Fortrus Pty Ltd v Barraigh Pty Ltd
[2010] QSC 478
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- Unreported Judgment
- Fortrus Pty Ltd v Barraigh Pty Ltd[2010] QSC 478
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Fortrus Pty Ltd v Barraigh Pty Ltd[2010] QSC 478
Fortrus Pty Ltd v Barraigh Pty Ltd[2010] QSC 478
SUPREME COURT OF QUEENSLAND
PARTIES: | (applicant) v BARRAIGH PTY LTD ACN 145 433 272 (respondent) FORTRUS PTY LTD ACN 101 141 851 (applicant) v MOSMAN SERVICES PTY LTD ACN 079 350 744 (respondent) |
FILE NO: | BS11154 of 2010 |
Trial Division | |
PROCEEDING: | Application to set aside statutory demand |
DELIVERED ON: | 21 December 2010 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 14 December 2010 |
JUDGE: | Mullins J |
ORDER: | In respect of each proceeding, the statutory demand dated 21 September 2010 is set aside |
CATCHWORDS: | CORPORATIONS – WINDING UP IN INSOLVENCY – STATUTORY DEMAND – supporting affidavit – where deponent of the affidavit that was filed with the application to set aside the statutory demand was not a director, employee or agent of the applicant – where deponent purported to raise as a ground of dispute on behalf of the applicant a condition which the deponent asserted that the payment of the debt by the applicant to the respondent was subject – where there was no material in the supporting affidavit that connected the applicant with the ground of dispute that made the payment of the debt by the applicant conditional on payment of a debt to a company associated with the deponent CORPORATIONS – WINDING UP IN INSOLVENCY – STATUTORY DEMAND – application to set aside demand – genuine dispute as to indebtedness – where consultancy agreement between the applicant and the respondent was entered into after the purpose for which the services under the consultancy agreement were directed had been fulfilled – whether the applicant requested services from the respondent of the type provided for in the consultancy agreement – whether services were performed by the respondent under the consultancy agreement Corporations Act 2001 (Cth), s 459G David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265, followed Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452, followed Hansmar Investments Pty Ltd v Perpetual Trustee Co Ltd (2007) 61 ACSR 321, considered Mibor Investments Pty Ltd v Commonwealth Bank of Australia (1993) 11 ACSR 362, considered NA Investments Holdings Pty Ltd v Perpetual Nominees Ltd (2010) 79 ACSR 544, considered Rapcivic Contractors Pty Ltd v Mapol Nominees Pty Ltd [2009] 1 Qd R 21, considered |
COUNSEL: | S L Doyle SC with M D Martin for the applicant W Sofronoff QC with G Handran for the respondents |
SOLICITORS: | ClarkeKann for the applicant Tucker & Cowen for the respondents |
[1] Each proceeding was commenced by the applicant to set aside the creditor’s statutory demand for payment of debt dated 21 September 2010 that was served by each of the respondents Barraigh Pty Ltd (Barraigh) and Mosman Services Pty Ltd (Mosman). The proceedings were heard together.
[2] Barraigh is a company associated with Mr MacKinnon. Mosman is a company associated with Mr Crawford. Mr Paul McDonald is the sole shareholder and director of the applicant.
[3] In each proceeding the originating application was filed within 21 days of the service of the statutory demand together with an affidavit of William John McDonald (Mr Bill McDonald) filed on 13 October 2010 (the 13 October affidavit). Mr Bill McDonald is the brother of Mr Paul McDonald, There is a preliminary issue as to whether the 13 October affidavit supports the application, as required by s 459G(3)(a) of the Corporations Act 2001 (Cth) (the Act).
[4] If the preliminary issue is decided in favour of the applicant, the issue then to be determined on each application is whether the applicant can show there is a genuine dispute as to the existence of the debts claimed.
The statutory demands
[5] Barraigh claims a debt of $948,750 which is described in the statutory demand as “Fee due and payable pursuant to a Consultancy Agreement between the Creditor and the Company dated 6 July 2010.”
