Re Australian Builders Group Pty Ltd [2022] VSC 254 (20 May 2022): statutory demand, s 459G, application to set aside, genuine dispute about existence and/or amount of debt & whether due and payable because condition precedent in deed not met,validity of notice, principles of economic duress

May 23, 2022

In Re Australian Builders Group Pty Ltd [2022] VSC 254 the Supreme Court, per Hetyey AsJ, set aside a statutory demand based on a genuine dispute based on the construction of an agreement and default notice but also by a claim of duress.

FACTS

On or around 1 June 2017 Mind, a not-for-profit organisation providing community-managed specialist mental health services entered into an agreement with Australian Win Win Investment Pty Ltd (‘the landlord’) to lease a property located at 691 High Street, Thornbury, Victoria (‘the property’ and ‘the lease’ respectively) for an amount of $130,000 per annum (approximately $10,833.33 per calendar month) [1].

In early May 2018, Mind and ABG entered into a sublease agreement for the property (‘the sublease’). The parties to the sublease agreed that ABG would pay a reduced amount of rent of $121,000 per annum (approximately $10,083.33 per calendar month) [2].

From February 2019, ABG began to fall into arrears & by 15 April 2021, it owed Mind approximately eight months’ rent, totalling $82,279.92 (‘the arrears’). Pursuant to a repayment deed, ABG agreed to make regular payments of the arrears of $2,500 plus GST, together with interest, per week.

Regarding the repayment Read the rest of this entry »

A & J Morphett Nominees Pty Ltd v JBT Lawyers Pty Ltd & Anor [2022] VSC 238 (17 May 2022): role of Stakeholder, where deposit held by solicitor as stakeholder on behalf of both parties to sale transaction & failed to refund deposit to purchaser who validly terminated the contract.

May 22, 2022

In A & J Morphett Nominees Pty Ltd v JBT Lawyers Pty Ltd & Anor [2022] VSC 238 Justice Dixon in upholding an appeal made important statements for practitioners on the role of stakeholders.

FACTS

On 26 November 2018 the appellant and Chloe Estelle Pty Ltd entered into the contract with the appellant paying the deposit of $42,000 to the respondent on 6 December 2018 [4].

On 21 March 2019, the appellant by written notice terminated the contract and requested that the respondent repay the deposit to it [4].

The appellant, A & J Morphett Nominees Pty Ltd, commenced proceedings against Chloe Estelle Pty Ltd, as first defendant, and the respondent, JBT Lawyers Pty Ltd, as second defendant in the Magistrates Court.  In its defence the respondent admitted that it received the deposit sum as a stakeholder as alleged by the appellant [6].

On 24 June 2019, the appellant entered default judgment in the proceeding against Chloe Estelle Pty Ltd, which included an amount for interest and costs [7]. The appellant did not recover against Chloe Estelle Pty Ltd as it was and on 18 July 2019, an administrator was appointed and it was subsequently ordered to be wound up. The liquidators made no claim for the deposit.

It was never been in dispute that the respondent received that sum as a stakeholder for the appellant and Chloe Estelle Pty Ltd [3].

On 29 March 2019, the Federal Circuit Court, per Small J,made an order in a Family Law dispute between different parties.  It relevantly Read the rest of this entry »

CBS Commercial Canberra Pty Ltd v Axis Commercial (ACT) Pty Ltd, in the matter of CBS Commercial Canberra Pty Ltd [2022] FCA 544 (12 May 2022): application to set aside statutory demand, offsetting claim,

May 15, 2022

The Federal Court, per Halley J, set aside a statutory demand in CBS Commercial Canberra Pty Ltd v Axis Commercial (ACT) Pty Ltd, in the matter of CBS Commercial Canberra Pty Ltd [2022] FCA 544 in finding that an offsetting claim constitutes a genuine dispute. It is a very good decision setting out the complications of offsetting claims arising from building contracts relied upon in setting aside a statutory demand which is based on a certificate and judgment obtained under the Security of Payments Act.

FACTS

CBS engaged Axis as a sub-contractor to undertake work at a building site located in Gungahlin in the Australian Capital Territory [12].

