the case of the company.  If this statement in the report is true, these look like pretty clear indicators of insolvency to me.  It also occurs to me that an absence of minuted directors meetings where the financial position of the company, and in particular where expenditure, budgets and available funding are considered, is another fairly good indicator of insolvency.  However, there are difficulties about the evidentiary status of this report.  Strictly speaking, all that has been proved is that this document was provided to the plaintiff, and that is relevant as showing that there was significant additional information which came to the plaintiff between the time when it arguably gave the company some additional time to pay, and when it filed an application to wind up the company.  In these circumstances, it is not clear that I can rely on this report as evidence of the truth of its contents, and in the circumstances therefore I will not do so.  There is also the consideration that the defendants were not cross‑examined about this material.

  1. [36]
    The company issued a quarterly report to 30 September 2000 on 24 October that year.[31]  This shows that most of the funds at hand for capital expenditure at the beginning of the financial year had already been spent, although the additional expenditure said to be planned was less than the amount said to be in hand by way of cash and shares.  The financial report said, among other things:  “Financing facilities of up to $5 million are being established to fund additional capital expenditures, overruns and working capital.”  In my opinion, it would have been more honest for the report to say that these were being sought rather than being established; by the time the document was signed, the Commonwealth Bank had refused to provide assistance, and so far as the evidence before me shows, no one else had agreed to provide any.  The material does not disclose any quarterly report of the company to the end of December that year.
  1. [37]
    There was also reference in the affidavit of the first defendant[32] to attempts to arrange finance from a private financier in November 2000.  On 21 November 2000 a written offer of a debt facility for $4.5 million for a period of three years was provided to the company from a private lender, on various terms in relation to security et cetera set out in the letter.[33]  That required a payment of fees of just under $60,000 for acceptance.  The valuation fee was subsequently reduced by $6,000.  An acceptance document (which remains undated) was signed by four directors,[34] but the first defendant did not depose to the document, or the required cheque, having been sent to the financier, or to the money in fact becoming available, and presumably this never occurred.  The failure to take up this offer is unexplained, but I suspect that it was because the company at that stage did not have the funds available to pay the required fee.  It is difficult to see how this provided any reasonable grounds for a belief in solvency.
  1. [38]
    The real difficulty here is that the question of what amounts to reasonable grounds for a belief in the solvency of a company is a difficult thing to determine in advance of trial. That is particularly the case when the issue at the moment is whether it is clear that a defence, on which the defendants carry onus, will not be made out. There is some vagueness about what amounts to insolvency, and therefore necessarily some greater vagueness about what amounts to reasonable grounds for a belief in solvency.[35]  There is the further consideration that at the moment the plaintiff’s argument really relies on the proposition that this defence is not available throughout the relevant period, and it may well be that there were reasonable grounds at the beginning of the relevant period, even if there were not by the end.
  1. [39]
    On the material presently available, I suspect that that defence could not be made out in respect of the whole of the relevant period. On the other hand, it is not clear that that is so, or that the defence could not be made out in respect of all parts of the relevant period. Again, the same difficulty arises; the plaintiff’s case has been argued on an all or nothing basis, and on that basis it must fail.
  1. [40]
    The defendants also rely on the defence in s 588H(3).  This involves the proposition that the defendant had reasonable grounds to believe and did believe that a competent and reliable person was responsible for providing to that defendant adequate information about whether the company was solvent and that the other person was fulfilling that responsibility, and expected on the basis of the information so provided that the company was solvent and would remain solvent even if it incurred that debt and any other debts that it incurred at that time.  This is relied on, although the pleadings identify the persons relied on as the fifth defendant and an employed accountant.
  1. [41]
    There is, however, little evidence to support the proposition that information apparently adequate from a person believed on reasonable grounds to be competent and reliable, provided a basis for an expectation that the company was and would remain solvent. The only information sworn to as having been provided was the information in relation to negotiations for loans.[36]  That in my opinion is not the sort of information that subsection is talking about; it is, it seems to me, essentially concerned with the situation where someone is providing false information which at face value shows that the company is solvent, and the director concerned does not realise that the information is false but rather has a reasonable basis for believing that that person was able to provide reliable information, and was doing so.[37]  There is really nothing in the affidavits to support anything like that, and it seems to me that there is nothing to raise an arguable defence under that provision.  All that was said in support of this defence on behalf of the defendants was that the position of each defendant had to be considered individually, and that each director may in his own peculiar circumstances be able to raise that defence.  The short answer to that argument is that I have read the affidavit filed by each of the defendants and it does not contain any material to raise that defence.
  1. [42]
    Section 588H(5) provides a defence if it is proved that the person took all reasonable steps to prevent the company from incurring the debt.  There is no material to support that defence in any of the affidavits, which are drawn on the assumption that the debt was incurred back at the time when the arrangement was first made between the plaintiff and the company for the supply of wet concrete at the site, a proposition which on the evidence is clearly wrong.  This defence focuses on the particular debt which is the subject of the claim under the section, that is the debt to the plaintiff.  There is simply no attempt in any of the material to suggest that any steps, reasonable or otherwise, were taken by any of the defendants to prevent the company from continuing to order from the plaintiff concrete for which it was unable to pay (or in the event did not pay) during the relevant period.  There is nothing in the material I have seen that suggests that there is any defence under this provision.
  1. [43]
    Again, all that was said in the defendant’s submissions in relation to this point was that the circumstances of each director must be considered separately. That does not help, when none of the directors deposes to any facts which could give rise to even an arguable defence on this basis.
  1. [44]
    The next matter relied on was relief under either s 1317S or s 1318(1) of the Act.  Section 1317S applies in proceedings under s 588M, and provides that if it appears to the court that the defendant has acted honestly and, having regard to all the circumstances of the case, ought fairly to be excused for the contravention, the court may relieve the director either wholly or partly from a liability to which the director would otherwise be subject.  The court is to take into account any action the director took with a view to appointing an administrator of the company, when that action was taken and the result of that action, and other matters thought relevant.  Section 1318 is somewhat wider, but is capable of covering the same ground, and provides a discretionary power to excuse either wholly or in part from the liability, on a similar basis.[38]  It appears to have been accepted on behalf of the plaintiff that it is not open in these proceedings to make a finding that the defendants acted other than honestly, but it was submitted that this alone was not sufficient to justify relief under these provisions.[39]  Again, there was little said in support of these discretionary excusals on behalf of the defendants.
  1. [45]
    These provisions give a wide discretion: Daniels v Anderson (1995) 37 NSWLR 438 at 525, where it was said that the purpose of s 1318 “is to excuse company officers from liability in situations where it would be unjust and oppressive not to do so, recognising that such officers are businessmen and women who act in an environment involving risk in commercial decision making.”  It is relevant to take into account the reasonableness of the director’s conduct, and the way in which the breach of duty occurred.[40]  Although I have a great deal of material, there is little information about the position of the various defendants during the relevant period, when debts were being incurred which the company could not pay.  This should not assist the parties who carry the onus on this, but I am wary about whether it really is sufficiently clear that at a trial their reliance on these provisions will fail for me to give summary judgment now.  On the whole, I consider it is not.  Accordingly, even if the plaintiff had otherwise proved its claim, I would not have given summary judgment, because some of the defences relied on give rise to triable issues.