[6] The affidavit of Mr MacKinnon that accompanied the statutory demand was made by him in his capacity as a director of Barraigh and on the basis that he had inspected the business records of Barraigh and had knowledge of the matters deposed to in the affidavit. He confirmed that the debt was of the nature described in the statutory demand.
[7] The statutory demand made by Mosman was in identical terms for the same amount, except that the verifying affidavit was sworn by Mr Crawford.
Consultancy agreements
[8] Each consultancy agreement was executed as an agreement and was described as being made on 6 July 2010. The applicant was referred to as the Company and the relevant respondent was referred to as the Consultant in the agreement. The recitals to the agreement were expressly adopted as part of the agreement and stated:
“A.The Company wishes to engage the Consultant to provide the Services.
- The Consultant has agreed to provide the Services to the Company on the terms and conditions of this agreement.”
[9] Clause 2 of the agreement stated:
“The Consultant agrees to provide the Services to the Company for the Fee.”
[10] Clause 3 then provided:
“3.1The Company must, in consideration for the Consultant providing the Services, pay the Consultant the Fee.
3.2 The Consultant shall submit to the Company in respect of the Fee and the Company shall pay the amount of the invoice to the Consultant immediately upon demand.”
[11] The definitions of “Fee” and “Services” are found in schedule 1 to the agreement:
“Fee means $862,500 plus GST.”
…
Services means:
(a) all necessary and requested advice in relation to the acquisition of MDL 162 by MCG Coal Holdings Pty Ltd (or its subsidiary); and
(b) all services, functions and responsibilities which are not specifically described in this but which are necessary or incidental to the provision of the services contemplated by paragraph (a) above.”
The 13 October affidavit
[12] It is noteworthy that Mr Bill McDonald does not state the capacity in which he swears the affidavit. The affidavit identified a number of companies and their shareholders and directors. The first company identified is MCG Resources Pty Ltd (MCG Resources) of which the current shareholders are stated in paragraph 2 to be B McDonald (No 2) Pty Ltd with 800,000 ordinary shares, Barraigh with 400,000 ordinary shares and Mosman with 400,000 ordinary shares. The directors of MCG Resources are identified in paragraph 3 as Mr MacKinnon, Mr Crawford and the deponent. Mr McDonald stated in paragraph 1 that “The purpose of establishing MCG Resources was to acquire coal mining tenements in Central Queensland with a view to mining the coal.”
[13] In paragraphs 4, 5 and 6, Mr McDonald described the exploration permits for coal that MCG Resources either holds, are the subject of innovation applications or, in one instance, is the subject of an agreement to purchase.
[14] Mr McDonald then dealt in paragraphs 7 and 8 with MCG Exploration Pty Ltd (MCG Exploration) which was established “to purchase coal mining tenements from MCG Resources with a view to mining the coal.” He set out the shareholding of MCG Exploration as B McDonald (No 2) Pty Ltd with 80 ordinary shares and each of Barraigh and Mosman with 10 ordinary shares. He stated in paragraph 9 that the directors of MCG Exploration are also Mr MacKinnon, Mr Crawford and Mr Bill McDonald.
[15] The next company that Mr Bill McDonald described in paragraph 10 is MCG Coal Holdings Pty Ltd (MCG Coal Holdings) which was incorporated in conjunction with MCG Coal Pty Ltd (MCG Coal) to “effect a transaction acquiring MDL 162 from Stanwell Corporation and to on-sell that mining development license through a complicated series of transactions to Macarthur Coal Limited.”
[16] Mr Bill McDonald identified the shareholders of MCG Coal Holdings in paragraph 11 as MCG Resources with 3 million ordinary shares and Fortrus Resources Pty Ltd (Fortrus Resources) with 2 million ordinary shares, the directors as Mr MacKinnon, Mr Crawford and Mr Bill McDonald, and that MCG Coal Holdings is the sole shareholder of MCG Coal.