The chronological events Read the rest of this entry »

Australian Securities and Investments Commission v RI Advice Group Pty Ltd [2022] FCA 496 (5 May 2022): ss 912A(1)(a) & (h) Corporations Act 2001 (Cth), failure to have adequate cybersecurity risk management in place,

May 14, 2022

The Federal Court, per Rolfe J, in Australian Securities and Investments Commission v RI Advice Group Pty Ltd [2022] FCA 496 made what has widely been described as a first occasion a corporation has been found to have breached its licence obligations in failing to have adequate risk management systems to manage its cyber security risks. The Court ordered declaratory relief requiring RI Advice to undertake work to improve its security under the supervision of an expert.  

The orders were made in terms agreed between the parties just before the trial was scheduled to commence.

I have followed this proceeding closely with posts ASIC commences action against RI Advice Group Pty Ltd for failing to have adequate cyber security in August 2020 and ASIC v RI Advice Group Pty Ltd cyber security civil penalty trial pushed off from a 29 November 2021 hearing date to a date in April 2022 in May 2021,

FACTS

The Court provided a factual background about stating that RI Advice :

  • was:
    • a wholly-owned subsidiary of Australia and New Zealand Banking Group Limited (ANZ). RI Advice up to and including September 2018;
    • from 1 October 2018, along with two other ANZ financial licensees, part of the IOOF Holdings Limited (IOOF) group of companies [12]
  • carries on a financial services business within the meaning of s 761A of the Corporations Act Act (“The Act”) under a third-party business owner model.
  • authorises Under s 916A of the Act, RI Advice independently-owned corporate authorised representatives (“ARs”) and individual authorised representatives to provide financial services to retail clients on RI Advice’s behalf and pursuant to the Licence [13]

The AR Practices (practices of groups of one or more Authorised Representatives):

  • electronically received, stored and accessed  confidential and sensitive personal information and documents in relation to their retail clients. The personal information included:

(a) personal details, including full names, addresses and dates of birth and in some instances health information;(b) contact information, including contact phone numbers and email addresses; and

(c) copies of documents such as driver’s licences, passports and other financial information [14].

  • since 15 May 2018 provided financial services to at least 60,000 retail clients [15]
  • had 9 cybersecurity incidents between June 2014 and May 2020, being:
    • in June 2014 an AR’s email account was hacked and five clients received a fraudulent email urging the transfer of funds, one of whommade transfers totalling some $50,000;
    • in June 2015 a third-party website provider engaged by an AR Practice was hacked, resulting in a fake home page being placed on the AR Practice’s website;
    • in September 2016 one client received a fraudulent email purporting to be an employee of an AR Practice asked for money. The AR Practice used an email platform where information was stored “in the Cloud”, with was no anti-virus software and only one password which everyone used.
    • in January 2017 an AR Practice’s main reception computer was subject to ransomware delivered by email, making certain files inaccessible;
    • in May 2017 an AR Practice’s server was hacked by brute force through a remote access port, resulting in file containing the personal information of some 220 clients being held for ransom and ultimately not recoverable;
    • between December 2017 and April 2018 (December 2017 Incident) an unknown malicious agent gained unauthorised access to an AR Practice’s server for several months  compromising the personal information of several thousand clients, some of whom reported unauthorised use of the personal information;
    • in May 2018 an unknown person gained unauthorised access to the email address of an AR and sent a fraudulent email to the AR’s bookkeeper requesting a bank transfer;
    • an unauthorised person used an AR Practice’s employee’s email address:
      • in August 2019 to send phishing emails to over 150 clients ; and
      • in April 2020 to send phishing emails to the AR Practice’s contacts [16].

Inquiries and reports following the cybersecurity incidents revealed thatthere were a variety of issues in the respective ARs’ management of cybersecurity risk, including:

  • computer systems not having up-to-date antivirus software installed and operating;
  • no filtering or quarantining of emails;
  • no backup systems in place, or backups not being performed; and
  • poor password practices including:
    • sharing of passwords between employees,
    • use of default passwords,
    • passwords and other security details being held in easily accessible places or being known by third parties [17].

Regarding the incidents Read the rest of this entry »

High Court hears argument in Google LLC v Defteros [2022] on 3 May 2022

May 9, 2022

The Full Bench of the High Court heard argument in Google LLC v Defteros [2022].  It is a case of considerable interest to defamation practitioners.  The key issue is whether a search engine a publisher of defamatory material on a third party website to which that search engine provides a hyperlink when the search result on its own conveys no defamatory imputation.  Also Google seeks a ruling on what is required to notify the search engine of defamatory publication for the purposes of the common law doctrine of innocent dissemination and the statutory defence under section 32 of the Defamation Act 2005. 