Summary judgment – counterclaim

  1. [46]
    The plaintiff and the additional defendant to the counterclaim also seek summary judgment in respect of the counterclaim pursuant to r 293.  The respondent’s current pleading, which was not settled by counsel, is the document filed 23 September 2005.[41]  The counterclaim begins on p 10 of that document, but the pleading is very difficult to follow.  The counterclaim was summarised in the written submissions for the defendants by saying that the plaintiff had misrepresented the true position as to the indebtedness of the company in various ways and that those misrepresentations amounted to misleading or deceptive conduct in breach of s 52 of the Trade Practices Act 1974.  This involved the wrongful assertion of indebtedness in correspondence, wrongful and inaccurate statements of levels of indebtedness and statutory demands, wrongful verification in affidavits, promising that more time to pay would be given when it was not, and swearing an incorrect affidavit in support of a winding up application.
  1. [47]
    As to the wrongful assertions of indebtedness in correspondence, paragraph 2.15 of that pleading asserted that there was a false representation in a letter of demand, presumably the letter dated 3 January 2001,[42] that “the outstanding debt is beyond commercial terms”.  It was alleged that the commercial terms were for payment at the end of the following calendar month, or in the alternative 30 days from the date of invoice.  I have already referred to the correspondent in which different terms were agreed between the parties, that is, payment four days after invoice, so that on the face of it as at 3 January 2001 the time for payment for all goods invoiced up to 26 December 2000 had been reached, in accordance with that agreement. 
  1. [48]
    Apart from that, there had been default in making payment for earlier invoices, so under Clause 6 of the general credit terms and conditions in the credit agreement the plaintiff was entitled to call up all amounts owing by the customer, as it did by this demand.  What was said in the letter seems to me to have been correct.  In any case, to the extent that it was not, there is no evidence that any of the defendants, or for that matter anyone else on behalf of the company, was misled as to the true situation.  If it was misleading or deceptive conduct, plainly no loss was suffered by anyone as a result.
  1. [49]
    It was alleged in paragraphs 2.21 and 2.22 that on 8 January 2001 the additional defendant by counterclaim on behalf of the plaintiff swore that the debt of $160,841.42 was due and payable by the company.  Again, the criticism of this is apparently that it was false because the debt for December, some $34,244.07, was not due and payable until the end of January:  2.23.  For the reasons I have already given, that was incorrect. By 8 January all the debt was due and payable and the affidavit was correct.  Again, there is no reason to think that the defendants or anyone else on behalf of the company was misled as a result of this, or that as a result of what was deposed to any of them acted to their detriment.