[17] Paragraphs 12, 13 and 14 dealt with MCG Coal. Mr McDonald stated that he is its sole director and MCG Coal entered into a sale and purchase agreement dated 5 July 2010 between Stanwell Corporation as seller and MCG Coal as buyer in respect of mining development licence MDL 162. Mr McDonald also stated that MCG Coal is also an obligor under a loan facility agreement dated 1 September 2010 between Macarthur Coal Limited (Macarthur) and MCG Coal Holdings, MCG Coal, MCG Resources and Fortrus Resources. (There is no suggestion that the applicant was a party to the loan facility agreement.)
[18] Mr McDonald stated in paragraph 15 that the shares in Fortrus Resources are held by Mr Paul McDonald and him through related entities and that Mr Paul McDonald and Mr Bill McDonald are the directors of Fortrus Resources.
[19] Mr Bill McDonald confirmed in paragraph 17 that the consultancy agreement was signed by Mr Paul McDonald in his capacity as director of the applicant.
[20] The first basis for the dispute about the debt is set out in paragraph 18:
“No “services” were ever requested by the Applicant nor did the Respondent ever perform any services within the meaning of the Consultancy Agreement.”
[21] Then, in paragraph 19, Mr Bill McDonald identified an exchange of emails between Mr Crawford, Mr MacKinnon, Mr Paul McDonald and him on 26 and 27 August 2010 which he asserted confirms the agreement made by those persons to the effect that, upon Macarthur acquiring 90 percent of MDL 162, the remaining 10 percent was to be held in the proportions of 55 percent for Mr Bill McDonald and 15 percent for each of Mr Paul McDonald, Mr MacKinnon and Mr Crawford.
[22] The email sent by Mr Bill McDonald on 26 August 2010 at 5.21pm suggested a split as to 15 percent to Terry (which appears to be a reference to Mr Crawford), 15 percent to John (which appears to be a reference to Mr MacKinnon), 10 percent to Paul (which appears to be a reference to Mr Paul McDonald), and 60 percent to Bill (which appears to be a reference to Mr Bill McDonald). Mr Bill McDonald congratulated Mr Crawford for “getting this first deal across the line.”
[23] Mr Paul McDonald sent an email on 27 August 2010 at 11.44am which suggested that Mr Paul McDonald was not happy with receiving only 10 percent.
[24] The email from Mr Bill McDonald dated 27 August 2010 at 1.40pm suggested that a telephone hook up be organised and proposed a different split in relation to “the 10% that we receive under the arrangement with MacCoal” with reference being mad again to the “great job” done by Mr Crawford and then stated:
“1.9 million goes to Terry and John split 50/50. 3.6 mill goes back to MCG Civil to cover costs.”
[25] It appears that discussions then took place among Mr Bill McDonald, Mr Paul McDonald, Mr Crawford and Mr MacKinnon, as the following email was sent by Mr MacKinnon on 27 August 2010 at 3.39pm:
“Following discussions we have settled on the following ownership structure of the 10% stake in MDL 162. The ownership of MCG Resources and Fortrus Resources will need to reflect this within the confines of the ownership of MCG Coal.
Bill55%
Paul15%
John15%
Terry15%.
1.9 million goes to Terry and John split 50/50. 3.6 mill goes to MCG Civil to cover costs.”
[26] The second basis on which the debts are disputed are set out in paragraphs 20, 21 and 22:
“20.In addition to the acquisition of those percentages of MDL 162, Crawford and McKinnon were to receive $1.9 million (inclusive of GST) split between them equally and I was to receive $3.6 million to cover expenses incurred by my company MCG Civil Pty Ltd ACN 099 423 088 (“MCG Civil”). The $1.9 million equates to the total amount referred to in the Consultancy Agreements between the Applicant and the Respondent and the Applicant and Barraigh Pty Ltd ACN 145 433 272, which is the subject of a similar application to set aside a statutory demand.
