Robhen Corporation Pty Ltd v Newport Capital Group Pty Ltd [2000] NSWSC 345

New South Wales Supreme Court

CITATION : Robhen Corporation Pty Ltd v Newport Capital Group Pty Ltd [2000] NSWSC 345 CURRENT JURISDICTION: Equity Division Corporations List FILE NUMBER(S) : SC 1063/00 HEARING DATE(S) : 17/04/2000 JUDGMENT DATE : 17 April 2000

PARTIES : Robhen Corporation Pty Limited (P) Newport Capital Group Pty Limited (D) JUDGMENT OF : Young J

COUNSEL : A Lo Surdo (P) M K Meek (D) SOLICITORS : Coudert Brothers (P) Michael Saunders & Associates (D) CATCHWORDS : CORPORATIONS [214]- Statutory demand- Problem as to construction of document- Company's construction arguable- On any view some moneys due- Statutory demand varied- Observations on undesirability of issuing demands on Christmas Eve- Corporations Law ss 459F, 459G. WORDS & PHRASES- "Consummation". LEGISLATION CITED : Corporations Law, ss 459F, 459G Carter v Empire Mutual Insurance Co 374 NE (2d) 585 (1978) (Mass) CASES CITED : Oregon Home Builders v Montgomery Investment Co 184 P 487 (1919) (Ore) Taylor v Riley 133 So (2d) 869 (1961) (Ala) DECISION : See para 7

THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST YOUNG J MONDAY 17 APRIL 2000

1063/00 - ROBHEN CORPORATION PTY LTD v NEWPORT CAPITAL GROUP PTY LTD

JUDGMENT

1 HIS HONOUR: This is an application to set aside a statutory demand under s 459G of the Corporations Law. The plaintiff was endeavouring to sell an enterprise. It entered into an agreement with the defendant as some sort of financial adviser. The defendant had a pro forma letter "confirming our agreement" which was issued on 10 December 1998. That document is a rather infelicitous concatenation of words, but it has been said by both counsel that it is a commercial document and that it should have some meaning attributed to the verbiage which was employed, difficult though it is. Essentially, the argument as to its construction focuses on Part IIC which entitled the defendant to what is called a "transaction fee", if any transaction is "consummated" during the "term". Unfortunately neither "transaction" nor "term" are properly defined. 2 The defendant, by statutory demand dated 24 December 1999, demanded that the plaintiff pay it $577,757 being the transaction fee relating to the sale of the enterprise known as Emphasys Corporation Pty Ltd. The plaintiff contended that a sum of no more than $332,223.25 could be due. The question here is whether there is a genuine dispute that $245,533.75 (the difference between the two amounts) is due. 3 In deciding the amount due for the transaction fee, the question as to when a transaction is "consummated" is the key issue. The plaintiff says that on the proper construction of the document, the transaction is consummated at the time when the plaintiff becomes contractually bound to sell its business. The defendant says that there is a distinction between signing or exchanging a contract to sell and the completion of that contract and that the natural meaning of the word "consummated" is the completion of the contract. 4 As a word just plucked out of the air by itself without context, one would have to prefer the defendant's version; see eg Oregon Home Builders v Montgomery Investment Co 184 P 487 (1919) (Ore); Taylor v Riley 133 So (2d) 869 (1961) (Ala); cf Carter v Empire Mutual Insurance Co 374 NE (2d) 585, 594 (1978) (Mass). However, each contract has to be construed as a whole and whilst there are some indications in Part IIC that the word has that meaning, there are some counter indications in Part IIB that the consummation was the exchange of the contracts. The position is made even more difficult because the drafter of the document obviously thought that it was of benefit to the defendant to define the word "transaction" very widely, but the different examples given show that some of the so-called transactions might well be consummated on exchange of contracts or by the making of an offer and some might not be. 5 It seems to me that the construction on both sides is fairly arguable. I agree with the submission that it is not for me, on this summary application, to decide the matter. That can be done by the District Court in due course after considering the factual matrix. 6 I am of the view that there is a proper and genuine dispute between the plaintiff and the defendant. However, even if the plaintiff's version of the construction of the document was correct, it would still be liable to pay $332,223.25 to the defendant. In an ordinary commercial dispute where one party offers the other "X" dollars, being part of "Y" dollars claimed, in full settlement, and that offer is rejected, the Court leaves the parties to commercial negotiation as to what should be paid. However, s 459H of the Corporations Law seems to me to make it mandatory to reverse the commercial practice and if the Court cannot see any genuine dispute as to part of what is allegedly owing, then the Court must vary the demand under s 459H(4), and not just set it aside completely. 7 Accordingly, the Court is satisfied that there is genuine dispute as to the amount of the debt. The Court makes an order varying the demand to be a demand for $332,223.25 and declares the demand to have had effect as varied as from when the demand was served on the plaintiff and under s 459F(2)(a) extends the period for compliance with the demand for the period commencing today and ending at 11.59pm on 8 May 2000. 8 As to costs, the plaintiff, by its counsel, says it is entitled to costs on the indemnity basis. Counsel says this because the prime matter argued was the plaintiff's construction argument. The defendant says that the plaintiff has only partially succeeded. 9 It was put to the defendant in January that it was entitled to $332,223.25 from the plaintiff. The attitude that the defendant took was that it should press on, as a result of which the summons was issued on 12 January 2000 to set aside this statutory demand. It seems to me that that meant that the prime thrust was on the question of construction and whether the demand as a whole could be substantiated. It could not be, and I think the proper order is that the defendant should pay the plaintiff's costs of the proceedings. 10 So far as whether the costs should be on the indemnity basis or not, the only matter that really would make me order costs on the indemnity basis is that there was an issue of a statutory demand on 24 December 1999. It seems to me that any person who issues a statutory demand in Australia on 24 December is being commercially irresponsible. It puts a tremendous pressure over the holiday season where many law offices close down and it really cannot be said that the issue of this demand just happened by chance. 11 However the main indicia of a normal case of indemnity costs are not present in this case. There was no commercial irresponsibility on either side, nor was this a case where the time of the Court was wasted. There is an arguable case for indemnity costs. However, as, in fact, the plaintiff seemed to have been able to deal with the matter by 12 January 2000, I do not order indemnity costs in this case. In any event, the differences between ordinary costs and indemnity costs are fairly slight. I should give the general warning to people who conduct themselves by issuing demands just before Christmas that the Court may not be so merciful next time, when such demands are varied or set aside. oOo