Promise of time to pay

  1. [50]
    There was then a complaint that a promise was given to allow more time to pay, which promise was not honoured. That appears to be a reference to an offer sent by the solicitors for the plaintiff on 13 February 2001.  That letter was sent by facsimile in reply to a facsimile of 9 February 2001,[43] which said among other things:

“We have made application for finance to a number of financial institutions, banks, and private lenders.  We are confident of being successful in the near terms of finalising $6M loan. … We have preliminary approval from a number of lenders.  We are at advanced approval stage with an international bank, with an onsite inspection to take place early next week prior to final approval.  Additionally, a $2.5M loan has been approved by one director in a venture capital company and we are waiting for the other director to sign off.  Yet another group has offered support to an application we have made to an Australian bank in the form of a guarantee.  On Thursday we visited a private lender in Sydney who approved a $4.5M drawdown against his assets and cash flow.  We believe his loan book is in excess of $150M.  He is hopeful of finalising this loan next week.  The company hereby acknowledge the debt of $160,841.42 and undertake to pay this debt in full on or before 8 March 2001.”

  1. [51]
    The reply of 13 February 2001[44] omitting formal parts was as follows:

“We acknowledge receipt of your facsimile of 9 February 2001.  Unfortunately, it does not, as you had suggested in your telephone conversation with Rick Jones on Friday morning, provide details of the finance which ‘has been approved’.  What it does do is suggest, as you have previously, that there are a number of different applications for finance currently being considered by various entities.  Regardless, our client is prepared to grant you an extension up and until 8 March 2001 in order to settle its debt.  This is without prejudice to our client’s rights to proceed at any time if it chooses and on the basis that you acknowledge our client’s indebtedness of $168,226.71[45] … Please confirm in writing by the close of business today that these terms are accepted.”

