Re Coles Supermarkets Australia Pty Ltd [2022] VSC 438 (28 July 2022)

Re Coles Supermarkets Australia Pty Ltd [2022] VSC 438 (28 July 2022)

Intro:

Amber Stacey Ga and Wenico Ga, Jr. (‘Amber’ and ‘Wenico’,[1] respectively, and ‘the defendants’, collectively), who are married and appear today as self-represented litigants, are former employees of Coles Supermarkets Australia Pty Ltd (‘the plaintiff’ or ‘Coles’). Because the defendants declined to be vaccinated in accordance with a COVID-19 vaccination policy for Coles employees, Coles terminated their employment. The court now proceeds to question whether a statutory demand issued by the defendants against Coles on 16 May 2022 for the sum of $6,028,250 (‘the statutory demand’ or ‘the demand’) should be set aside pursuant to ss 459G, 459H and 459J of the Corporations Act 2001 (Cth) (‘the Corporations Act’) on the basis that there is a genuine dispute about the existence of the debt claimed in the demand, because of alleged defects in the demand or, alternatively, for ‘some other reason’.

Facts:

Before the termination of her employment, Amber was employed by Coles as a team member in the bakery department of the Sippy Downs store in the Sunshine Coast region, Queensland. Amber’s employment was terminated with four weeks’ notice on 30 May 2022 which took effect on 27 June 2022. Wenico’s employment with Coles was terminated with five weeks’ notice on 27 May 2022 and took effect on 1 July 2022. Before that time, Wenico was employed as a customer service agent at Coles’ Maroochydore store, also in the Sunshine Coast, where he was involved in the delivery of online grocery orders.

Coles introduced its COVID-19 vaccination policy in November 2021 (‘the Policy’). The Policy required employees in Queensland to be vaccinated against COVID-19 by 25 February 2022, or have an approved exemption, in order to continue to work on site. The defendants did not obtain COVID-19 vaccinations by that time or receive exemptions.

Prior to the implementation of the Policy, on 9 July 2021, Amber and Wenico, the defendants, emailed a letter to their respective Coles store managers, titled ‘Notice of Conditional acceptance to Offer’. In that letter the defendants stated they did not consent to being offered ‘a medical product now or in the future, including but not limited to an alleged COVID‑19 ‘vaccine’, flu vaccine and any or all medical devices including but not limited to a face mask or face covering’. They also sought various information from Coles, including details of the efficacy and safety of COVID‑19 vaccines, COVID‑19 tests, and the use of face masks. The letter also gave notice of various ‘fees’ the defendants would charge upon the occurrence of certain events specified in a ‘fee schedule’, including hourly administration fees, a $2 million fee for ‘compensation for any discrimination event of any kind ... per person, per incident’ and a further $2 million fee for ‘all breaches or restrictions of ... Universal Human Rights’, and a $4 million ‘non-negotiable joinder fee’ for any person seeking to become a party to the contract said to be constituted by the letter.

On 19 July 2021, Amber and Wenico further corresponded with their respective store managers by email in a letter titled ‘Notice of Default’. The letter asserted that because Coles had not provided Amber and Wenico with the requested information, Coles was bound by the terms and conditions set out in the earlier correspondence. The letter included a ‘fee schedule’ in the same or similar terms as the previous ‘fee schedule’. A further letter titled ‘Final Notice of Default’ was emailed by the defendants to the relevant Coles store managers on 27 July 2021. Again, the letter included a ‘fee schedule’ and asserted that Coles had acquiesced to the terms and conditions previously set out.

On 25 February 2022, Wenico, one of the defendants, attended his workplace without a vaccination exemption. Later that day, Ms. Lucy Tehan, an employee relations specialist employed by Coles, sent him an email confirming that his application for a medical exemption was denied and directing him not to attend work until he complied with the Policy. The email also stated that Coles ‘[did] not accept the nature of [Wenico’s] correspondence which purports to impose obligations, including personal and financial liability on Coles and individual Coles’ [sic] personnel’. Correspondence was also sent to Amber on 25 March 2022 confirming she was not permitted to work as she had failed to comply with the Policy.