21.The Consultancy Agreement was prepared by Hynes Lawyers on instructions from Crawford. Whilst I was aware of its existence and that it was signed by my brother it did not reflect the ultimate agreement I had reached with Crawford and McKinnon. No services referred to in the Consultancy Agreement were ever requested by the Applicant or performed by the Respondent.
22.Furthermore the agreement to pay Crawford and McKinnon $1.9 million was conditional upon MCG Civil receiving the $3.6 million referred to in the exchange of emails. That amount has not been received by MCG Civil.”
[27] On the basis of the reasons set out in the 13 October affidavit, Mr McDonald asserted his belief in paragraph 23 that “there is a genuine dispute in respect of any claim by the Respondent pursuant to the purported Consultancy Agreement referred to in its statutory demand.”
[28] Mr McDonald also exhibited copies of letters that were sent by the applicant’s solicitor to the relevant respondent in connection with the consultancy agreement on 22 and 24 September 2010. The letter of 22 September 2010 recited the following instructions:
“Our client’s instructions are that Fortrus did not provide any services to MCG Coal Holdings in respect of MDL 162. Certainly Fortrus did not give any request to your clients to perform any such work.
What did occur on our instructions is that your clients assisted in the negotiations with Macarthur Coal as directors of the selling/borrowing entity, MCG Coal Holdings.
…
There does not seem to us to be any logical reason for interposing our client, Fortrus between the works that should have been performed by your clients in discharging their duties as directors. In fact that arrangement appears to us to be entirely artificial.
…
In respect of those consultancy agreements, we are instructed that no work was in fact performed pursuant to those agreements and that the work that was performed was by your clients as directors. Consequently no fee is due and owing.”
Preliminary issue
[29] The importance of the preliminary issue is that if the 13 October affidavit is not sufficient to be characterised as “the supporting affidavit”, the court has no jurisdiction to set aside the statutory demand: David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265, 276, 278; Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452, 459 (Graywinter). According to Graywinter at 459:
“In a s 459H(1)(a) case, the affidavit must in my view disclose facts showing there is a genuine dispute between the parties. A mere assertion that there is a genuine dispute is not enough. Nor is a bare claim that the debt is disputed sufficient. It follows from the fact that the affidavit need not go into evidence, which is the customary function of an affidavit, that it may read like a pleading.”
[30] The approach in Graywinter has been frequently discussed and applied in other cases, as illustrated by the list of such cases set out in NA Investments Holdings Pty Ltd v Perpetual Nominees Ltd (2010) 79 ACSR 544 at [78]. White J in Hansmar Investments Pty Ltd v Perpetual Trustee Co Ltd (2007) 61 ACSR 321 observed at [27]:
“Exceptionally in this area of the law, an affidavit under s 459G may read like a pleading: Graywinter at FCR 459; ACSR 588. Thus, a supporting affidavit may raise a ground of dispute in a form which is inadmissible to prove the facts giving rise to the dispute, and those facts may be proved in a later affidavit filed and served outside the 21-day period. However, there is no requirement in s 459G that the supporting affidavit read like a pleading.”
[31] It is curious that in the 13 October affidavit Mr Bill McDonald did not directly deal with the relationship of Fortrus to the other corporate entities that were described in the affidavit. Mr Bill McDonald did not expressly state that he was authorised by the applicant to swear of the 13 October affidavit. He is not a director of the applicant and does not assert that he was an employee or agent of the applicant. The authorisation of Mr Bill McDonald to swear the 13 October affidavit is a matter of inference, however, from that fact that the 13 October affidavit is relied upon by the applicant in these proceedings. The 13 October affidavit was filed together with the application by the applicant’s solicitors ClarkeKann. Mr Bill McDonald exhibited to the 13 October affidavit letters written by ClarkeKann in which they stated expressly that they were acting for the applicant. The supporting affidavit for the purpose of s 459G(3)(a) of the Act is not subject to the restrictions of the form prescribed for the affidavit verifying the statutory demand: cf Rapcivic Contractors Pty Ltd v Mapol Nominees Pty Ltd [2009] 1 Qd R 21 at [16].
