Torvill Pty Ltd v Club Decor Pty Ltd Torvill Pty Ltd v Club Refurbishments Pty Ltd [1997] FCA 876

FEDERAL COURT OF AUSTRALIA CORPORATION - Statutory Demand - Defect in Notice of Statutory Demand - dispute as to indebtness - Offsetting claim Corporations Law - s459G, s459H, s459J CASES:

Re Ad-A-Cab Holdings Pty Ltd (1996) 14 ACLC 1763

Re Morris Catering (Australia) Pty Ltd (1993) 11 ACLC 919

Scanhill Pty Ltd v Century 21 Australasia Pty Ltd (1993) 12 ACSR 341

Kalamunda Meat Wholesalers Pty Ltd v Reg Russell & Sons Pty Ltd (1994) 51 FCR 446

TORILL PTY LTD -v- CLUB DECOR PTY LTD No. VG-3139 of 1997 TORILL PTY LTD -v- CLUB REFURBISHMENTS PTY LTD No. VG-3141 of 1997 Ryan JR Melbourne 15 August 1997

FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VG-3139 of 1997 B E T W E E N : TORILL PTY LTD Applicant AND CLUB DECOR PTY LTD Respondent VG-3141 of 1997 B E T W E E N : TORILL PTY LTD Applicant AND CLUB REFURBISHMENTS PTY LTD Respondent MINUTES OF ORDERS Judicial Registrar Ryan 15 August 1997 THE COURT ORDERS: 1. The statutory demands of Club Decor Pty Ltd and Club Refurbishments Pty Ltd dated 30 April 1997 are set aside. 2. The Respondent in each case is to pay the costs of the Applicant.

FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VG-3139 of 1997 B E T W E E N : TORILL PTY LTD Applicant AND CLUB DECOR PTY LTD Respondent VG-3141 of 1997 B E T W E E N : TORILL PTY LTD Applicant AND CLUB REFURBISHMENTS PTY LTD Respondent Ryan JR Melbourne 15 August 1997 REASONS FOR JUDGMENT These are both matters in which the Applicant requests the Court to set aside statutory demands. The Applicant in both cases operates licensed premises under a General Licence Class 1. The premises operated for many years as the Kilkenny Inn Hotel, a city hotel providing liquor, meals and some entertainment. The Applicant has changed the nature of the business in that it now operates as what has been described as "a gentlemens club". The operation may perhaps be loosely so described but, if that be correct, it does not operate in the older, conventional sense of a licensed club with a Club liquor licence but rather as licensed premises under a General licence providing services and entertainment including table top dancing. The premises now rejoice in the title of Goldfingers Mens Club Hotel. The Applicant engaged the two Respondent companies, Club Decor Pty Ltd (Decor) and Club Refurbishments Pty Ltd (Refurbishments). Decor supplied furniture and fittings to allow the old Kilkenny Inn to operate in the new role of Goldfingers Mens Club. Refurbishments agreed to fit out the premises in the new mode. The Applicant attacks both statutory demands on the grounds that the ACN numbers therein are incorrect and are demands for companies which do not exist. The Applicants asserts these defects and some miscalculations in the amount of the debt claimed by Decor are substantial defects in that substantial injustice will be caused unless the demands are set aside. I confirm the preliminary view expressed to Counsel at the hearing of the applications. The Applicant brought both applications within the time prescribed under section 459G of the Corporations Law. There is no doubt that the statutory demands identified Decor and Refurbishments by their true company names albeit with incorrect ACN numbers. The recent trend of authority as outlined in Re Ad-A-Cab Holdings Pty Ltd (1996) 14 ACLC 1763 shows that where what was relied on was a "defect", relief could only be granted if "substantial injustice" would be caused unless the demand was set aside. I do not consider that the incorrect ACN numbers or the miscalculation in the statutory demand by Decor are defects which would cause substantial injustice if the demands are not set aside on that account. However, the Applicant has also asserted that there are genuine disputes between the company and both Respondents about the existence and amount of the debts to which the demands relate. A close examination of the affidavit material has convinced me that this is so. Counsel for the Respondents argues that the matters outlined in the Applicant's principal affidavit, the affidavit of Raymond Bertram Bartlett sworn 20 May 1997, do not establish genuine disputes about either debt. I have concluded that the material in that affidavit and in the Respondents two major affidavits, the affidavits of Mark Owen Lafferty and Joseph Owen Lafferty sworn 16 July 1997, provide ample evidence of genuine disputes between the Applicant and the Respondents about the existence and amounts of the debts to which the demands relate. On those grounds I must set aside both demands pursuant to section 459H(3). It is not necessary to go into detail in respect of the elements of what I find to be genuine disputes in respect of both debts. It is common ground that the Applicant paid 50% of each account for furniture (Decor - Exhibit H) and fittings (Refurbishments - Exhibit I) on about 30 January 1997 and an additional advance payment of $25,000 on each account, a total advance of $50,000, on or about 17 February 1997. In the affidavit material, neither Respondent comments on, or in any way addresses, the Applicant's assertion that both contracts were orally varied on about 17 February to provide that the balance owing on both accounts would not become payable until such time as all of the refurbishment and refurnishing works had been completed by the Respondents to the satisfaction of the Applicant. There is ample evidence that the Applicant is not satisfied with the refurbishment and refitting works and that the Applicant and Respondents do not agree on variations allegedly made to both contracts. In Re Morris Catering (Australia) Pty Ltd (1993) 11 ACLC 919, Thomas J stated (at 922), in a passage quoted with approval by Beazley J in Scanhill Pty Ltd v Century 21 Australasia Pty Ltd (1993) 12 ACSR 341 at 356: "There is little doubt that Div 3 is intended to be a complete code which prescribes a formula that requires the court to assess the position between the parties, and preserve demands where it can be seen that there is no genuine dispute and no sufficient genuine offsetting claim. That is not to say that the court will examine the merits or settle the dispute. The specified limits of the court's examination are the ascertainment of whether there is a 'genuine dispute' and whether there is a 'genuine claim'." In Kalamunda Meat Wholesalers Pty Ltd v Reg Russell & Sons Pty Ltd (1994) 51 FCR 446 at 448 Hill J stated: "It is often possible to discern the spurious, and to identify mere bluster or assertion. But beyond a perception of genuineness (or the lack of it) the court has no function. It is not helpful to perceive that one party is more likely than the other to succeed, or that the eventual state of the account between the parties is more likely to be one result than another. The essential task is relatively simple - to identify the genuine level of a claim (not the likely result of it) and to identify the genuine level of an offsetting claim (not the likely result of it)." Given the conclusion I have reached it is not necessary to consider the assertions of both Respondents that the Applicant does not have offsetting claims which would reduce the substantiated amount of the debts allegedly owed below the statutory minimum. I will simply note that if offsets were allowed at amounts at which they could arguably be made the substantiated amounts might well fall below the statutory minimum. MINUTES OF ORDERS THE COURT ORDERS: 1. The statutory demands of Club Decor Pty Ltd and Club Refurbishments Pty Ltd dated 30 April 1997 are set aside. 2. The Respondent in each case is to pay the costs of the Applicant. I certify that this and the preceding 3 pages are a true copy of the reasons for judgment of Judicial Registrar Ryan. Associate: Dated: 15 August 1997 Counsel for the Applicant: Mr S Marantelli Solicitors for the Applicant: Nanscawen Grant Counsel for the Respondent: Mr M McNamara Solicitors for the Respondent: T J Mulvany & Co Date of hearing: 11 August 1997 Date of judgment: 15 August 1997