On 28 February 2022, Wenico sent a document styled ‘Notice to cease and desist’, together with attachments, to Ms. Tehan, Mr. Steven Cain as Coles CEO, the Store Manager of Maroochydore Coles, and others, claiming, amongst other things, that Coles had not ‘demonstrated compliance with employment laws and contract laws’ and had committed actions ‘of a criminal nature’ (‘the 28 February 2022 notice’). The document also referred to prior notices sent to Coles in July and August 2021. Like the earlier documentation, the document included a ‘fee schedule’ in the same or similar terms as the previous ‘fee schedules’ but including a new item for ‘punitive damages for loss of wages’. The ‘fee schedule’ was said to be accepted by Coles in the event Coles terminated Wenico’s employment. The notice also made Coles an offer to ‘buy-out’ Wenico’s employment contract for the amount of $836,000 or to find him alternative work at Coles. In the event Coles opted to terminate Wenico’s employment and not take up any of the alternatives put forward, it was stated that Coles would be taken to have accepted the fee schedule.

On 2 March 2022, Mr. Jason Goyal, Coles’ legal counsel, responded to the 28 February 2022 notice by letter, specifically rejecting any allegations that Coles had contravened its contract of employment with Wenico and maintaining that given Wenico had not complied with the Policy, he had demonstrated that he was not ready, willing and able to perform his work duties. The letter also stated that whilst every assertion made by Wenico was not specifically responded to, any silence by Coles should not be interpreted as acceptance of those assertions.

The notice dated 4 March 2022 attached an invoice in the sum of $8,020,000 addressed to ‘Steven Cain Acting as CEO for Coles Supermarkets Australia Pty Ltd ABN 45 004 189 708’ comprised of a number of the fees set out in the previous ‘fee schedules’ (‘the 4 March 2022 invoice’). The 4 March 2022 invoice was purportedly amended that same day to the lesser sum of $6,022,000, including ‘Compensation per discrimination event (Religious and Disability)’ in the sum of $2 million, ‘Breach of Universal Human Rights’ in the sum of $2 million, together with administration fees and loss of wages.

On 13 March 2022 and 28 March 2022, Wenico issued further invoices to Mr. Cain ‘[a]cting as CEO for Coles Supermarkets’, each titled ‘Invoice Overdue’ and for the sums of $6,024,050 and $6,028,050, respectively. The second of these is for the same sum as the amount claimed in the statutory demand. Additional ‘notice[s] of default for overdue payment’ was then issued by the defendants jointly on 20 April 2022 and 30 April 2022 to Mr. Cain seeking payment of this same amount. Amber and Wenico appear to have then posted the statutory demand and accompanying affidavits to the plaintiff on 17 May 2022. I will return to the characteristics of the demand and the supporting affidavits shortly.

An email was sent by the defendants to Mr. Cain on 9 June 2022 attaching the 4 March 2022 invoice and the invoices of 13 March 2022 and 28 March 2022 which they said needed to be attached to the statutory demand.

Issue:

Whether or not a statutory demand issued by the defendants against Coles on 16 May 2022 for the sum of $6,028,250 should be set aside.

Ruling: Yes.

Whilst the discretion conferred under s 459J(1)(b) of the Corporations Act to set aside a statutory demand for ‘some other reason’ is broad, a judge should not set aside a demand under s 459J(1)(b) simply because she or he subjectively considers it fair to do so. The Court’s power under this sub-section exists to maintain the integrity of the statutory demand procedure in Part 5.4 of the Corporations Act and to counter its subversion.[21] Non-compliance with the requirements of s 459E(3) that the demand be accompanied by an affidavit verifying the debt claimed will justify the setting aside of the demand under s 459J(1)(b) of the Corporations Act.Further, the absence of a specific reference to the nature of the debt in the affidavit in support of a demand may also warrant its setting aside under s 459J(1)(b) of the legislation.

Section 459J of the Corporations Act is in the following terms:

  (1) On an application under section 459G, the Court may by order set aside the demand if it is satisfied that:

      (a) because of a defect in the demand, substantial injustice will be caused unless the demand is set aside; or

      (b) there is some other reason why the demand should be set aside.

  (2) Except as provided in subsection (1), the Court must not set aside a statutory demand merely because of a defect.