[32] Mr Bill McDonald exhibited the email exchanges of 26 and 27 August 2010 which appear to be the negotiations involving Mr Bill McDonald, as well as Mr Paul McDonald, with Mr Crawford and Mr MacKinnon in respect of the payment of the sum of $1.9m which Mr Bill McDonald deposed to being the aggregate (in round terms) of the amounts referred to in the consultancy agreements.
[33] It is also relevant that the services under the consultancy agreement for which each respondent is claiming the outstanding fees are expressed in the consultancy agreement as related to the transaction to acquire MDL 162 by MCG Coal Holdings or its subsidiary about which transaction Mr Bill McDonald has knowledge, in view of his sole directorship of MCG Coal (which is the subsidiary of MCG Holdings that acquired MDL 162) and his significant shareholding and directorship of MCG Coal Holdings.
[34] On the basis of these means of knowledge of the involvement of the respondents in the acquisition of MDL 162 by MCG Coal, Mr Bill McDonald can make statements authoritatively for the purpose of the supporting affidavit required by s 459G of the Act about whether the services referred to in the consultancy agreement were requested of or performed by the relevant respondent. The 13 October affidavit sufficiently asserted the matters that relate to the first ground of dispute to satisfy the requirement for a supporting affidavit in accordance with Graywinter.
[35] The position appears to be, different, however in relation to the second basis that is put forward to dispute the debts. This basis depends upon the payment of the total fees of $1.9m being conditional upon a payment of $3.6m being made to Mr Bill McDonald’s company MCG Civil Pty Ltd (MCG Civil) to cover costs incurred in relation to the same acquisition of MDL 162. The terms of the emails of 26 and 27 August 2010 do not expressly, or by implication, make the payment of the sum of $1.9m to the respondents conditional upon the payment of $3.6m to MCG Civil. There is nothing in the 13 October affidavit that suggests that the applicant had any interest in MCG Civil receiving the payment of $3.6m. There is nothing in the 13 October affidavit that suggests that the applicant was party to an agreement that made the payment of the consultancy fees to the respondents conditional upon MCG Civil receiving payment of $3.6m.
[36] There is therefore only one basis for challenging the respondent’s debts that is properly raised by the 13 October affidavit. It is therefore necessary to consider all the material that has been adduced by the applicant and the respondents that is relevant to the only basis for challenging the debts that was properly raised as a ground of dispute in the 13 October affidavit which is whether the services that are the subject of each consultancy agreement were neither requested by the applicant nor performed by each respondent.
Whether there is a genuine dispute as to the existence of the debts
[37] The supplementary material filed on behalf of the applicant and the affidavits filed on behalf of the respondents detail more complex dealings involving the companies associated with Mr Bill McDonald, and Paul McDonald, Mr Crawford and Mr MacKinnon than indicated by the statutory demand made by each respondent or even the 13 October affidavit. The following summary of events is taken from the material that was relied on by the applicant and the respondents that relates to the first ground of dispute.
[38] Hynes Lawyers acted for MCG Coal holdings and MCG Coal in connection with the acquisition of MDL 162.
[39] The acquisition of MDL 162 by MCG Coal was for about $285m plus GST pursuant to a sale and purchase agreement dated 5 July 2010 that was completed on 1 September 2010, using the finance of $360m made available by Macarthur. Upon certain conditions being satisfied, Macarthur must convert its loan to a 90 per cent shareholding in MDL 162. That has not yet occurred.
[40] Mr MacKinnon’s email of 27 August 2010 at 3.39pm therefore referred to the proposed ownership structure of the balance of the 10 per cent ownership in MDL 162, if Macarthur took up its 90 per cent shareholding. MCG Coal would in the first instance own that 10 per cent which would ultimately benefit its shareholder MCG Coal Holdings, the shareholding of which did not reflect the interests set out in that email of 27 August 2010. That gives meaning to the suggestion in the email that “The ownership of MCG Resources and Fortrus Resources will need to reflect this within the confines of the ownership of MCG Coal.”
