JUDGMENT No. CO! 2% enegecenses® IN THE FEDERAL COURT OF AUSTRALIA ) ) VICTORIA DISTRICT REGISTRY ) No. VG 3437 of 1994 ) ) GENERAL DIVISION BETWEE N: GREAT RED LETTUCE COMPANY PTY LIMITED Applicant - and - COMMONWEALTH BANK OF AUSTRALIA ACN 123 123 124 Respondent JUDGE : Heerey J DATE: 7 December 1994 PLACE: Melbourne EX TEMPORE REASONS FOR JUDGMENT This is an application to set aside a statutory demand under nh s 459G of the Corporations Law. The statutory demand by the respondent the Commonwealth Bank of Australia (the bank) was for $909,701.52. It arose out of a guarantee of accounts at the bank. The applicant company was one of a group of companies, the others being GRCL Industries Pty Limited (GRCL) and Superior Fruit and Vegetables Pty Limited (SFV), which were concerned with the production of hydroponic vegetables and also the business of selling "Everfresh" bags, these being bags used to store fresh produce. GRCL was deregistered on 19 April 1993 for failure to lodge accounts. The applicant's case principally is that it has an offsetting claim within the meaning of s 459H(1)(b) of the Corporations Law. That offsetting claim is said to arise from the following circumstances. On 25 March 1991 the bank 2. dishonoured a cheque for $420 payable to H.R. Marketing Pty Limited (HRM). That dishonour is said to have been wrongful. As a result of that dishonour, HRM terminated a contract to supply Everfresh bags to the applicant. In turn the applicant was unable to supply Everfresh bags to Safeway, and as a consequence it lost profits at the rate of $35,000 per month which it might have earned over a period of four years. Thus the applicant is said to have an offsetting claim of $1.68 million. In determining whether the applicant has satisfied the requirements of s 459H(1)(b), the question is whether it has been shown there is a serious question to be tried: Scanhill Pty Ltd v Century 21 Australasia Pty Limited (1994) 12 ACLC 111. In my opinion the applicant has failed to satisfy this requirement for a number of reasons. First, it seems that the applicant was never the customer of the bank. At all material times the customer of the bank was GRCL. The applicant never had an account with the bank. It is true that cheques payable to the applicant were paid into this account, and that cheques were drawn on the account to pay debts owing by the applicant, but that in itself is not enough to establish the contractual relationship of banker and customer as between the applicant and the bank. Secondly, the evidence, and in particular the affidavit of 3. Mr William Soper, the company secretary of HRM, establishes that the dishonour of the cheque was not causally related to the termination of any contract by HRM. Indeed, the contract that HRM had was one with GRCL and not with the applicant, but in any case it is clear that that contract was terminated, as appears from HRM's letter of 16 April 1991 (which incidentally was after the cheque for $420 was finally honoured on re- presentment) on other grounds and in particular the failure of GRCL to provide security as promised, its failure to pay "many invoices within 30 days", its failure to "carry out a vigorous marketing effort to maximise sales", and its failure to make any significant sales. In summary it seems that HRM's complaint was that GRCL did not perform adequately as distributor and was not providing security for large orders. Thirdly, in any case there are no details provided of the contract alleged to have existed between the applicant and Safeway. Fourthly, there is nothing to show that, even assuming there was a relationship of banker and customer between the applicant and the bank, and a contract between the applicant and HRM, and that the dishonour of the cheque for $420 was a cause of the termination of the latter contract, the damages from such a breach of the contract between the applicant and the bank would include loss of profits on any contract between the applicant and Safeway. It does not seem to me that for the purposes of the first limb of the rule in Hadley v 4, Baxendale (1854) 9 Exch 34 the dishonour of a cheque payable to A will result "according to the usual course of things" in the customer suffering loss of profits from a contract with B which the customer is unable to perform because A has terminated its contract with the customer as a result of the dishonour. Nor does the evidence disclose knowledge by the bank of any special circumstances known to the bank as might bring the second limb of the rule into play. In any case I am far from satisfied that there is a triable issue that the dishonour was wrongful. In addition to the case of offsetting claim, the applicant claimed to have a defence in relation to the alleged dishonouring of cheques on the account of SFV. No details were provided as to the amounts or any other detail as to this. It was said that it was "only a potential ability to challenge the enforceability of the guarantee per se". I do not think any claim sufficient to set aside the demand is made on that basis. Finally, it was said that the demand should be set aside under s 4593(1}(d) on the ground that the applicant had not had access to its books of account following on the appointment of receivers, and in particular that the receivers had lost the books of account. As a matter of evidence, that claim seems to be refuted by the affidavit of Mr Kenneth Russell, a retired partner of Coopers and Lybrand. He deposes that the books and records of GRCL were kept by the firm, with the exception of some lease and hire purchase agreements which were mislaid for about one month in the course of a relocation of office space in 1992, but were later recovered. For those reasons the application is dismissed. I order the applicant pay the respondent's costs. Appearances Counsel for the applicant: Solicitor for the applicant: Counsel for the respondent: Solicitor for the respondent: Date of hearing: I certify that this and the preceding four (4) pages are a true copy of the reasons for judgment of his Honour Mr Justice Heerey. 7 Sh... Associate Date R Saunders Wilmoth Field & Warne R Greenberger Ian F Purbrick 7 December 1994