Defects in statutory demand

It is submitted that it is not clear on the face of the demand whether the debtor is said to be Coles, another Coles entity, or Mr Cain personally. It is also pointed out that a company search for Coles confirms that its registered office is in fact 800-838 Toorak Road, Hawthorn East VIC 3123. I am not satisfied that either of these apparently minor defects has caused Coles any substantial injustice for the purpose of s 459J(1)(a) of the Corporations Act.

In particular, I accept that the reference to Mr Cain was not intended to refer to him as the debtor. The title to the demand refers to ‘the company’ in parentheses and suggests the demand was always intended to be issued to a corporate debtor. The affidavits in support of the demand also refer to the correct ABN for the plaintiff.

The demand identifies the debt as being ‘made up of the following items’, but only lists a single item being ‘[the 4 March 2022 invoice], issued for’ purported breaches of two contracts in respect of the defendants being stood down without pay ‘as per Fee Schedule

The demand does not attach the invoice dated 4 March 2022 to which it refers, nor does it specify, particularise or attach the contracts said to have been breached.

In any event, Wenico appears to have sent Coles personnel two invoices dated 4 March 2022, both of which are for different sums than the amount claimed in the demand. I note the defendant’s submission that there was only one invoice issued and therefore can only be one payment.

Neither the 4 March 2022 invoice nor the revised invoice sent later that day bears Amber’s name. The invoices were only issued in the name of Wenico. It is therefore unclear on what basis Amber has signed the statutory demand which purportedly relies on the 4 March 2022 invoice and how she claims to be a creditor of Coles

It is unclear whether the defendants are referring in the demand to their employment contracts with Coles or the purported contracts. In my view, the statutory demand is vague and ambiguous because it fails to explain to a reasonable person in the position of the director of the plaintiff the general nature of the alleged debt in order for that person to ascertain whether there is a genuine dispute about the debt. The legal basis of the debt claimed is simply unclear. The plaintiff should not be expected to guess what the demand relates to or the source of the obligation to make payment. Without knowing these things, the plaintiff has been put in the unsatisfactory situation of having to determine whether there is a genuine dispute about the existence or amount of the debt and whether to make an application to set the demand aside. A substantial injustice has therefore occurred.

Problems with affidavits in support of demand

First, neither of Amber or Wenico’s affidavits exhibit any of the notices, correspondence and invoices (including the 4 March 2022 invoice) to which they refer. The affidavits do not provide verification of the debt claimed in the statutory demand as required by s 459E(3) of the Corporations Act. The affidavits do not clearly state the nature of the debt or refer to the source of the obligation on the plaintiff to make payment. In addition, they do not make clear how the debt set out in the demand is calculated.Although Amber and Wenico say they were not aware of the specific requirements for affidavits in support of statutory demands, this does not address the deficiencies of their affidavits.

Secondly, it is also unclear whether the affidavits in support of the demand have been witnessed by a person authorised to take affidavits in Queensland (where they appear to have been signed), or at all. Both affidavits are missing a conventional jurat clause (including details of where, before whom and by whom it was sworn). Both affidavits identify two witnesses: Judith Groves and Shaun Groves (who are the same people who witnessed the purported contracts), but there is no indication that those people are authorised affidavit takers or special witnesses under the Oaths Act 1867 (Qld).The reference in the affidavits to them being signed in the presence of two witnesses in accordance with certain biblical scripture does not suffice.

Accordingly, the debt claimed in the demand is not properly verified by affidavit for the purpose of s 459E(3) of the Corporations Act. I am satisfied that these deficiencies in the affidavits in support of the demand and the non-compliance with s 459E(3) constitute ‘some other reason’ to set the demand aside under s 459J(1)(b).

No debt due and payable

There is also a further basis to set aside the demand for ‘some other reason’ which is critical in this case.

For the purpose of s 459E(1) of the Corporations Act, a debt is due and payable when it is ascertainable, immediately payable and presently recoverable or enforceable by action.