  1. [52]
    It appears that the words “these terms are accepted” had a line drawn around them and the facsimile was signed by the first defendant and the third defendant for the company, and the facsimile was returned to the plaintiff’s solicitors. The plaintiff relies on the without prejudice reservation of rights to assert that the document did not in the circumstances amount to a binding agreement not to take proceedings against the company, or representation that it would not, but rather an offer to accept the amount nominated in discharge of the debt if it was paid by 8 March 2001.  On the other hand, the defendants refer to the statement that the plaintiff was “prepared to grant you an extension up and until 8 March 2001” as amounting, relevantly, to a representation that it would not take steps to enforce the agreement until that date.  In addition, the defendants submit that the effect of this agreement was to make the amount of the indebtedness by the company to the plaintiff not “due and payable” until 8 March 2001.
  1. [53]
    Viewed as a representation, this is either a representation as to the current intention of the plaintiff, or a representation as to a future matter. Insofar as it is a representation as to the current intention of the plaintiff, there is no evidence that that did not represent the intention of the plaintiff as at 13 February 2001.  It appears clear enough that the plaintiff’s intention changed as a result of the report it received on or about 16 February 2001.  The report that was provided to the plaintiff was a draft report from a firm of accountants which concluded, relevantly, that the company was not solvent.[46]  The accountants had been retained to prepare a solvency report for a group of the company’s creditors who were being asked to defer taking action against the company.
  1. [54]
    That report led the plaintiff’s credit manager immediately to take advice from the plaintiff’s solicitors, and subsequently to instruct the plaintiff’s solicitors to file an application for the winding up of the company in support of which an affidavit was executed.[47]  It is the sort of thing one would expect to produce a change in attitude on the part of the plaintiff.  There is simply no evidence that the statement, assuming that it does amount to a representation of a present intention not to take proceedings prior to 8 March 2001, was false at the time it was made and therefore misleading or deceptive.
  1. [55]
    Insofar as the defendants can rely on the statement as a representation with respect to a future matter, they can rely on the provision in s 51A(1) of the Trade Practices Act, that the representation should be taken to be misleading if the corporation does not have reasonable grounds for making the representation.  This gives them the further advantage that the onus is on the plaintiff to prove that it had reasonable grounds for making the representation:  s 51A(2).  Of course, it may be easy enough for the plaintiff to discharge on that onus.  Nevertheless, at the moment the question is whether it is clear that the plaintiff will discharge that onus if there is a trial.
  1. [56]
    As to the effect of this agreement on the question of whether any or all of the money, the indebtedness of which had been acknowledged on behalf of the company, was then due and payable, this was not a matter particularly relied on in argument on behalf of the defendants, and for present purposes I think it is unnecessary for me to express any particular view on it.
  1. [57]
    On or about 21 February 2001 the plaintiff filed an application for the winding up of the company, and affidavits in support of the application, including one by the additional defendant by counterclaim sworn that day.  However, the application was never served, and apparently no action was ever taken on the application.  The application was returnable on 21 March 2006.[48]  No application for the appointment of a provisional liquidator was filed by the plaintiff, but it appears that the company came to believe that the plaintiff was intending to proceed immediately, and on an ex parte basis, to appoint provisional liquidators.
  1. [58]
    There is no evidence that this belief on the part of the defendants, or anyone else on behalf of the company, was as a result of anything done by the plaintiff, except in the sense that filing the application for winding up the company had created a situation where an application to appoint provisional liquidators could be filed. According to the defendants’ pleading, the company’s solicitors “informed directors and advised that to pre-empt the appointment of a provisional liquidator ex parte immediately after the filing of the winding up notice [sic] the appropriate response of directors to protect the company was to appoint a voluntary administrator before the legal entitlement to seek ex parte a provisional liquidator arose in favour of Pioneer.”:  para 2.35.  It is pleaded that this information caused directors to appoint a voluntary administrator around 10 am on 22 February 2001:  para 2.61.
  1. [59]
    The difficulty with the counterclaim, so far as it relies on misleading and deceptive conduct in relation to the representation in the letter, is that the letter was not a clear statement that the plaintiff would not take action before 8 March, in view of the proviso.  Leaving aside the question of the interpretation of that document as an agreement it is I think difficult to interpret it as a representation that the plaintiff definitely will not take action prior to 8 March.  I am wary about deciding an issue as to the correct interpretation of that document finally on an application under r 293, but after careful consideration I am satisfied that it is clear enough for the purposes of that rule that this letter is not to be interpreted as a representation that come what may the plaintiff will not take action prior to 8 March for it to be unnecessary to have a trial about that. 
  1. [60]
    The defendants relied on the analysis of the approach to an application for summary judgment of Chesterman J in Gray v Morris [2004] 2 Qd R 118.  I have never regarded his Honour’s judgment in that matter as representing the majority view, and it seems to me that his Honour has subsequently conceded as much.[49]  I consider that the correct approach to an application under r 292 or 293 is that laid down in Deputy Commissioner of Taxation v Salcedo [2005] 2 Qd R 232, and that is the approach I am adopting.  In the present case the issue is one of interpretation of a document, which I have, as well as affidavit evidence as to the context in which it was sent.  I have a mass of evidence as to the background circumstances, to the extent that they are of assistance.  I cannot see how a trial judge would be in a better position than I am to decide this question. 
  1. [61]
    In these circumstances, so long as there were reasonable grounds to make the more limited representation which was made, the plaintiff will at a trial discharge the onus of showing that the representation was not misleading. The future matter was the plaintiff’s conduct in the future, and the plaintiff acted as set out in the letter, deciding to take action only as a result of the receipt of significant additional information, the draft report of Jessop & Partners. The defendant’s case on this point is based on the proposition that the letter was a representation that the company would be given until 8 March to finalise the bank loan.[50]  Once this interpretation of the letter is rejected, this aspect of the counterclaim must fail.  
  1. [62]
    There is a further difficulty with this aspect of the counterclaim, and that is in showing that there has been loss or damage suffered because of the misrepresentation. The defendants’ complaint is not that the misrepresentation was made, but that it was not honoured; that is to say, their case depends upon loss or damage flowing because the plaintiff did take action prior to 8 March.  Assuming at this point that the plaintiff’s action was a cause of any loss subsequently suffered by the defendants, their loss was not suffered because the representation was made but because it was not honoured.  But that is not the basis on which damages are awarded under the Trade Practices Act in relation to misleading or deceptive conduct; it is a matter of looking at how much worse off the defendants are compared with where they would have been if the representation had not been made. 
  1. [63]
    There is no evidence that if the letter had not contained a representation that the plaintiff would not take action before 8 March, the defendants or the company would have done anything different from what they did anyway.  It is not the defendants’ case that but for that representation the defendants would have caused the company to obtain the finance earlier, so as to have been in the position to pay the various debts prior to the time when the application was filed by the plaintiff.  The company and the defendants are no worse off because they were told that than they would have been if they had not been told that.  The Trade Practices Act does not under s 82 (or for that matter s 87) provide an indirect mechanism by which promissory representations of this nature can be enforced.[51]  It follows that in my opinion any claim based on s 52 of the Act must fail. 
  1. [64]
    The final matter complained of is that the affidavit sworn in support of the application to wind up the company was false, because it was incorrect to state that the full amount of the debt was due and payable. Depending on the effect of the agreement on 13 February 2001 the money may not at that point have been payable, and accordingly this was at least arguably misleading or deceptive. But again there is no evidence that the company or the defendants were in fact misled by this; indeed the affidavit was not served, and they would have found out about it only later. Had they known about it, they would have rejected it as wrong, as they reject it as wrong now. It is clear enough that no loss has been suffered as a result of this, assuming it was a breach of s 52, so this part of the counterclaim must also fail.

