A PAK Plastics Pty Ltd v Merhone Pty Ltd SUPREME COURT OF NEW SOUTH WALES — COURT OF APPEAL COLE JA, GILES AJA and Simos AJA 17 September 1996 [1996] NSWCA 2 Corporations Law — statutory demand — setting aside — whether genuine dispute about existence or amount of debt — on facts, there was — demand rightly set aside. Corporations Law s 459H Giles AJA. The appellant served a statutory demand on the respondent dated 10 December 1994 claiming $16,552.97. The respondent brought proceedings in the Equity Division claiming an order that the statutory demand be set aside. The summons was filed on 23 December 1994. The hearing took place late in March 1995, and on 4 April 1995 Santow J published reasons the effect of which was that the statutory demand should be set aside and the respondent should have its costs. An appeal was brought from that decision, and this is the hearing of the appeal. The issue in the Equity Division was whether or not, within the words of s 459H of the Corporations Law, there was a genuine dispute between the parties about the existence or amount of the debt claimed in the statutory demand. The debt claimed was said to be money recoverable on total failure of consideration, being the agreed purchase price for a PLC unit under a contract which had been repudiated by the respondent's failure to deliver the PLC unit and thereupon terminated by the appellant. It was plain from the voluminous correspondence between the solicitors for theparties prior to 10 December 1994 that whether or not the contract had been repudiated turned on whether there was an obligation then and there to deliver the PLC unit, which itself turned on the relationship between the purchase of the PLC unit and the purchase of some ducting, arguably part of the same blow-moulding unit which the PLC unit was to control. If, as the respondent maintained, it was not obliged to deliver the PLC unit until it had been paid for the ducting as well as for the PLC unit, there can have been no repudiation. Before his Honour it was acknowledged that there was a genuine dispute in relation to the ducting and money payable for the ducting, although that was sought to be put aside on this appeal. His Honour received quite a deal of evidence. He also received an outline of submissions from the appellant which ran to sixteen pages. That does not of itself mean that the issues exposed before his Honour revealed a genuine dispute, but when one looks at the evidence and the issues to which they gave rise it can be seen that the sixteen pages of the outline of submissions reflected that there was a genuine dispute. I would ordinarily be content to say that Santow J, having dealt carefully with what was before him, came to the right result for the right reasons. It is, however, appropriate to add this. On the appeal it was submitted that when determining whether there was a genuine dispute it was necessary to pay regard to the requirement that the Court be 'satisfied' as to the existence of the genuine dispute, and that the Court could not be satisfied unless there had been at least a limited assessment of the merits 2 UNREPORTED JUDGMENTS of the dispute and evidence of a standard sufficient forsatisfaction. At least the latter may be accepted as a tautology, so the submission went on that Santow J did not have evidence of a standard sufficient for satisfaction. Whether there is a genuine dispute is ultimately a question of fact. There was ample evidence before his Honour of the existence of a dispute and of the genuineness of the dispute, and, contrary to the submission of the appellant on appeal, it went beyond mere assertion or mere expression of belief. Reference was made in the course of the hearing of the appeal to evidence on oath from Mr Rhone of facts demonstrating, if accepted, a connection between the PLC unit and the ducting, and of a conversation with Mr Beale of the appellant capable of supporting, if accepted, that the dealings between the parties were at all times on the basis that the PLC unit would not be delivered until all money (that is, including the payment for the ducting) had been paid to the respondent. It is not necessary to go further. There was dispute over those matters, but the dispute was not to be resolved on the summons in the Equity Division. There were other matters which add to the existence of a genuine dispute, but they need not be mentioned. A subsidiary aspect of the appeal was the appellant's submission that the order for costs made by his Honour was inappropriate, and not only inappropriate but one which had been made without the opportunity to be heard. On the evidence of Mr Howell, when orally going through the outline of submissions he drew his Honour's attention to the fact that the basis on which the respondent claimed a lien, that being one of the issues debated, had changed since the proceedings had commenced, andmade a comment to the effect that, 'If your Honour was to find against the defendant, then that is a matter on which I would seek to address your Honour in relation to costs.' In fact when Santow J published his reasons, no application was made to address on the question of costs. It would have been entirely appropriate for Mr Howell, notwithstanding that his Honour in pronouncing reasons had included an award of costs against the appellant, to have asked to be heard. It is not uncommon for a judge, where the outcome on costs appears plain, to include an order for costs when pronouncing judgment, and if a party feels disadvantaged because deprived of an opportunity to address on the question of costs that party can and should then ask the judge to be heard and if necessary to revise the order. However, I do not think that this aspect of the appeal turns on whether or not the appellant failed to make a timely application. The essence of the submission was that while the correspondence prior to 10 December 1994 had demonstrated that the respondent claimed a lien and hence said that it was not obliged to deliver the PLC unit, no facts were put forward in the correspondence to support the existence of the lien. It was not until affidavits were filed in early March that the facts were exposed. Hence it was said that the proper order was that the respondent pay the costs until the filing of the affidavits. I am unable to agree. In my view it was as plain as a pikestaff that there was a dispute, and while it may have been open to the appellant to chance its arm by serving the statutory demand, if on the exploration of the dispute which that provoked therespondent was successful the chancing of the arm would bring costs against the appellant. I do not think that there was any other order which his Honour could have made even if there had been put to him what has been put to us on the question of costs. In my view, therefore, the appeal should be dismissed with costs, but I cannot part with it without adding this. The amount at stake was under $17,000, with an associated dispute dealing with a few thousand dollars more. The relationship URJ A PAK Plastics Pty Ltd v Merhone Pty Ltd (Cole JA) 3 between the parties finally broke down in December 1994, but it was not until early April 1995 that the summons was disposed of at first instance. There was then this appeal, and it is now mid-September 1996. The costs expended probably exceed the amount at stake. The time which has passed is probably greater than the time which would have passed had proceedings been brought in the Local Court and the dispute fought out. It is a great pity that the course which has been undertaken was felt necessary. However, we cannot turn the clock back, and I propose that the appeal be dismissed with costs. Cole JA. I agree. Simos AJA. I agree with Mr Justice Giles. I would only add for myself that it is plain from an examination of the appellant's written submissions to this Court, as well as from an examination of his written submissions to the learned trial judge, that there were and are genuine disputes of both fact and law which will have to be resolved on a final basis in due course. It is also plain to me from an examination of part B of the appellant's written submissions to this Court that what the appellant was really submitting was that his Honour Justice Santow should have determined on a final basis the various relevant issues of fact and law involved in the proceedings before him. I refer for example to the following submissions on behalf of the appellant: (1) His Honour should have found that there were separate contracts; (2) His Honour should have found that there was only one term in dispute, namely whether there was an agreement for a lien; (3) His Honour should have found that there was no lien; (4) His Honour should have found that the defendant was not indebted and so on; (5) His Honour should have found that the plaintiff was in breach and that the defendant was entitled to terminate the contract and recover the price on a total failure of consideration. As I have said these submissions involved the notion that it was for Justice Santow to arrive at a final determination of the many issues of fact and law between the parties. That would have been a entirely inappropriate having regard to the fact that his Honour's task was to do no more than determine whether he was satisfied or not that there was a genuine dispute between the parties as to the existence or amount of the debt. His Honour was, in my view, plainly correct in the decision which he made and I agree that orders should be made in accordance with those proposed by Mr Justice Giles. Cole JA. The order of the Court is that the appeal is dismissed with costs. Orders accordingly. Solicitors for the appellant: Phillip Howell Counsel for the respondent: R Kaye Solicitors for the respondent: Peter J Arnott