In Re Simmoll Pty Ltd I made the following comments in relation to the concept of debt for the purposes of the Corporations Act:

Although the term ‘debt’ is not defined in the Corporations Act, it should be construed in a practical and common sense manner, consistent with its context and the underlying statutory purpose. In Rothwells Ltd v Nommack (No 100) Pty Ltd,[37] a case which involved an application to restrain a winding up proceeding, McPherson J succinctly described a debt as a liquidated sum in money presently due, owing and payable by a debtor to a creditor. A debt can therefore be distinguished from a claim of damages for breach of contract or any other unliquidated claim. ... Similarly, there is abundant authority for the proposition that an obligation to pay unliquidated damages is not a debt capable of supporting a statutory demand.[40] This is consistent with the legislative policy underpinning Part 5.4 of the Corporations Act that the statutory presumption of insolvency in s 459C(2)(a) should be available only in clear cases of indebtedness where the reason for non-compliance with a statutory demand is an inability of the debtor company to pay and where no other inference for non-payment can be drawn, such as the debt being presently unrecoverable or unenforceable.

I am not satisfied that the sum claimed in the statutory demand is due and payable for the purpose of s 459E(1) of the Corporations Act. It is not ascertainable, immediately payable, and presently recoverable or enforceable. Amber and Wenico have not obtained any judgment of a court or tribunal in relation to any claim for breach of contract or discrimination, or the infringement of their workplace rights, upon which they can base the demand. Although they submit that the debt arises because of the operation of the various notices, fee schedules, and purported contracts sent to Coles and its employees, presumably as a liquidated sum, there is no record of any acceptance by the named recipients, counterparties, or Coles itself, to the terms of those documents. In particular, none of the purported contracts are executed by any party other than the defendants.

Further, any silence on the part of Coles or the named recipients of, or counterparties to, the purported contracts, invoices, other notices, and fee schedules sent by the defendants does not automatically constitute their acceptance or acquiescence. It is a fundamental principle of contract law that an offeree’s intention to accept an offer must be clear and unequivocal. However, because silence is almost always equivocal, it will rarely be regarded as acceptance. As the Court of Appeal further explained in Danbol Pty Ltd v Swiss Re International SE:

The requirement for acceptance, which must be communicated by the offeree to the offeror, is subject to a number of principles. First, as a general rule, silence cannot constitute acceptance. The rule is primarily designed to protect the offeree from having a contract foisted upon it by preventing the offeror from stipulating that a contract will be created by silence on the part of the offeree. It is a reflection of the requirement for mutual assent.

The Court of Appeal further observed that in the absence of a clearly identified offer and acceptance, it will be difficult for a party to identify mutual assent to a binding legal relationship and its terms.

Because there is no debt that is due and payable, the demand must also be set aside under s 459J(1)(b) of the Corporations Act for ‘some other reason’.

Conclusion and costs

It is clear that Amber and Wenico have objected to the imposition of the Policy by Coles in the strongest possible terms. It is also clear that they feel particularly aggrieved by the termination of their employment by Coles. However, the statutory demand procedure is not the appropriate vehicle to ventilate those matters.

In light of the reasons I have set out, the statutory demand must be set aside under s 459J(1)(a) for numerous defects which result in substantial injustice and/or under s 459J(1)(b) for ‘some other reason. Further, and to the extent necessary, the demand must also be set aside under ss 459G and 459H because there is a genuine dispute about the existence of the debt claimed in it.

Following the delivery of these ex tempore reasons, I heard the parties on the question of costs and made a ruling to the following effect.

Coles sought an order that Amber and Wenico pay its costs on a standard basis, whereas Amber and Wenico resisted that order.

Section 459N of the Corporations Act states that where on an application under s 459G, the Court set aside a demand, it may order the person who served the demand to pay the Coles' costs in relation to the application. Section 24 of the Supreme Court Act 1986 (Vic) also relevantly provides that ‘the costs of and incidental to all matters in the Court ... is in the discretion of the Court and the Court has full power to determine by whom and to what extent the costs are to be paid. The fact that Amber and Wenico say they do not consent to a costs order by the Court is irrelevant. The Court retains jurisdiction to make an order for costs.

The Court also has wide discretion in relation to costs. However, there is a general rule that, in the absence of good reason to the contrary, a successful litigant should recover their costs. Where a company succeeds in setting aside a statutory demand, the Court will usually order that the company be awarded costs pursuant to the general principle that costs should follow the event, however, each case will turn upon its own facts.