Sections 53(g) and 60

  1. [65]
    The pleading also relies on ss 53(g) and 60 of the Act.  Section 53(g) provides that “a corporation shall not, in trade or commerce, in connection with the supply or possible supply of goods or services, or in connection with the promotion by any means of the supply of goods or services … (g) make a false or misleading representation concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy.  There was no argument specifically relying on this provision advanced on behalf of the defendants, which in my view was realistic.  Nothing was done here in connection with the supply or possible supply or promotion of the supply of any goods; what was done was in relation to the recovery of payment for the goods that had been supplied.  In addition, for the reasons that I have given earlier it seems to me clear that there was no false or misleading representation concerning the existence of any remedy, which appears to be the only thing which could be even faintly arguable.  The reliance on s 53(g) in my opinion is simply misconceived.
  1. [66]
    The same applies to s 60, which prohibits the use of physical force or undue harassment or coercion in connection with the supply or possible supply of goods or services to a consumer or the payment for goods or services by a consumer.  There is plainly no reference to physical force here, and although the letters of demand were somewhat peremptory, I cannot see how they amount to undue harassment or coercion simply because the company did not have the money to pay the debts at the time.  But it is necessarily a complete answer to the claim under s 60 that the company was not a consumer:  see s 4B of the Act.  The claim under s 60 is also misconceived.
  1. [67]
    In circumstances where any claim against the plaintiff must fail, the consequential claim under s 75B against the additional defendant by counterclaim must also fail.  I therefore give judgment under r 293 that the counterclaim of the first, second, third, and fifth defendants be dismissed with costs.

Strike out application

  1. [68]
    In these circumstances, it is unnecessary to consider whether all or parts of the counterclaim should be struck out. There was even an issue raised on behalf of the plaintiff that there was no jurisdiction in respect of the counterclaim because the amount claimed was beyond the monetary limit of the District Court. However, no application was made to the Supreme Court under s 86 of the District Court of Queensland Act to transfer the proceedings to the Supreme Court, so the question arises whether the provisions in s 68(3) of the Trade Practices Act have the effect of picking up the wide jurisdiction as to counterclaims which is conferred on the District Court by s 86 of the District Court of Queensland Act when no such application has been made.  The terminology of s 86 of the Trade Practices Act is very general, and uninstructed by authority (and no authority on the subject was cited to me by either counsel), in my opinion the Commonwealth legislation does pick up the provision of s 86 of the State Act, and the extended jurisdiction available to this court.  Accordingly, I would not have struck out the counterclaim for want of jurisdiction. 
  1. [69]
    I would, however, certainly have struck out the counterclaim in any case because even if I have thought there was some arguable case for some form of relief under the Trade Practices Act, the current pleading is hopelessly inadequate and seriously defective, and contains much which is irrelevant, and in some cases scandalous, or otherwise inappropriate, and discloses no reasonable cause of action. In the circumstances, however, it is unnecessary for me to go into this in any detail.
  1. [70]
    There remains the issue of whether all or part of the defence should be struck out. Paragraph 3 contains an allegation about affidavits having been knowingly falsely sworn, which is irrelevant and scandalous.[52]  Paragraph 9 purports to plead a defence under s 588H(4) of the Act, according to the heading, but the plea has nothing to do with that provision.  It says:

“The defendants as a board and the fifth defendant took all reasonable steps to prevent the company from incurring postponeable or deferrable debts when the period of temporary liquidity shortage arose in the December quarter of 2000.”

  1. [71]
    Section 588H(5) says “It is a defence if it is proved that the person took all reasonable steps to prevent the company from incurring the debt.”  The reference to “the debt” is obviously a reference to the debt in respect to the incurring of which proceedings are being brought under s 588M:  see s 588H(1).  That means the debt to the plaintiff.  The plea in paragraph 9 does not allege that the defendants took all reasonable steps to prevent the company from incurring the debt to the plaintiff, and therefore it is not good plea and should be struck out.
  1. [72]
    Apart from this, there are matters contained in what are described as particulars which are not proper particulars, or which are otherwise objectionable. Paragraphs 6.01, 6.02, 6.03, 6.04 are irrelevant to the allegation in paragraph 6, 6.08 is argumentative and therefore not a proper particular, as is 6.09.  There are then a series of paragraphs (6.10-6.25) which are headed “Particulars of reasonable grounds to expect solvency:  liquidity in excess of all debts and capital commitments at 30 June 2000 including the plaintiff’s contract of supply debt.”  Any such particulars necessarily are irrelevant to the allegation in paragraph 6, or, if it comes to that, the allegation in paragraph 7 of the defence, neither of which make the liquidity of the company at 30 June 2000 relevant.  Paragraphs 6.10-25 should all be struck out.
  1. [73]
    Paragraph 7 of the defence pleads the defence under s 588H(2) of the Act, and then it is followed by what are said to be particulars of reasonable grounds to expect solvency.  From paragraph 7.01 to paragraph 7.22, the particulars may, at least arguably, be particulars of those reasonable grounds, but paragraphs 7.23, 7.24, 7.26-7.30 are plainly not proper particulars of the allegation in paragraph 7, nor is paragraph 7.36 which contains an irrelevant allegation against the plaintiff’s parent company.  Paragraph 7.37 contains material which is irrelevant and scandalous, in the form of allegations about the falseness of affidavits and the plaintiff’s acting unlawfully, which I have already dealt with and which I have rejected, and should be struck out.  In the light of the material that I have seen in connection with this application, paragraph 8.04 strains credulity, but I do not think it is susceptible to being struck out on that ground.
  1. [74]
    Much of the existing defence should therefore be struck out: Paragraphs 3, 6.01 – 6.04, 6.08, 6.09 – 6.25, 7.23, 7.24, 7.26 – 7.30, 7.36, 7.37, and 9. The additional document filed 30 September 2005 was also defective and should be struck out.  I will hear further submissions as to whether the defendants would prefer the whole defence to be struck out, so that a new (and hopefully more skilfully drawn) pleading can replace it; otherwise, I will just strike out those parts referred to earlier.  The application is otherwise dismissed; I will hear submissions on the question of costs.

Footnotes

[1]  Statement of claim para 27; defence para 4 (not admitted); affidavit of Patane filed 24 March 2006.

[2]  Statement of claim paras 2, 3, 7; defence para 1

[3]  Statement of claim para 12(a); defence para 1.

[4]  Affidavit of Brown filed 17 March 2006.  Exhibit CAB-1.

[5]  Affidavit of Massard filed 5 April 2006 para 12.

[6]  Exhibit ST-6.

[7]  Affidavit of Massard filed 5 April 2006 Exhibit JSM-04; Affidavit of Trevor filed 17 March 2006 Exhibit ST-4.

[8]  Exhibit JCM-05.

[9]  Affidavit of Trevor filed 17 March 2006 Exhibit ST-5.

[10]  Exhibit ST-6.

[11]  Exhibit JCM-02; Exhibit ST-7.

[12]  This was effectively conceded by counsel for the respondents during argument:  pp 16, 17.

[13]  Exhibit JCM-07.  Also at affidavit of Trevor filed 17 March 2006 Exhibit ST-2.