[41] Prior to completion of the acquisition of MDL 162 by MCG Coal, a number of documents were signed on 1 September 2010. Hynes Lawyers on instructions from Mr Crawford had prepared the consultancy agreements. Each consultancy agreement was executed on 1 September 2010. When Mr Paul McDonald signed each agreement, it was undated. Mr Crawford and Mr MacKinnon acknowledge that the consultancy agreements were backdated.
[42] At the same time as the consultancy agreement with each respondent was signed by the applicant, Mr Bill McDonald on behalf of MCG Coal Holdings signed a services agreement between MCG Coal Holdings and the applicant. Mr Paul McDonald signed the services agreement on behalf of the applicant. That agreement was also backdated to 6 July 2010. Under the services agreement the applicant is described as the supplier and MCG Coal Holdings is described as the company. Under clause 2 of the services agreement, the supplier agreed to provide the services to the company for the fee. The fee was defined in the services agreement as $1.725m plus GST. The services were defined to mean the services set out in schedule 2 to the agreement and all services, functions and responsibilities which were not specifically described, but which were necessary or incidental to the provision of the services contemplated in schedule 2. Schedule 2 provided:
“The Services are to:
- provide all requested advice in relation to the acquisition of MDL 162 by the Company (or its subsidiary);
- assist the Company in procuring loan funds for the payment of the deposit under the sale and purchase agreement for MDL 162; and
- provide security for loan funds obtained by the Company for payment of the deposit under the sale and purchase agreement for MDL 162.”
[43] Clause 3.1 of the services agreement provided:
“The Company must, in consideration for the Supply providing the Services, pay the Supplier the Fee.”
[44] At the time the consultancy agreements and the services agreement were signed, Mr MacKinnon handed to Mr Paul McDonald an invoice from each respondent addressed to the applicant.
[45] The invoice from Barraigh Pty Ltd was dated 15 July 2010 for $862,500 plus GST and described the services that were provided as “For negotiation, arrangement and advice for financing of Fortrus Pty Ltd on its proposed acquisition”.
[46] The invoice from Mosman Services Pty Ltd was also dated 15 July 2010 for $862,500 plus GST and described the services provided as “For negotiation, arrangement and advice for short term financing to Fortrus Pty Ltd.”
[47] After the funds paid to Stanwell Corporation for the purchase price for MDL 162 and retention of funds for the duty payable on the transfer, the balance of the loan funds of about $58.6m was paid to the trust account of Hynes Lawyers.
[48] There were a number of debts that had to be paid by MCG Coal Holdings from the trust account funds. Mr Bill McDonald telephoned Mr Crawford at about 11am on 3 September 2010. Mr Crawford set out in his affidavit filed on 25 November 2010 his recollection of the telephone discussion. Mr Bill McDonald in his affidavit filed on 8 December 2010 denied that he spoke the exact words attributed to him in Mr Crawford’s affidavit, but accepted that he did state to Mr Crawford that the sum of $1.9m would be paid by the applicant to Mr MacKinnon and Mr Crawford. Mr Crawford had recorded that Mr Bill McDonald had given his word that he would guarantee that the sum of $1.9m would get paid immediately into the respective bank accounts for Mr MacKinnon and Mr Crawford. Mr Bill McDonald’s explanation for making a statement that he did to Mr Crawford is set out in paragraph 10 of his affidavit filed on 8 December 2010:
“I deny that I spoke the exact words attributed to me. However, I did state to Crawford that the $1.9 million would be paid by Fortrus Pty Ltd and I did do so in emphatic terms. But I did this in order to obtain Crawford’s agreement to the immediate payment to Golding and Bannister. Golding had provided an unsecured loan for the deposit on MDL 162 of $28.5 million. Peter Bannister through his company Banno Investments Pty Ltd was a shareholder in MCG Resources Pty Ltd. Crawford, MacKinnon and I had agreed to purchase Banno’s shares for $4 million as part of the deal with Macarthur Coal Limited. Bannister and Golding had been instrumental in the success of the Macarthur project/venture, and I wanted them paid immediately. I required Crawford’s and MacKinnon’s agreement for those payments (they had to sign documents authorising the payment as directors of MCG Coal Holdings Pty Ltd) and Crawford had said things to the effect that no such authorisation would be forthcoming until he and MacKinnon had been paid the $1.9 million. I couldn’t justify an internal dispute delaying payment to Golding and Bannister, so I told Crawford that he and MacKinnon would get the $1.9 million.”
