ACN 078 592 908 Pty Ltd v Access RnD Tax Solutions Pty Ltd

1. [1]

   This is an application by the plaintiff, now called ACN 078 592 903 Pty Ltd, and formerly called Priava Pty Ltd, for an order setting aside a creditors’ statutory demand (the demand) dated 10 August 2015 served upon it by the defendant, Access RnD Tax Solutions Pty Ltd.

2. [2]

   The amount of the debt claimed is $34,811, and the schedule to the demand shows that the amount is made up of three invoices dated 1 November 2013, 1 December 2013 and 4 September 2013 for the sums of $2,500, $2,500 and $29,311 respectively.

3. [3]

   The plaintiff paid $5,000 to the defendant on 25 August 2000, as it accepted that the debts the subject of the two invoices that each claimed $2,500 were owed to the defendant by the plaintiff.

4. [4]

   The plaintiff applies under s 459G of the Corporations Act 2001 (Cth) on the ground set out in s 459H(1)(a). The issue is whether there is a genuine dispute about the existence or amount of the $29,311 debt claimed in the demand.

Facts

1. [5]

   The defendant provided services to the plaintiff by way of expert assistance in the preparation of returns to enable the plaintiff to apply for certain research and development incentives made available by the Australian Government.

2. [6]

   Mr James Pegum is a director of the plaintiff. He was the only person who acted for the plaintiff in its dealings with the defendant.

3. [7]

   Mr Rodney James Campbell is a director of the defendant who was primarily involved in the defendant’s dealings with the plaintiff.

4. [8]

   Mr Pegum and Mr Campbell were the only witnesses in these proceedings.

5. [9]

   Mr Campbell gave evidence that a related company to the defendant had provided services to the plaintiff over a number of years. I will not set that evidence out as I am satisfied that it related to a different service than is relevant to the present dispute. The available evidence on that subject would not justify the court making a finding concerning the existence, or the terms of the agreement that is now in dispute on the basis of that earlier evidence. In any event, the evidence shows that between the earlier period and the date of the formation of the agreement alleged by the defendant in this case, the parties had made a number of ad hoc agreements as to the fees that the plaintiff would pay to the defendant that would render any earlier practices superseded.

6. [10]

   The defendant provided the relevant services to the plaintiff for the 2011-2012 year. Ultimately, the parties agreed to a fee for those services, and that fee was ultimately paid.

7. [11]

   The present dispute concerns a claim by the defendant for a fee in relation to services provided to the plaintiff for the 2012-2013 year.

8. [12]

   On 2 November 2012, Mr Campbell sent an email to Mr Pegum the material part of which was as follows:

9. [13]

   The plaintiff did not respond to this email in writing. There is no evidence that the plaintiff accepted either of the alternatives in the email in writing. The defendant alleges that Mr Pegum on behalf of the plaintiff, accepted the first of the two alternatives orally.

10. [14]

    A number of observations must be made about the contents of this email. First, it obviously offers two alternative bases for calculating the defendant’s fees, each of which is said to be a general industry billing formula. The email implies that the amount of the fee may be different in particular cases depending upon which formula is chosen. It was a coincidence that the amounts used for the purposes of the examples rendered the same amount of fees.

11. [15]

    Secondly (focusing on the first alternative that is claimed by the defendant to be the relevant one), it appears to suggest a range of possibilities by means of the reference to “2-5%”. If that is the correct way of reading the description of the first alternative, then an agreement by the plaintiff that the fee payable to the defendant would be on the basis of the first alternative would leave uncertain the percentage fee for the first $500,000 of the relevant expense.

12. [16]

    It is clear that if the email is read literally, the use of the hyphen between the number 2 and 5 would convey the necessity for a single percentage to be agreed within that range. In fact, during the course of the evidence and submissions I had taken it for granted that the email was intended to refer to this range, and conversed with counsel on that basis, particularly in the course of the submissions of counsel for the plaintiff.

