Wine Marketers Pty Ltd v Metro Wine Bottle Recyclers Pty Ltd (t/as Colonial Vinegar Co) [1996] FCA 730

IN THE FEDERAL COURT OF AUSTRALIA) ) VICTORIA DISTRICT REGISTRY ) No. VG 3125 of 1996 ) GENERAL DIVISION ) BETWEEN: WINE MARKETERS PTY LTD (ACN 006 333 946) (Applicant) AND: METRO WINE BOTTLE RECYCLERS PTY LTD (ACN 058 200 927) trading as THE COLONIAL VINEGAR COMPANY (Respondent) CORAM: Ryan J DATE: 2 August 1996 PLACE: Melbourne REASONS FOR JUDGMENT RYAN J: This is an application to set aside a statutory demand dated 22 February 1996. The description and the amount of the debt as set forth in the schedule to the statutory demand is as follows: Description of the Debt Amount of the debt Amount due and owing to the Creditor for goods sold or delivered which debt is verified in the attached Affidavit sworn by Geoffrey Robert Parkes on 22/2/96 $29,317.75 There is no dispute that the amount claimed is due from the company to the respondent. However, the company asserts that it has an offsetting claim arising from the premature termination without proper notice of a distributorship agreement said to have subsisted between the company as distributor and the respondent as supplier. The applicant has, since the service of the statutory demand, commenced proceedings in the County Court of Victoria to prosecute that offsetting claim. The statement of claim in those proceedings reveals that it embodies claims for damages for the termination without reasonable notice of the distributorship agreement, a claim for what is said to be agreed compensation to the company for the respondent having itself commenced to distribute its products in Tasmania where the company is alleged to have spent time and money in building up a market. I should interpolate that the amount of that agreed compensation is alleged to have been $11,972.24. There is a dispute on the evidence as to whether the company had any identifiable exclusive rights under whatever distributorship agreement existed between the applicant company and the respondent. A particular difficulty appears to have arisen from the supply by the company of the respondent's goods to the "House" chain of retail stores which apparently trades in various metropolitan areas. Joined in the County Court proceedings is Parkes, a former employee or agent of the company who is now employed by the respondent. Damages are claimed from him for breach of contract and breach of confidence. On the present state of the evidence, the company's prospects of successfully implicating the respondent in a breach of confidence by Parkes are not strong. There is no allegation in the County Court proceedings to support a cause of action against the respondent for inducing a breach of contract by Parkes. The company also confronts very great difficulties in establishing its cause of action for breach of contract against the respondent. Some of those difficulties arising out of terms of trade formalised in December 1995 I have indicated in the course of discussion with counsel. I am not unmindful of the need for care in the examination of the alleged existence of a genuine dispute in cases of this kind which was indicated by Lockhart J in Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd 1994 13 ACSR 37 where his Honour said at p. 39: Certainly the court will not examine the merits of the dispute other than to see if there is in fact a genuine dispute. A notion of a "genuine dispute" in this context suggests to me that the court must be satisfied that there is a dispute that is not plainly vexatious or frivolous. It must be satisfied that there is a claim that may have some substance. On the other hand, the court must be careful, because if all an applicant has to do is assert both a claim and some basis for it, without more, it would mean in almost every case that the court would set aside statutory demands where application is made to that effect. Plainly that is not what the legislature intended by introducing this new regime. However, despite the giving effect to that caution, I am led to conclude in the circumstances of the present case that the claim which the company seeks to advance is not plainly vexatious or frivolous and that it has some prospects, notwithstanding the difficulties, to which I have adverted, of establishing an offsetting claim which may overtop the admitted debt due by the company or reduce it to an amount below the statutory minimum. I am not unmindful in coming to the conclusion which I have that there are mechanisms available in the County Court to the respondent as defendant in that action, including an order for security for costs or summary judgment on a counter-claim which may result in the undisputed amount of the debt due to the respondent being paid into Court. If it were necessary, those considerations would weigh with me in exercising the discretion which the Court has under s. 459(j) of the Corporations Law. Accordingly, I shall order that the statutory demand dated 22 February 1996 be set aside. In the circumstances, I shall further order that the cost of both parties of the application to this Court be costs in the cause in proceedings numbered 9603442 of 1996 in the County Court of Victoria.