[14] ASIC v Plymin (2003) 46 ASCR 126 at [516] per Mandie J.

[15]  See Deputy Commissioner of Corporate Affairs v Abbott (1980) CLC 40-667.

[16]  Affidavit of Brown filed 17 March 2006 Exhibit CAB-1, p 5.

[17]  Affidavit of Schoch filed 5 April 2006 para 36, which refers to the application having been made by the chairman (Byrne) and the CEO (Massard).  Affidavits by those deponents filed the same day provide no information as to this, other than a reference in para 14 of Byrne’s affidavit that on 6 October 2000 the Commonwealth Bank unexpectedly did not agree to the company’s funding requirements.

[18]  Affidavit of Patane filed 23 March 2006 Exhibit BBP-2.

[19]  Affidavit of Byrne filed 5 April 2006 paras 14, 15, 16.

[20]  He says that the telephone call communicating the approval of the loan came two and a half hours after:  paras 18, 19.

[21]  See generally ASIC v Plymin (supra) at [369] – [379].

[22] Sandell v Porter (1966) 115 CLR 666 at 670; Re Newark Pty Ltd [1993] 1 Qd R 409 at 415-6; Brooks v Heritage Hotel Adelaide Pty Ltd (1996) 20 ASCR 62 at 64.

[23]  It seems to have taken the company an extraordinarily long time to get the bank the information it required; the second defendant was meeting with them to provide information in late January and early February 2001, four months after the first approach:  affidavit of Perkins filed 5 April 2006 paras 5, 8.

[24]  Applying the test in Deputy Commissioner of Taxation v Salcedo [2005] 2 Qd R 232.

[25]  Affidavit of Brown filed 17 March 2006 Exhibits CAB-1 and CAB-2.

[26]  There is as admission on the pleadings of a particular rate at a particular time, but no evidence that that remained the rate, and a notice to admit facts which was proved referred to different rates, although there is no evidence as to whether those facts were admitted.

[27]  The first defendant:  affidavit of Schoch filed 5 April 2006 paras 42, 54, 57; second defendant:  affidavit of Perkins filed 5 April 2006 para 10 (although this deals only with the proposition that the bank would make the loan available to the company); third defendant:  affidavit of Byrne filed 5 April 2006 para 24; fifth defendant:  affidavit of Massard filed 5 April 2006 para 36.

[28]  Copies of the documents disclosed as directors’ minutes of meetings between ASX Listing and Voluntary Administration:  Affidavit of Patane filed 23 March 2006 Exhibit BBP-2.

[29]  Second affidavit of Brown filed 30 August 2006 (document 72) Exhibit CAB‑1.

[30]  Filed 5 November 2006 para 54.

[31]  Affidavit of Schoch Exhibit WMS‑07.

[32]  Filed 5 April 2006 paras 43-4.

[33]  Affidavit of Schoch Exhibit WMS-8.

[34]  Exhibit WMS-9.

[35]  See generally ASIC v Plymin (supra) at [423] – [427].

[36]  The first defendant deposed to the accountant’s closely monitoring future capital commitments of the company (para 34), but did not say that he or anyone else was told the details of this, and what details.

[37] Manpac Industries Pty Ltd v Ceccattini (2002) 20 ACLC 1,304 at [54].

[38]  See Kenna & Brown Pty Ltd v Kenna (1999) 32 ASCR 430 at 455.

[39]  Citing Manpac Industries Pty Ltd v Ceccattini (2002) 20 ACLC 1,304.  See also Advance Bank Australia Ltd v FAI Insurance Ltd (1987) 5 ACLC 716 at 725.

[40] ASIC v Plymin (No. 2) (2003) 21 ACLC 1237 at 1241.

[41]  Transcript argument p 14; I was told I should ignore the document filed 30 September 2005, which is quite irregular, and does not appear to have been signed.

[42]  Affidavit of Brown filed 17 March 2006 Exhibit CAB-3.

[43]  Affidavit of Brown filed 17 March 2006 Exhibit CAB-11.

[44]  Affidavit of Brown filed 17 March 2006 Exhibit CAB-12.

[45]  The letter went on to indicate that this represented the amount acknowledged in the earlier facsimile together with interest in the sum of $3,882.29 and costs of $3,500 “capped on the basis that the debt is paid by 8 March 2001.”

[46]  Affidavit of Brown filed 30 August 2000 Exhibit CAB-1, p 5.