13. [17]

    In his submissions, counsel for the defendant suggested that the use of the hyphen involved a typographical error, in which the hyphen had been used instead of a point. That is, “2-5%” should have read “2.5%”. This suggestion is significant because the invoice that the defendant rendered in which it claimed the amount of $29,311 was calculated on the basis of the formula in alternative 1 in the email on the basis that the amount payable for the first $500,000 was 2.5%. If that course was justified, the problem apparently caused by the email containing the range of payments for the first $500,000 might disappear.

14. [18]

    Counsel for the defendant justified his submission on the basis that the example calculation included in the email has been made using the percentage of 2.5% for the first $500,000, as 2.5% of that amount is $12,500.

15. [19]

    The author of the email, Mr Campbell, did not give evidence that the “2-5%” was a typographical error. In his 14 October 2015 affidavit at par 21, Mr Campbell stated:

16. [20]

    This evidence contains an assertion that the 2 November 2012 email provided that the percentage fee on the first $500,000 was 2.5%. The plaintiff did not object to this evidence. It was read before counsel for the defendant raised the possibility that the reference to 2-5% was a typographical error for 2.5%. The evidence did not assert that a typographical error had been made. It is strictly inadmissible because it is an assertion of what was contained in the document. I would give it little weight, and in my view it is not sufficient to prove that the email has a meaning other than the meaning that would be derived from a consideration of the ordinary meaning of the words, numbers and symbols used in the email.

17. [21]

    It must be observed that if a typographical error was made, it was made twice. If, as appears probable from the appearance of the email, it was typed with an ordinary keyboard, the typographical error suggested is difficult to explain given the relatively wide separation of the “.” and “-“ keys. There are also difficulties as a matter of the proper interpretation of the email. The use of the expression “but usually scaled at thresholds” introduces an element of indefiniteness into the first alternative. The words positively suggest that some agreement would be needed as to the relevant percentages and thresholds. In the absence of positive evidence that a typographical error was made, the court could not find that such an error had occurred, particularly in view of the fact that Mr Campbell’s business involved compiling specialist returns to the Australian Government body called AusIndustry for the purpose of justifying the client’s eligibility to benefit from what is called the Research and Development Tax Incentive offered by the Australian Government. While even the most meticulous of professionals may fail to discover typographical errors that they have made, given Mr Campbell’s expertise, and the purpose of the email in stating the bases upon which the defendant would be entitled to fees, the court could not find that the same typographical error had been made twice without positive evidence from Mr Campbell to that effect.

18. [22]

    In any event, proof by Mr Campbell that the email contained the suggested typographical errors would not establish anything about how Mr Pegum understood that email when he read it. Mr Pegum has been deprived of the opportunity to give evidence on that subject, because the assertion that there were typographical errors was not made until the defendant’s final submissions. The natural way to read the email is to read it literally, and the fact that the example given was calculated using 2.5% for the first $500,000 does not signal to the careful reader that the use of 2-5%, rather than 2.5%, was a mistake. As I read the 2-5% as meaning what it said until a contrary suggestion was made by counsel for the defendant, I could not reasonably find that Mr Pegum ought to have understood, let alone that he did understand, that Mr Campbell intended to say 2.5%.

19. [23]

    I will return to the significance of this issue again below. However, its apparent significance is that evidence that Mr Pegum on behalf of the plaintiff agreed that the defendant’s fee would be calculated on the basis of alternative 1 would not be sufficient to create a binding contract between the plaintiff and the defendant that would oblige the plaintiff to pay a fee calculated on the basis of 2.5% for the first $500,000. It would be necessary for a further agreement to be made concerning the percentage to be used in calculating the fee for the first $500,000 to be within the range from 2 to 5.

20. [24]

    On 7 November 2012, Mr Pegum responded to the 2 November 2012 email by saying:

21. [25]

    It is unclear whether the defendant carried out the work relating to the 2011-2012 year before or after Mr Campbell sent the 2 November 2012 email to Mr Pegum. There is no positive evidence on this subject. The plaintiff submitted that the work had been done after the email. There is evidence as to when the defendant did the work for the 2012-2013 year. That was in the last days of June immediately before the end of the financial year. The urgency with which the work was done for that year suggests that either it was necessary for the return to be lodged before 30 June 2013, or alternatively that it was highly desirable for that to happen so that the plaintiff could receive the relevant tax incentive as soon as possible after the end of the financial year. There is some basis for inferring that the same would have been the case for the prior financial year. Counsel for the plaintiff submitted that I should not make this inference. If it had mattered, and I had been required to do so in other instances, I would have drawn the inference on the balance of probabilities. However, I do not think it matters in this instance when the defendant did the work necessary for the 2011-2012 year. Whether or not was before the date of the 2 November 2012 email ultimately does not matter.