[49] Mr Bill McDonald sent an email at 11.19am on 3 September 2010 to the solicitor who was dealing with the distribution of the trust account funds at Hynes Lawyers, Mr Standen, and to Mr Crawford and Mr MacKinnon. Mr Bill McDonald requested approval of Mr Crawford and Mr MacKinnon of a payment of $2.6m to MCG Civil to cover costs. Mr Bill McDonald sent an email at 11.28am on 3 September 2010 to the personal assistant to Mr Paul McDonald that was copied to Mr Crawford, Mr MacKinnon and Mr Standen that advised that there would be $1.9m paid into the applicant’s account and requesting that the two invoices that were attached (which were the invoices dated 15 July 2010 from the respondents) be paid. Mr Standen did a trust account authority that provided for the payment of debts by MCG Coal Holdings to Golding and Banno Investments Pty Ltd, payment of lodgement fees, a security bond and transfer fees, the payment of $1.9m to the applicant and payment by way of a bank cheque for $2.6m drawn in favour of MCG Civil. The trust account authority was signed in three places by Mr Bill McDonald on 3 September 2010 as director for and on behalf of MCG Holdings Pty Ltd. The cheque of $1.9m was deposited to the applicant’s bank account on the same date. The applicant did not then make the payments to the respondents claimed under the consultancy agreements.
[50] The respondents’ solicitors alleged in their letter of 27 September 2010 that as a result of the telephone discussion between Mr Bill McDoanld and Mr Crawford on 3 September 2010 and the email that was sent by Mr Bill McDonald on the same date to Mr Paul McDonald’s personal assistant with instructions to pay the respondents’ invoices that the payment of $1.9m was made to the applicant with the intention on the part of MCG Coal Holdings that the proceeds be applied to discharge the indebtedness of the applicant to the respondents pursuant to the consultancy agreements. Mr Bill McDonald relies on his ulterior purpose in obtaining the authorisation of Mr Crawford and MacKinnon to the other payments made by MCG Coal Holdings to explain the statements that he had made to Mr Crawford on 3 September 2010 and that he was not a director of the applicant and had “no authority to make statements or admissions on its behalf.” That lack of authority appears to be related to the conversation and emails involving Mr Bill McDonald on 3 September 2010. There is no suggestion that the applicant has repaid the sum of $1.9m to MCG Coal Holdings.
[51] The respondents rely on the terms of the consultancy agreements to claim that the amounts claimed in the outstanding invoices are payable by the applicant. Neither Mr Crawford nor Mr MacKinnon provide any detail in their affidavits about the actual services each of the respondents provided to the applicant under the relevant consultancy agreement.
[52] Mr Bill McDonald asserted in paragraph 5 of his affidavit filed on 8 December 2010 that Mr MacKinnon and Mr Crawford “formulated and created” the structure of the services agreement between MCG Coal Holdings and the applicant and the consulting agreement between the applicant and each respondent in order to facilitate the payment to them of $1.9m. Mr Paul McDonald stated in paragraph 5 of his affidavit filed on 13 December 2010 (as clarified by his affidavit filed by leave on 14 December 2010) relating to the claim by Barraigh that the applicant did not require short term finance (or any finance) and did not acquire MDL 162 and did not ask for, nor was provided with, any services by Barraigh of the description set out in its invoice dated 15 July 2010. Mr Paul McDonald made similar statements in paragraph 5 of his affidavit filed on 13 December 2002 relating to the claim by Mosman.
