IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VG 3119 of 1998 BETWEEN: KIDS AT SEA PROGRAMME AUSTRALIA LTD (ACN 068 795 139) Applicant AND: PACIFIC NEW MEDIA PTY LTD (ACN 053 912 502) Respondent JUDICIAL REGISTRAR: MURPHY DATE OF ORDER: 4 MAY 1998 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The statutory demand is set aside; 2. The respondent pay the applicant's cost of the proceeding. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VG 3119 of 1998 BETWEEN: KIDS AT SEA PROGRAMME AUSTRALIA LTD (ACN 068 795 139) Applicant AND: PACIFIC NEW MEDIA PTY LTD (ACN 053 912 502) Respondent JUDGE(S): MURPHY JR DATE: 4 MAY 1998 PLACE: MELBOURNE REASONS FOR JUDGMENT Under s 459G of the Corporations Law the applicant seeks to set aside the respondent's statutory demand for payment of a debt. The demand was made on 20 March 1998 and alleges that the applicant is indebted to the respondent in the amount of $18,500, being the total of two invoices for $3,500 and $15,000 set out in the schedule. THE ISSUE The applicant has the burden of establishing that there was a genuine dispute between it and the respondent about the existence of the debt or the amount of a debt to which the demand relates. The leading recent authority on the meaning of the expression "genuine dispute" is Spencer Constructions Pty Ltd v G. & M. Aldridge Pty Ltd, (1997) 15 ACLC 1,001. In that case, at 1,011 the Full Court, after considering a number of decisions, said: "In our view a 'genuine dispute' requires that: · the dispute be bona fide and truly exist in fact; · the grounds for alleging the existence of a dispute are real and not spurious, hypothetical, illusory or misconceived." Earlier, the Court noted various comments about the role that it plays in these applications. At 1,009 the Court said: "What is clear is that in considering applications to set aside a statutory demand, a court will not determine contested issues of fact or law which have a significant or substantial basis." At 1,010 it referred to another formulation: "It is clear that what is required in all cases is something between mere assertion and the proof that would be necessary in a court of law. Something more than mere assertion is required because if that were not so then anyone could merely say that it did not owe a debt: John Holland Construction and Engineering Pty Ltd v Kilpatrick Green Pty Ltd (1994) 12 ACLC 716 at 718...." The Court also referred to Re Morris Catering (Australia) Pty Ltd (1993) 11 ACSR 601 at 605where Thomas J said: "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 MATERIAL BEFORE THE COURT. The applicant relied on affidavits of Helen Shannon sworn 8 April 1998, Lawrence Shannon sworn 27 April 1998, and Aldo De Luca sworn 27 April 1998. The affidavit of Helen Shannon is on its face defective in that she deposes to conversations that she was not present at. Her affidavit is, however, confirmed by Lawrence Shannon and the two must be read together. The applicant alleges that it has a genuine dispute with the respondent as to the amount and existence of the debts relied upon. It relies on alleged representations that were made at a meeting that occurred on 18 April 1997. The applicant is a charity. One of its fundraising activities is the selling of lottery tickets. The representations are said to arise in the course of conversations wherein the respondent offered its services to the applicant to assist it to target potential purchasers of lottery tickets. This would involve an analysis of the applicant's database to identify the location, socio-economic group, and occupations of past purchasers of tickets. After this analysis, the respondent would be able to market the lottery by targeting individuals in more affluent areas. The representations on which counsel for the applicant relied to establish the basis of a genuine dispute were set out in paragraphs 6, 8 and 10 of Helen Shannon's affidavit. Mr Lawrence Shannon confirms in paragraphs 4 and 6 of his affidavit that the representations were made. In its response, the respondent relies on the affidavit of Monica Mary Ferrie sworn 21 April 1998 wherein she denies that the representations were made. She annexes a credit application, exhibit MMF3, which contains an acknowledgment in paragraph 6: "Pinpoint work completed does not in itself constitute a guarantee of a successful response from whom it is directed." Counsel for the respondent submitted that the material provided by the applicant did not provide a basis to find a genuine dispute as to the existence of either of the debts. He referred to the fact that two debts were involved: the first, for $3,500, was for the initial analysis of the applicant's database. He submitted that the applicant's material did not dispute the $3,500 agreed sum for this work. At their highest, the alleged representations went to the second debt which was for a mail-out to the addresses