22. [26]

    The evidence shows that the parties did not finally agree upon the fee that the plaintiff would pay to the defendant for the work done for the 2011-2012 year until about 27 March 2013. On 19 March 2013, Mr Pegum initiated a discussion with Mr Campbell to deal with the fact that “We still haven’t agreed on last year’s account”. Following a number of emails a meeting apparently occurred on 27 March 2013. On the following day Mr Campbell wrote an email to Mr Pegum in which he said:

23. [27]

    The expression “to clear the way for the on-going R&D Tax work” in the first paragraph is equivocal. On a fair reading, it means at least that the agreement between the parties concerning the amount the defendant would be paid for the 2011-2012 year was necessary before the defendant would commence work for the following year. It could also mean that the parties had agreed on the basis of the defendant’s fee for that following year. While it would be natural to infer that the defendant required certainty as to how it would be paid for the first year before it would embark upon the work for the second year, it does not follow as strongly that the defendant would not start working on the second year before there was a fixed agreement as to how it would be paid for that work. While it might have been commercially sensible for the defendant to require an agreement as to how it would be paid for the second year’s work before it started that work, it must be remembered that the defendant had undertaken the previous year’s work without any specific agreement concerning the basis upon which it would be paid. In any event, the email does not clearly state that the parties had reached an agreement concerning the second year’s fees.

24. [28]

    The agreement reached in relation to the 2011-2012 year was that the plaintiff would pay the defendant a lump sum of $25,000 payable in ten equal instalments of $2,500.

25. [29]

    Mr Campbell gave evidence concerning what happened at this meeting about the defendant’s fee for the work relating to the 2012-2013 year. The evidence, which was contained in Mr Campbell’s 14 October 2015 affidavit, was in the following terms:

26. [30]

    In par 21, the words “I explained that our practice was to charge on the first basis” were admitted as evidence of what Mr Campbell said to Mr Pegum. The words “and Mr Pegum subsequently agreed in discussions with Rod Campbell and Dave Sammut of Access RnD on a flat fee (GST inclusive) of $25,000” were admitted as evidence of Mr Campbell’s understanding. Ultimately, there was no issue about the $25,000 flat fee being agreed for the 2011-2012 year. The words “At the same meeting Mr Pegum confirmed to me that the engagement for the following tax year would be on the said standard terms” were admitted as evidence of what Mr Pegum said.

27. [31]

    Paragraph 24 was admitted into evidence on the basis that it was Mr Campbell’s contention concerning the effect of the discussion.

28. [32]

    There is thus, some evidence that Mr Pegum agreed on behalf of the plaintiff that the defendant’s fee for the 2012-2013 year would be calculated “upon the said standard terms”. As I have explained above, Mr Campbell asserted in par 21 that first alternative in the 2 November 2012 email provided for a fee of 2.5% for the first $500,000. However, the effect of the evidence of the conversations not being given in direct speech, and the consequent generality of the evidence and lack of specificity as to what was actually said, has the result that there is no evidence that Mr Campbell brought to Mr Pegum’s attention the precise operation of the first alternative that Mr Campbell intended.

29. [33]

    In his 30 October 2015 affidavit, Mr Pegum denied discussing the engagement for the 2012-2013 year at the meeting with Mr Campbell on around 27 March 2013. He denied agreeing with Mr Campbell that the fee would be calculated by reference to the terms set out in the 2 November 2012 letter, at that meeting, or at all. He said: “There was no need for me to discuss with Mr Campbell, let alone agree, the fee for work to be performed in respect of a future possible engagement”.

30. [34]

    Thus, Mr Pegum denied the subject being discussed at all. He did not accept that there had been some discussion on the subject, but say that no agreement had been reached. He did not accept that there had been discussion about the 2 November 2012 email, but there had been no resolution of the percentage to be charged on the first $500,000. Mr Pegum did not mention the fact that the email contained the expression “2-5%”.