The transcript of oral argument before their Honours can be found here.

It is an appeal from a decision from the Victorian Court of Appeal in Defteros v Google LLC [2021] VSCA 167 (17 June 2021).  Interestingly on that occasion the appellant, Defteros, was unsuccessful.  Google’;s cross application for leave to appeal was refused. 

Special leave was granted on 10 December 2021 conditional upon Google paying Defteros’s costs of the appeal and not disturbing the costs orders in the Court of Appeal and at trial.  The transcript of the Special Leave Application can be found here.  In short, there is a public interest in resolving the issue. 

The essence of Google’s submissions is that the trial judge and the Victorian Court of Appeal erroneously found that the provision of a hyperlink was participation in the communication of defamatory material for the purpose of publication.  

The submissions of both parties can be found Read the rest of this entry »

Stubbings v Jams 2 Pty Ltd [2022] HCA 6 (16 March 2022); equity, unconscionable conduct, reliance on certificates of independent advice

March 30, 2022

In a 5 – 0 decision the High Court allowed an appeal from the Victorian Supreme Court in Stubbings v Jams 2 Pty Ltd [2022] HCA 6 and the operation of certificates of independent advice and unconscionable conduct.  The lead judgment is that of Kiefel CJ, Keane and Gleeson with separate opinions by Gordon and Steward.

FACTS

The facts

The appellant owned two houses in Narre Warren, both mortgaged to Commonwealth Bank with weekley repayments of between $260 and $280 per week. The appellant did not live in either house.  He lived at rental premises at Boneo, where he worked repairing boats for the owner of the property [7].

The Appellant fell out with the owner,  ceased work and, needing to move house, sought to purchase another property on the Mornington Peninsua [7].

At the relevant time the appellant:

  • was unemployed
  • had no regular income
  • had not filed tax returns in several years and
  • was in arrears on rates payments in respect of the two Narre Warren properties [8]

After a home loan application to ANZ was rejected for lack of financial records, the appellant was introduced to Mr Zourkas [8] who described himself as a “consultant”, in the business of introducing potential borrowers to Ajzensztat Jeruzalski & Co (“AJ Lawyers”) [9]. The service AJ Lawyers provided to clients was to facilitate the making of secured loans by those clients [9].

The primary judge found that Zourkas played an “important and essential” role in these transactions, in that his involvement ensured that AJ Lawyers never dealt directly with the borrower or guarantor, such as the appellant [9]

When the appellant and Zourkas met on a number of occasions in 2015:

  • at the first meeting, the appellant said that he “wanted to buy a little house” to live in, to which Mr Zourkas responded that “there would not be a problem going bigger and getting something with land”  O which resulted in the appellant finding a five?acre property with two houses on it in Fingal, available for $900,000.
  • at another meeting, Zourkas told the appellant that he could borrow a sum sufficient to pay out the existing mortgages over the Narre Warren properties, purchase the Fingal property, and have approximately $53,000 remaining to go towards the first three months’ interest on the loan [10] .
  •  Zourkas advised the appellant that he could then sell the Narre Warren properties, reducing the loan to approximately $400,000, which the appellant could then refinance with a bank at a lower interest rate [10]

The calculation was that:

  • two Narre Warren properties and the Fingal property would secure the appellant’s obligations as guarantor
  • the existing debt to Commonwealth Bank secured on the Narre Warren properties totalled approximately $240,000.
  • on the basis that the two properties had a market value of $770,000, the appellant’s equity was thus worth about $530,000 [11].

On 30 June 2015, the appellant signed a contract to Read the rest of this entry »

Re Slodyczka & Farren Pty Ltd (Costs) [2022] VSC 102 (4 March 2022): application for costs by the defendant; where presumption of insolvency rebutted, multiple defences relied upon

March 9, 2022

The postscript to Re Slodyczka & Farren Pty Ltd [2022] VSC 102 is a decision by Associate Justice Hetyey regarding costs of the application. 

FACTS

in the substantive judgment  the plaintiff’s application to wind up the defendant in insolvency was dismissed.