[47]  Affidavit of Brown filed 17 March 206 paras 16, 17.

[48]  Affidavit of Brown filed 17 March 2006 para 19.

[49]  See Jessup v Lawyers Private Mortgages Ltd [2006] QSC 3 at [14].

[50]  Respondent’s outline of argument para 38.

[51] Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 at [42], [48], [57].

[52] Butler v Crowley & Greenhalgh (W6521/96, Muir J, 11.11.99, unreported) at [4].

Close

Editorial Notes

  • Published Case Name:

    Pioneer Construction Materials Pty Ltd v Schoch and Ors

  • Shortened Case Name:

    Pioneer Construction Materials Pty Ltd v Schoch

  • MNC:

    [2007] QDC 143

  • Court:

    QDC

  • Judge(s):

    McGill DCJ

  • Date:

    25 May 2007

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
Advance Bank Australia Ltd v FAI Insurance Ltd (1987) 5 ACLC 716
1 citation
Jump To
Cite 1 - (1987) 5 ACLC 716
Australian Securities and Investments Commission v Plymin (No 2) (2003) 21 ACLC 1237
1 citation
Jump To
Cite 1 - (2003) 21 ACLC 1237
Avco Financial Services Ltd v While (1977) VR 561
1 citation
Jump To
Cite 1 - (1977) VR 561
Brooks v Heritage Hotel Adelaide Pty Ltd (1996) 20 ASCR 62
1 citation
Jump To
Cite 1 - (1996) 20 ASCR 62
Clark v Raymor (Brisbane) Pty Ltd (No 2) [1982] Qd R 790
1 citation
Jump To
Cite 1 - [1982] Qd R 790
Corozo Pty Ltd v Total Australia Ltd [1988] 2 Qd R 366
1 citation
Jump To
Cite 1 - [1988] 2 Qd R 366
Daniels v Anderson (1995) 37 NSWLR 438
1 citation
Jump To
Cite 1 - (1995) 37 NSWLR 438
Deputy Commissioner of Corporate Affairs v Abbott (1980) CLC 40-667
1 citation
Jump To
Cite 1 - (1980) CLC 40-667
Deputy Commissioner of Taxation v Salcedo[2005] 2 Qd R 232; [2005] QCA 227
2 citations
Jump To
Cite 1 - [2005] 2 Qd R 232
Cite 2 - [2005] 2 Qd R 232
Gray v Morris[2004] 2 Qd R 118; [2004] QCA 5
1 citation
Jump To
Cite 1 - [2004] 2 Qd R 118
Investment Commission v Plymin (2003) 46 ASCR 126
3 citations
Jump To
Cite 1 - (2003) 46 ASCR 126
Cite 2 - (2003) 46 ASCR 126
Cite 3 - (2003) 46 ASCR 126
Jessup v Lawyers Private Mortgages Ltd [2006] QSC 3
1 citation
Jump To
Cite 1 - [2006] QSC 3
Kenna & Brown Pty Ltd v Kenna (1999) 32 ASCR 430
1 citation
Jump To
Cite 1 - (1999) 32 ASCR 430
Leigh - Mardon Pty Ltd v Wawn (1995) 17 ACSR 741
1 citation
Jump To
Cite 1 - (1995) 17 ACSR 741
Manpac Industries Pty Ltd v Ceccattini (2002) 20 ACLC 1,304
2 citations
Jump To
Cite 1 - (2002) 20 ACLC 1,304
Cite 2 - (2002) 20 ACLC 1,304
Marks v GIO Australia Holdings (1998) 196 CLR 494
1 citation
Jump To
Cite 1 - (1998) 196 CLR 494
Re Newark Pty Ltd (in liq) [1993] 1 Qd R 409
1 citation
Jump To
Cite 1 - [1993] 1 Qd R 409
Sandell v Porter (1966) 115 C.L.R., 666
1 citation
Jump To
Cite 1 - (1966) 115 C.L.R., 666

Cases Citing

Case NameFull CitationFrequency
Bradnam's Windows and Doors Pty Ltd v Offermans[2011] 2 Qd R 408; [2011] QCA 1067 citations
Graham v Legal Services Commissioner (No 2) [2014] QCA 306 1 citation
Offermans v Bradnams Windows & Doors Pty Ltd [2010] QDC 5342 citations
Offermans v Bradnams Windows and Doors Pty Ltd [2012] QDC 81 citation
Trenfield v HAG Import Corporation (Australia) Pty Ltd [2018] QDC 1073 citations
1

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