31. [35]

    Mr Campbell gave evidence of a further meeting that took place on about 26 June 2013 in the following terms:

32. [36]

    This evidence is also not in proper form, in the sense of conversations being given in direct speech. It was admitted, however, as evidence of what Mr Pegum said, with the word “agreed” being read as if Mr Pegum had said “we will pay”. Again, the difficulty arises that Mr Campbell used the expression “based on its standard terms”.

33. [37]

    Mr Pegum’s response to this evidence was to say that he did not make statements of the kind deposed to in par 30 of Mr Campbell’s affidavit.

34. [38]

    The defendant carried out the work necessary to compile the plaintiff’s 2012-2013 return in about the period 25 to 29 June 2013. This fact is reflected in four emails between the parties over those dates. None of those emails contains any reference to the terms upon which the defendant’s fee for the work would be calculated. The work was carried out with some urgency.

35. [39]

    The defendant learnt from the plaintiff of the amount that fitted the description of the “Notional R&D expense” as referred to in the first alternative in the 2 November 2012 letter on around 28 August 2013. On that date, Mr Sammut sent an email to Mr Pegum in which he said:

36. [40]

    Mr Pegum referred to the part of this email that reads “the terms that you have previously negotiated with Rod” in par 6 of his 16 December 2015 affidavit. He said that he had not negotiated or agreed to any terms with Mr Campbell relating to the amount that the plaintiff would pay for the defendant’s services for the 2012-2013 year. Mr Sammut did not give evidence.

37. [41]

    Also on 28 August, 2013 Mr Pegum sent a return email to Mr Sammut, which was copied to Mr Campbell. The email said:

38. [42]

    Mr Pegum did not provide any explanation of his use of the expression “finalise what we discussed”. In context, given that the work for the 2012-2013 year had already been done successfully, the only inference to be drawn is that the only outstanding matter was the fee payable to the defendant. There is a strong basis for inferring that the words “we discussed” related to a discussion between Mr Pegum and Mr Campbell on the subject of the defendant’s fee.

39. [43]

    Also, Mr Campbell did not in his evidence, refer to the series of emails now under consideration concerning the defendant’s fee, which refer to previous negotiations and discussions. It may be that the only discussions that the defendant alleges took place occurred on 27 March and 26 June 2013, but that is not clear.

40. [44]

    Mr Campbell sent an email to Mr Pegum on 10 September 2013 in which he said:

41. [45]

    Mr Pegum did not comment in his evidence on the use by Mr Campbell of the words “as discussed” in this email.

42. [46]

    Nor did Mr Campbell. It may be of some significance that Mr Campbell asked Mr Pegum to respond “on payment arrangements” in a way which suggests that Mr Campbell did not understand that the plaintiff would necessarily pay the whole of the amount of the invoice at once. He invited Mr Pegum to suggest payment arrangements, and gave a reason why he wanted at least $10,000 to be paid before the end of the month. This evidence is in that respect, inconsistent with Mr Campbell’s assertion in par 30 of his 14 October 2015 affidavit, which stated that Mr Pegum agreed on behalf of the plaintiff to pay the defendant’s account in full immediately on receipt of the cash rebate.

43. [47]

    The invoice for the $29,311 is dated 4 September 2013, but was apparently sent to the plaintiff as an attachment to Mr Campbell’s 10 September 2013 email. The invoice provided:

44. [48]

    The invoice did not make any specific reference to any agreement between the parties relating to the defendant’s fee.

45. [49]

    Thereafter, the defendant sent a number of emails to the plaintiff to pursue payment of the invoice. On 3 October 2013 Mr Campbell asked Mr Pegum: “Can you give me a bell – we urgently need to sort out some arrangement on fee payment. Our pot is bare!”

46. [50]

    Then on 29 October 2013, Mr Campbell said:

47. [51]

    On 22 November 2013, the defendant sent to the plaintiff the penultimate monthly invoice of $2,500 for the 2011-2012 year. The invoice was dated 1 November 2013, and contained the words:

48. [52]

    Mr Campbell sent a further email to Mr Pegum on 2 December 2013, which was also copied to the defendant’s then solicitors. The email said:

49. [53]

    Mr Pegum gave evidence in par 9 of his 16 December 2015 affidavit that he replied to this email on a without prejudice basis on 3 December 2013. He said that the plaintiff had no evidence of receiving any response to this email.