The relevant facts for the purpose of considering a costs order were:

  • whilst the matter was commenced by originating process filed on 11 April 2021, there were delays and adjournments [2] resulted in two previous costs orders being made being:
    • on 7 July 2021, consent orders were made which, among other things, required the plaintiff to pay the defendant’s costs thrown away by reason of an adjournment of the hearing originally scheduled that day (‘the first costs order’).
    • at the next hearing date, on 27 July 2021, it was adjourned at the request of the defendant to enable it to put on supplementary material on the question of solvency, including audited accounts for the 2019/2020 and 2020/2021 financial years. The plaintiff’s costs of the hearing be reserved (‘the second costs order’).

The defendant opposed the winding up application on the following alternative bases [4]:

(a) service of the plaintiff’s statutory demand dated 3 February 2021 (‘the statutory demand or the demand’) was defective;

(b) the defendant was solvent and could displace the statutory presumption of insolvency;

(c) the defendant should be given leave pursuant to s 459S of the Corporations Act2001 (Cth) (‘theCorporations Act’) to oppose the winding up application on a ground or grounds it could have relied on for the purpose of an application to set the demand aside. The grounds sought to be raised were: (i) there was a genuine dispute about the amount of the debt claimed in the statutory demand in accordance with s 459H(1)(a); (ii) the defendant had an offsetting claim for the purpose of s 459H(1)(b) of the Corporations Act; and (iii) the demand was defective and a substantial injustice would be caused to the defendant if the demand was not set aside pursuant to s 459J(1)(a) of the Corporations Act; and

(d) pursuant to s 467(1)(a) of the Corporations Act, the Court should dismiss the plaintiff’s application as a matter of discretion.

In the substantive judgment the court held that, [5]:

  • the defendant failed to rebut the presumption of service of the statutory demand under s 29(1) of the Acts Interpretation Act 1901 (Cth).
  • the defendant succeeded in displacing the statutory presumption of insolvency on the basis that it was cash flow positive and balance sheet solvent. The proceeding was dismissed on this basis.
  • the defendant’s application under s 459S of the Corporations Act was not granted because the grounds sought to be raised in respect of the plaintiff’s debt were not material to proving solvency however  had the defendant failed to establish solvency the corut would haveultimately have granted it leave
  • the defendant could not to pursue its argument that the Court should dismiss the plaintiff’s application in accordance with the Court’s discretion under s 467(1)(a) of the Corporations Act because of a lack of proper notice to the plaintiff Read the rest of this entry »

Statutory demands. update Re Amville Constructions Pty Ltd [2022] VSC 65 (17 February 2022), Re Slodyczka & Farren Pty Ltd [2022] VSC 19 (1 February 2022) & Re Wynyard Victoria Pty Ltd [2022] VSC 81 (24 February 2022); insolvency, service, setting aside statutory demands, ss 459A, 459C, 459G, 459H, 459J, 459P, 459S of Corporations Act.

March 6, 2022

Associate Justice Heytey has had a busy start to the year with 2 decisions regarding applications under the Corporations Act 2001; Re Slodyczka & Farren Pty Ltd [2022] VSC 19 and Re Amville Constructions Pty Ltd [2022] VSC 65.  Associate Justice Gardiner considered an application to set aside a statutory demand in Re Wynyard Victoria Pty Ltd [2022] VSC 81.

Re Slodyczka & Farren Pty Ltd [2022] VSC 19

The key issue in this application was whether there was proper service of a statutory demand and whether the presumption of insolvency was rebutted. 

FACTS

Slodyczka & Farren Pty Ltd (‘the defendant’) was first registered on 14 December 2015. In response to the COVID-19 pandemic, it commenced a business in March 2020 for the manufacture and sale of face masks.  Between April 2020 and August 2020, Lion & Horn Pty Ltd (‘the plaintiff’) providing it with marketing services to sell of its masks [1].

In early February 2021, the plaintiff purportedly served the defendant with a statutory demand dated 3 February 2021, which claimed the sum of $36,091.77 in relation to an outstanding invoice dated 28 August 2020 for its marketing services . The defendant did not comply with the demand within the 21-day statutory period.

By originating process filed on 11 April 2021, the plaintiff sought to wind up of the defendant pursuant to ss 459A and 459P of the Corporations Act 2001 (Cth) relying upon the statutory presumption of insolvency contained within s 459C(2)(a) of the Corporations Act.

The Court framed the questions for consideration as being, at [9]:

(a) was service of the statutory demand effective?

(b) is the defendant solvent?