pinpointed by the earlier profile. He pointed to the exhibits which supported the proposition that indeed this work had been done by the respondent and it had incurred disbursements of $4,075 to purchase a list of names and addresses, and $9,075 for the distribution of brochures on behalf of the applicant. Counsel maintained that the representations alleged by the applicant go not to the profile undertaken for the invoiced amount of $3,500, but to the second invoice which was the mail-out contract. He further submitted that the representations were contradicted or not supported by contemporaneous documents. Counsel for the applicant asserted that the representations go to the whole contractual arrangements between the parties and raise a genuine dispute as that term has been construed. At this stage it is appropriate to return to the representations that were alleged to have been made and to consider whether they can be said to lack any genuine basis or not provide a basis upon which either or both the debts can be disputed. In Helen Shannon's affidavit she refers to a two-stage process that the respondent was to engage in. In paragraph 6, she deposes that the respondent, after analysis of the database: "would then be able to market our lotteries directly to target individuals in more affluent areas of the community, instead of our existing scattergun sales across all boundaries. The end result of this would be, they represented, to "reduce wastage" and to "multiply our marketing success many times over". In paragraph 10 she deposed: "On the basis of the information in the report, [the respondent] recommended using an organisation called 'Streetfile' to distribute Kids At Sea brochures in suburbs which, [the respondent] had identified as showing where these target individuals lived. The plan was to address these individuals personally, and to approach them by letter-box drops. The aim was to achieve a proportionately much greater number of ticket sales to our most statistically significant buyers by this method. Our existing response rate by conventional marketing methods was about 4%. [The respondent] represented to us that their more advanced method, and their scientific approach, would produce results "many times better" than we had achieved." In paragraph 13 she deposed: "....it is clear that whatever action was taken by [the respondent] and its employees, it totally failed to deliver the results promised at the start, at every level. In paragraph 4 of his affidavit, Lawrence Shannon deposed that the representations made "were fundamental to our decision to engage the respondent". In considering whether, in relation to both the $3,500 debt and the $15,000 debt, the representations can be said to provide a defence to the debt on the basis, as submitted by counsel for the applicant, of a breach of s 52 of the Trade Practices Act 1974 (Cth), promissory estoppel, or a breach of a collateral warranty, it is of interest to note exhibit MMF1 to Ms Ferrie's affidavit. This is a letter written to Mr Cherrie on the same day as the alleged conversation. The letter says, in part: "I have concentrated below on the single task at hand i.e. profiling the database and a direct mail campaign for ticket sales. I have also included at the end of this section some other ideas regarding ways in which PINPOINT can help you to achieve the objectives of Kids At Sea." This comment provides a basis for the submission of counsel for the applicant that the alleged representations constitute the raising of material that shows a genuine dispute as to both invoices. As indicated in the authorities referred to in Spencer, in these proceedings it is not for the Court to opine as to whether the applicant will ultimately be successful in resisting the respondent's claim. The issue is whether there are real grounds for alleging the existence of a genuine dispute. The alleged representations are of a nature that they provide a basis of a real dispute. They provide that basis for both the invoices because the material before me shows that the parties were discussing a single task when they were allegedly made, even though there were two steps to that task. On the material before me I am unable to accept the submission of the respondent that the two invoices stand alone. I am satisfied that the applicant has discharged its burden and that the whole of the statutory demand must be set aside. ORDERS (1) The Statutory Demand is set aside; (2) The respondent pay the applicant's cost of the proceeding. I certify that this and the preceding four (4) pages are a true copy of the Reasons for Judgment herein of Judicial Registrar Murphy Associate: Dated: 4 May 1998 Counsel for the Applicant: MR D HYDE Solicitor for the Applicant: PHILLIP HAMILTON Counsel for the Respondent: MR E WOODWARD Solicitor for the Respondent: MINTER ELLISON Date of Hearing: 4 MAY 1998 Date of Judgment: 4 MAY 1998