50. [54]

    The defendant sought to tender Mr Pegum’s 3 December 2013 email. In a separate judgment, I upheld the plaintiff’s claim that the email was protected by s 131(1) of the Evidence Act 1995 (NSW), and rejected the tender. It was necessary for me to read the email for the purpose of ruling on its admissibility. I must put the contents of the email out of mind for the purposes of determining the dispute between the parties.

51. [55]

    All that can be said on the basis of this evidence is that the plaintiff did make some response to Mr Campbell’s 2 December 2013 email, although there is no evidence about the nature of that response. It cannot be said that the plaintiff did not respond to the defendants’ series of emails entirely. The failure by the defendant to reply to Mr Pegum’s email may also have some significance, as that failure may blunt the significance of subsequent failures by the plaintiff to respond to later emails from the defendant that did not themselves deal with the 3 December 2013 email.

52. [56]

    It appears that the defendant delivered its tenth invoice for $2,500 in respect of the 2011-2012 year on about 4 December 2013.

53. [57]

    Mr Campbell sent an email to Mr Pegum on 5 August 2014 that said:

54. [58]

    On 7 December 2014, Mr Campbell sent another email in which he relevantly said:

55. [59]

    The next step was that on 11 August 2015, the defendant’s solicitor served the demand on the plaintiff.

56. [60]

    This prompted a response from the plaintiff’s solicitors. As mentioned above, they advised that the amount of $5,000 was undisputed and would be paid. They demanded the withdrawal of the demand. They said that there was:

Legal principles

1. [61]

   There was no dispute between the parties as to the principles that the court must apply in determining whether or not there is a genuine dispute between the parties about the existence or amount of the debt to which the demand relates. Both parties cited the recent decision of the Court of Appeal in Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd [2013] NSWCA 344; (2013) 85 NSWLR 601. The case was concerned with whether there was an offsetting claim for the purposes of s 459H(1)(b), but the Court also made observations relevant to the application of s 459H(1)(a). The Court dealt with the issue at length from [29] to [60]. I have, respectfully, extracted the parts of the joint judgment that are most germane to the present case:

2. [62]

   I do not seek to restate any of these principles, but for the purposes of the present case, I take from this decision of the Court of Appeal that the issue is not whether the debt exists, but whether the dispute about its existence is genuine (see [39]). The court must look to whether there is plausible evidence to establish the existence of a genuine dispute (see [47]). Even the existence of evidence that casts significant doubt on the contention that the debt is genuinely disputed does not justify rejecting the application (see [60]). The application may be rejected if the dispute about the existence of the debt can have no possible basis whatsoever (see [39]), and the court may reject statements made in support of the claim that there is a genuine dispute which lack precision, are inconsistent with undisputed contemporary documents or other statements by the same deponent, or are inherently improbable, and do not have sufficient prima face plausibility to merit further investigation (see [46]). The court may reject claims that are merely spurious, bluster or assertion or are fanciful or futile (see [52]). The exercise of determining whether the statutory demand should be set aside must be approached from the perspective that it is intended to be undertaken in a summary way (see [54]).

3. [63]

   The quality of the evidence that McClelland CJ in Eq in Eyota v Hanave (1994) 12 ACSR 785 apparently had in mind in the passage set out by the Court of Appeal at [46] may be seen in the following extract from the decision of the Judicial Committee of the Privy Council to which his Honour referred; Eng Mee Yong v Letchumanan [1980] AC 331 at 340, 341. The Judicial Committee was concerned with whether a caveat could be supported upon the basis of “oblique and scattered references to an alleged agreement” to extend the time for payment of the balance of the purchase price for a period. Lord Diplock, who delivered the judgment of their Lordships said:

Consideration

1. [64]

   In light of these authorities, the conclusion must be reached that the plaintiff has established that there is a genuine dispute as to the existence of the debt the subject of the demand, and an order should be made setting aside the demand.

2. [65]

   There are a number of aspects of the evidence that justify considerable suspicion about whether the debt is genuinely disputed, and cast significant doubt on the plaintiff’s contention to that effect. However, the evidence falls short of justifying a finding that the plaintiff’s claim is spurious.

3. [66]

   The plaintiff responded to the evidence given by Mr Campbell concerning the agreements that he made with Mr Pegum on about 27 March 2013 and 26 June 2013 by denying absolutely that the subject of the defendant’s fee for the 2012-2013 year was discussed at all. It may be probable that such a discussion took place, because it would make good commercial sense for the defendant to secure the plaintiff’s agreement to the basis of its fee for the second year, given the trouble that it had in coming to an agreement with the plaintiff to fix the fee for the first year. Mr Pegum did not acknowledge that any discussion about the fee occurred on the dates given by Mr Campbell, but go on to say that agreement was not reached (for example by reason of the lack of specificity in the first alternative in the 2 November 2012 email). Yet in the three emails that Mr Pegum received or sent between 28 August 2013 and 10 September 2013 there was reference to “terms previously agreed”, “finalise what we discussed”, and “as discussed”. As I have noted, Mr Pegum used the words “finalise what we discussed”. He did not explain the use of those words in his evidence. He did not respond to the emails he received from the defendant to deny at the time that there had been any such discussion. It is telling that the plaintiff did not pay the last two instalments of $2,500 in relation to the 2011-2012 year until 21 and 20 months after the invoices were delivered, and then only after the demand had been served on the plaintiff. The plaintiff did not respond to any of the emails it received from the defendant in which it was asked – or even implored – to start paying the account, with any open claim that it was not indebted to the defendant on the basis claimed.

4. [67]

   However, the fact is that Mr Pegum has given sworn evidence in which he denies that he entered into the agreement asserted by the defendant on behalf of the plaintiff.

5. [68]

   It is significant that the alleged fee agreement is not in writing, and the terms of the agreement have not been recorded or referred to in writing. There are only oblique and unexplained references to negotiations and discussions in the August 2013 emails. For obvious reasons the effectiveness of Mr Pegum’s sworn denials is enhanced by the absence of any documentary record of the terms of the alleged agreement.

6. [69]

   A particular concern is the inconsistency between Mr Campbell’s assertion that Mr Pegum agreed to pay the fee immediately on receipt of the invoice, and Mr Campbell’s apparent readiness to consider payment arrangements, which calls for further investigation.

7. [70]

   There is also the difficulty that arises as a result of the use of the expression “2-5%” in the statement of the first alternative basis for calculating the defendant’s fee in the 2 December 2012 email. The court simply cannot resolve that issue on the evidence in the present application, and it is thus a matter that requires further investigation. The issue is crucial to the defendant’s claim that an agreement existed that justified the debt the subject of the invoice delivered to the plaintiff. If the plaintiff had understood that the expression “2.5%” was intended, then an enforceable agreement may have been made if Mr Pegum agreed that the fee would be calculated on the basis of the first alternative. If the plaintiff understood that the expression “2-5%” actually used in the email meant that the percentage would fall within a range to be agreed, the acceptance of alternative 1 by itself would not be sufficient to create an enforceable agreement.

8. [71]

   It cannot be said that the plaintiff entirely ignored the communications that it received from the defendant after it received the defendant’s invoice. It is true that the court does not know the content of the plaintiff’s 3 December 2013 response. However, the defendant did not itself respond to that email, or seek to bring its contents into the open. The defendant only pursued the plaintiff in a relatively desultory way, and did not take any positive step to recover the debt for some 18 months after the invoice was delivered. These matters do not entirely negate the apparent effect of the plaintiff ignoring the defendant’s communications, and not paying the two admitted amounts of $2,500, but they do tend to blunt the significance of these matters.

Orders

1. [72]

   I make the following orders:

   1. (1)

      Order, pursuant to sections 449G and 449H of the Corporations Act 2001 (Cth) that the statutory demand dated 10 August 2015 served by the defendant on the plaintiff be set aside.

   2. (2)

      Order that the defendant pay the plaintiff’s costs of the proceedings.