(c) should the Court grant the defendant leave pursuant to s 459S(2) of the Corporations Act to oppose the winding up application on one or more grounds that the defendant could have relied upon in seeking to set aside the demand, but did not so rely? Further, is such a ground material to proving the Company is solvent?; and

(d) should the Court dismiss the plaintiff’s application under s 467(1)(a) of the Corporations Act as a matter of discretion?

DECISION

Service

In reviewing the legislation and legal principles the court Read the rest of this entry »

Australian Competition and Consumer Commission succeeds in alleging Google misled consumers regarding its location history settings. Privacy law enforcement via the Consumer Law

April 16, 2021

In a very significant decision of Australian Competition and Consumer Commission v Google LLC (No 2) [2021] FCA 367 the Federal Court, per Thawley J, has found that Google breached sections 18, 29 and 34 of the Australian Consumer Law (the “ACL”).  At 341 paragraphs it is a significant and detailed judgment.

Privacy policies and settings remain problematical in terms of practical, as opposed to theoretical, compliance with the Privacy Act 1988 and in providing consumers with a clear understanding of what the settings actually mean for them.  It does not help that settings are changed regularly and often without notice, with Facebook being particularly notorious in this regard.

It appears that the ACCC is stepping into the regulatory void that would otherwise be occupied by the Australian Information Commissioner in enforcing privacy protections.  By relying on misleading and deceptive conduct provisions of the ACL the ACCC is following the long established approach taken by the US Federal Trade Commission in bringing proceedings for misleading conduct where companies claim to protect privacy or have proper data security when in fact they do not.  That has led scholars to suggest that the FTC has developed a new common law of privacy. It would be a welcome development if the ACCC used its experience and superior litigation skills to enforce privacy protections in Australia.  The Information Commissioner has thus far had a dismal record in the Federal Court regarding consideration of the Privacy Act 1988.

The proceedings commenced in October 2019. Final orders will not be made for at least 14 days as the parties are to provide orders to reflect the court’s conclusions.  Given the nature of the findings it is reasonable to expect Read the rest of this entry »

Yuanda Vic Pty Ltd v Facade Designs International Pty Ltd [2020] VSCA 269 (16 October 2020): application for stay pending appeal, special or exceptional circumstances

October 20, 2020

In Yuanda Vic Pty Ltd v Facade Designs International Pty Ltd [2020] VSCA 269 the Court of Appeal granted a stay of payment pending hearing of an appeal.  It is an interesting and valuable decision because it is a comprehensive analysis of the principles associated with making a stay application.  It is also notable because the application was successful, a difficult result to achieve normally. 

FACTS

Under a supply and installation agreement dated 13 April 2018 (‘the Contract’), the respondent, (“Facade Designs”) agreed to  instal  façade elements manufactured and supplied by the applicant (“Yuanda”) as part of the construction of commercial and residential towers at 447 Collins Street known as ‘the Arch on Collins’ (‘the Project’) for the price of $14.5 million [5]. Facade Designs provided works from September 2018 until November 2019 when the Contract was terminated [6]

On 30 September 2019, Facade Designs provided a payment claim under s 14 of the Building and Construction Industry Security of Payment Act 2002 (‘the Act’) for $4,584,820.68 (inclusive of GST) (‘the Payment Claim’) [7].  Yuanda paid Facade Designs paid  $1,115,455 (inclusive of GST) on 2 October 2019, reducing the amount claimed to $3,469,365.58 [8].

Yuanda failed to provide a payment schedule to the respondent within 10 business days of receiving the Payment Claim, as contemplated by s 15 of the Act [9]. Pursuant to s 15(4) Yuanda became liable to pay Facade Designs the amount claimed on 30 October 2019  [10].  The applicant failed to pay the amount claimed [11]. Facade Designs conceded some reductions and  sought judgment pursuant to s 16(2)(a) of the Act [12].

The Court rejected Yuanda’s  contention that:

(a) the Payment Claim was invalid because it did not sufficiently identify the construction work or related goods and services to which the progress payments related within the meaning of s 14(2)(c) of the Act and as a consequence it was not liable to pay the amount under s 15(4) of the Act (‘the Adequacy of the Payment Claim’); and

(b) the Payment Claim included excluded amounts within the meaning of s 14(3)(b) and pursuant to s 16(4)(a)(ii) of the Act .

In relation to the excluded amounts issue the court held that, in determining Read the rest of this entry »