[53] The role of the court on hearing an application to set aside a statutory demand is to determine whether there is a genuine dispute about the existence (or the amount) of the debt and not to decide the dispute. As Hayne J suggested in Mibor Investments Pty Ltd v Commonwealth Bank of Australia (1993) 11 ACSR 362, 366-367:
“… at least in most cases, it is not expected that the court will embark upon 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.”
[54] Each respondent has relied on the terms of the consultancy agreement with the applicant as covering services that had already been provided, as the invoice was rendered by that respondent to the applicant immediately the consultancy agreement was signed. That does not accord with clause 3.1 of the consultancy agreement. In each case, the description of the services in the invoice does not match the services that are specified as the subject of the relevant consultancy agreement. In addition, the sole director/shareholder of the applicant expressly denies that the applicant requested or was provided with the services described in the respondents’ invoices. There is an additional problem with the Barraigh invoice in that it suggested that the services were provided to the applicant for “its proposed acquisition,” when there was no such acquisition by the applicant.
[55] The conduct of Mr Bill McDonald in saying one thing to suit his purposes between 27 August and 3 September 2010 that the respondents would be paid $1.9m in a way that suggested he would ensure the relevant payments were made, but in doing another thing in resisting the payment of the debts under the consultancy agreements after MCG Coal Holdings had paid $1.9m to the applicant ostensibly for the applicant to make the payment to the respondents under the consultancy agreements should not, in the normal course, be rewarded. The problem, however, is that Mr Bill McDonald’s conduct is not set against a clear case by the respondents for payment of their claimed debts. The relationship of the respondents to the applicant is much more complex than suggested by the statutory demands and there is a dispute raised about their entitlement for payment of those debts against the applicant under the terms of the consultancy agreements and in the context of the wider transactions to which the consultancy agreements are incidental.
[56] The consultancy agreements appear to be the means or device by which the respondents were to be paid consultancy fees for their roles in connection with the acquisition by MCG Coal of MDL 162, but there are sufficient discrepancies in the material to raise doubts about the propriety of the respondents pursing the applicant, rather than another entity that may have benefited from the respondents’ activities. There is therefore a genuine dispute about whether the applicant is liable to pay the respondents’ invoices under the consultancy agreements. The fact that the applicant has not repaid the sum of $1.9m to MCG Coal Holdings is a matter for MCG Coal Holdings and does not alter the fact that there is a dispute between the applicant and the respondents about the debts claimed under the terms of the consultancy agreements.
Orders
[57] In each proceeding, the applicant is entitled to an order setting aside the statutory demand dated 21 September 2010. The respondents sought an order that the disputed amounts should be paid into court by the applicant, if the statutory demands were set aside. There is evidence of the solvency of the applicant in the affidavit of Mr Paul McDonald filed on 13 December 2010. The identification of a genuine dispute about the debts does not in these circumstances justify the making of the order sought by the respondents.
[58] When the originating application to set aside each statutory demand was filed, the return date for the application was 22 November 2010. Each respondent filed an application on 22 October 2010 seeking the dismissal of the originating application or that the originating application be heard on the return of the respondent’s application on 11 November 2010.
[59] On 11 November 2010 each respondent’s application and the originating application in each proceeding was adjourned for hearing to 26 November 2010. A timetable was given for the filing of further affidavits by each of the respondents and the applicant. Costs were reserved on 11 November 2010.
[60] The affidavits on behalf of the respondents were not filed in accordance with the orders made on 11 November 2010 and the respondents’ applications and the originating applications were adjourned for hearing on 14 December 2010. Costs were again reserved on 26 November 2010.
[61] It is necessary to deal with these reserved costs, in addition to the costs of the originating applications. It was foreshadowed at the hearing on 14 December 2010 that the applicant and the respondents may seek to rely on further affidavits in relation to the question of costs. I will therefore give the parties an opportunity to make submissions on costs, before making any orders on costs.