Broadspectrum (Australia) Pty Ltd v Centauri Business Services Pty Ltd

BARRETT AJA: The plaintiff, which I shall call “Broadspectrum”, makes application under s 459G of the Corporations Act 2001 (Cth) for an order setting aside a statutory demand dated 4 February 2016 served on it by the defendant which I shall call Centauri.

The debt to which the statutory demand relates is described as "moneys due and payable under" four identified invoices. The total of the invoiced sums is $4,888,808.41. These sums are said by Centauri to relate to services performed by it for Broadspectrum and to be due pursuant to a contract between the two companies.

Broadspectrum has paid the amounts referred to in three of the four invoices. It maintains that it is not liable for the amount the subject of the fourth invoice, being $4,704,513.95. Broadspectrum's position is that it is not indebted because the work or services the subject of the fourth invoice did not fall within a particular definition in the contract between the parties.

The contract is a written contract executed by both companies. It envisages the provision of two types of services by Centauri to Broadspectrum. These are defined in the document as "Recovery Services" and "Support Services". Both kinds of services involve the application of accounting expertise.

The invoice in question refers to "Recovery Services". Broadspectrum maintains that such services as are covered by the invoice are not within the definition of "Recovery Services" and should be remunerated instead as "Support Services". The question of which category particular services fall within is of significance because Support Services are charged for on the basis of time spent, whereas Recovery Services attract a percentage fee based on savings achieved or other financial benefits obtained by virtue of the provision of the services.

The contract contains a definition of “Recovery Services" in a schedule containing a description of services, as follows:

The parties accept that the part of the definition relevant to this case is the part preceding the second of the dot points after "to identify".

In his affidavit filed with the originating process, Mr Sutherland outlined why Broadspectrum denied that the work the subject of the relevant invoice was within the definition of “Recovery Services”. He said in essence that the process described by Mr Lamond, the principal of Centauri, as involved in the work covered by that invoice was "a reconciliation process" and that that did not, as contemplated by the relevant definition, amount to an analysis of errors in specific Accounts Payable transactions, Direct payment transactions or Supplier payments. Rather, Mr Sutherland says, the errors are of a kind that would have been identified by processes of reconciliation in the ordinary course. Mr Sutherland refers to contemporary email correspondence making that point.

In his affidavit, Mr Lamond takes issue with the proposition that the work involved a reconciliation process. He refers to contemporary email correspondence. Paragraph 39 of Mr Lamond’s affidavit reads:

Mr Sutherland's affidavit in reply accepts some but not all of what Mr Lamond said in his affidavit at paragraph 39. Mr Sutherland deposed

It is also relevant to quote the witnesses’ positions on another aspect. Mr Lamond says at paragraph 40 of his affidavit:

Mr Sutherland replies at paragraphs 7 and 8, as follows:

In the same way, I refer to Mr Lamond's paragraph 41:

Mr Sutherland's response is in paragraph 9:

The pattern is repeated in paragraph 42 of Mr Lamond’s affidavit and paragraph 10 of Mr Sutherland’s. Mr Lamond says:

Mr Sutherland replies:

It is clear from this affidavit material that there is disagreement between Mr Sutherland and Mr Lamond about whether the activities of the defendant that caused it to submit the invoice in question were "Recovery Services" as defined. Their views are, of course, not determinative but they do serve to show competing contentions. Broadspectrum's position, broadly stated, is that the defendant did not discover anything that would not have been brought to light by the plaintiff's staff in the ordinary course. Centauri says that, even if that is so, it is irrelevant.

Broadspectrum's basic argument is that “Recovery Services” involve the application of forensic skill beyond that which would ordinarily be applied by staff members. In addition, the required analysis is restricted to entries in the general ledger and does not extend to transfers from the general ledger to BAS reports on the view Broadspectrum takes. Centauri says that no such characteristic appears from the definition of "Recovery Services" and, moreover, that some services that Broadspectrum has previously paid for as recovery services without objection involve the very kind of work that Broadspectrum now says is outside the definition. Also Centauri points to evidence suggesting that the kind of reconciliation work Mr Sutherland says is excluded because performed by staff members in the ordinary course was not done by staff members at all at the time the agreement was entered into.

The law as to the approach the court should take to the question of genuine dispute under section 459H(1)(a) is well settled. Relevant principles were summarised by the Court of Appeal of Victoria in Malec Holdings Pty Limited v Scotts Agencies Pty Limited [2015] VSCA 330 at [47] - [50] (footnotes omitted):

In the end, the core question here is as to the meaning of "Recovery Services" in the parties' contract and precise characterisation of work actually done. There is ambiguity and imprecision in the definition. Broadspectrum submitted that the determination of the precise intent of the definition might well require evidence of circumstances surrounding the making of the contract. One can readily accept that, consistently with the principles most recently refined in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; 89 ALJR 990 at [46] - [50], it might be necessary to adduce evidence of what was and was not ordinarily done within Broadspectrum when the contract was made in order to identify fields of work on which, as an objective matter, it might be expected to have sought external help.

I would add that if there were litigation in which Centauri sued for the fee, it might well be necessary to resort to expert evidence of accountants as to precisely what tasks would and would not be undertaken in making an analysis of the kind described in the scope of work envisaged by the Recovery Services definition according to its correct interpretation.

In cases of this kind the court will not decide between competing contentions on a matter of construction of an instrument unless the point is a short and straightforward point. The notion that the court may, as it were, descend into the arena to that limited extent probably first emerged in Delnorth Pty Limited v State Bank of New South Wales (1995) 17 ACSR 379 but, as the Court of Appeal emphasised in Infratel Networks Pty Limited v Gundry's Telco and Rigging Pty Limited [2012] NSWCA 365; 297 ALR 372, that is not the course that should ordinarily be taken. In fact, the Court of Appeal there endorsed the observation of Sackville J in Trecomax Pty Limited v Prentice [2004] FCA 1057; 50 ACSR 314, that s 459G proceedings are not ordinarily the occasion for the court to construe the contract where there are competing views about its meaning.

In the present case there is a dispute between the parties. Disputed matters of fact emerge from the affidavit extracts I have set out. There are also differing views as to the correct construction of the definition of "Recovery Services" that could only be resolved by proceedings in which one party sought to enforce the contract against the other. There is, for those reasons, a genuine dispute concerning the existence of the debt the subject of the statutory demand.

This conclusion makes it unnecessary to consider subsidiary arguments based on delay in resort to a dispute resolution mechanism provided for in the contract.

The orders are as follows: