New South Wales Supreme Court CITATION : Global v Luois [2001] NSWSC 556 revised - 16/07/2001 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 1925/01 HEARING DATE(S) : 19/06/2001 JUDGMENT DATE : 19 June 2001 PARTIES : Global Knitwear Pty Limited v Luois Pty Limited JUDGMENT OF : Master Macready at 1 COUNSEL : L. Ma for plaintiff G. Moore for defendant SOLICITORS : Lawrence Wong Solicitors for plaintiff Gibsons for defendant CATCHWORDS : Corporations Law. - Application to set aside statutory demand. - No matter of principle. DECISION : Paragraph 26 1 MASTER: This is an application to set aside a statutory demand under s 459(2) of the Corporations Law. The demand is dated 5 March 2001 and is in respect of a sum of AUD$63,714.23. It relates to goods sold by the defendant to the plaintiff. 2 The plaintiff seeks to set aside the demand as it says that there is a genuine dispute in respect to a part of the goods supplied, but also it seeks to set up an offsetting claim in respect of goods supplied by the plaintiff to the defendant. 3 The first affidavit in support by the plaintiff made the basis of the claim tolerably clear, and it has been expanded on in later affidavits. The actual summary of the claim as put by the plaintiff, which takes account of the payments that have been made, is set out in paragraph three of the submissions of the plaintiff. It is in the following terms: "3.1 The plaintiff has a genuine dispute of the existence of the claim of $6,659.73 of the Defendant's claim of $63,714.23. 3.2 The Defendant's claim should be reduced to $57,054.50. 3.3 The Plaintiff admitted owing the Defendant $57,054.50. 3.4 The Plaintiff has a genuine offsetting claim the total thereof is:- Offsetting claim USDO.52 = AU D1 USD6,420.00 $12,346.15 $12,346.15 USD21,762.00 $41,850.00 $41,850.00 AUD5,479.00 $5,479.00 AUD733 $733.00 AUD713 $713.00 Offsetting total $61,121.15 Less admitted total ($57,054.50) Excess $4,066.65 Less $486.96 claim by defendant $3,597.68 as exchange rate loss" 4 It can be seen that in respect of the amount in the demand the only dispute about the amount claimed is in respect of the sum of $6,659.73. That relates to a claim in respect of some goods which were delivered from the defendant to a customer of the plaintiff. That customer was APEC Pty Ltd, which had placed an order for T-shirts. The plaintiff placed an order, which was with the defendant, in the sum of $6,659.73. 5 The evidence from the plaintiff shows that the customer made claims of shortages in the cartons which were supplied, and it also shows that the customer returned the products to the plaintiff. Thereafter, according to the plaintiff, they kept the defendant informed and then started asking the defendant to come and take the products back. 6 The evidence is fairly clear that the actual goods have been retained by the plaintiff. What in fact has happened is that there has been a refusal by the defendant to accept them back. 7 It seems to me that there is very little evidence about what is the nature of the shortfall. There is in fact no evidence to show whether there is a substantial shortfall, or what extent it was. It seems clear to me that there is no evidence upon which I could in any way say that there has been some total failure of consideration. At best there might be some claim for a shortfall, but that has not been quantified and therefore it is impossible to determine what might be the extent of a genuine dispute. 8 I had the benefit of having a number of submissions in respect of the principles to be applied and I think probably the most useful summation is that given by McLelland CJ in Equity in Eyota Pty Limited v Hanave Pty Limited (1994) 12 ACLC 669. At page 671 his Honour made the following comments in respect of the expression Genuine dispute": 'It is, however, necessary to consider the meaning of the expression 'genuine dispute' where it occurs in s.459H. In my opinion that expression connotes a plausible contention requiring investigation, and raises much the same sort of consideration as the 'serious question to be tried' criterion which arises on an application for an interlocutory injunction or for the extension or removal of a caveat. This does not mean that the Court must accept uncritically as giving rise to a genuine dispute, every statement in an affidavit 'however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be' not having 'sufficient prima facie plausibility to merit further investigation as to (its) truth' (cf Eng Mee Yong v Letchumanan (1980) AC 331 at 341), or 'a patently feeble legal argument, or an assertion of facts unsupported by evidence' (cf South Australia v Wall (1980) 24 SASR 189 at 194). But it does mean that, except in such an extreme case, a Court required to determine whether there is a genuine dispute should not embark upon an inquiry as to the credit of a witness or a deponent whose evidence is relied on as giving rise to the dispute. There is a clear difference between, on the one hand, determining whether there is a genuine dispute and, on the other hand, determining the merits of, or resolving, such a dispute. In Milbor Investments (at ACLC 1066; ACSR 366-7) Hayne J said, after referring to the state of the law prior to the enactment of Division 3 of Part 5.4 of the Corporations Law, and to the terms of Division 3: 'These matters, taken in combination, suggest that at least in most cases, it is not expected that the Court will embark upon any extended inquiry in order to determine whether there is a genuine dispute between the parties and certainly will not attempt to weigh the merits of that dispute. All that the legislation requires is that the Court conclude that there is a dispute and that it is a genuine dispute.' In Re Morris Catering (Australia) Pty Limited (1993) 11 ACLC 919 at 922; (1993) 11 ACSR 601 at 605 Thomas J said: 'There is little doubt that Division 3...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's examination are the ascertainment of whether there is a "genuine dispute" and whether there is a "genuine claim". 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 simply to identify the genuine level of an offsetting claim (not the likely result of it).' I respectfully agree with those statements." 9 Here there simply is not any evidence about the extent of the shortfall, and all we know is that ultimately the customer did not take them from the plaintiff. In the circumstances I do not think there is a genuine dispute in respect of this claim. 10 The next matter which is in dispute between the parties is a claim for goods sold by the plaintiff to the defendant for US$6,420. That amount is alleged to be in respect of a trial shipment of some products. 11 The next claim relates to a far larger amount, which was a substantial dealing between the parties. It is clear that the parties did in fact enter into a written agreement for supply between them in respect of these following contracts, and that appears to have been in June. In substance the response of the defendant is that it was his understanding that the defendant was only to pay for the shipment of samples once the complete delivery of a subsequent large order was received by the defendant. 12 The order though is probably a little bit more than samples. It is in fact, as is apparent from the invoice, in respect of two lots of 120 dozens of towels contained in 80 cartons. Clearly the plaintiff thought that there was a sale as the invoice was issued in July, shortly after delivery and before disputes occurred. There is nothing in the terms of the agreement between the parties signed in June which suggested that the trial would be for payment on a deferred basis, and although it is arguable as to whether the plaintiff's affidavit at paragraph 42 has denied the assertion about the understanding to which I have referred, we have seen implicitly it does. 13 In my view there would seem to be an offsetting claim in respect of that matter. 14 The next matter concerns the invoice for US$21,262. This is for a major part of a supply from the plaintiff to the defendant, and the question which appears from the evidence is whether it was to be by one supply in a 40 foot container or two supplies in two 20 foot containers. 15 In this respect the parties' versions seem to pass in the night. In the plaintiff's version the plaintiff talks of the shipment being in a 40 foot container, and he goes on to say that the defendant wanted them in two shipments because they did not have enough to pay for a 40 foot container in one go. 16 That appears in paragraph 8. In paragraph 9 the plaintiff agrees that they received an order which had sufficient for a 40 foot container. 17 The story by the defendant is that there were discussions in October or early November in which the plaintiff advised that the supplier in China could not produce sufficient, and accordingly they would have to be in two 20 foot containers. The first one was delivered shortly prior to Christmas, and the problem for the defendant was that he had arranged to sell them in certain sets, and that not all the different combinations were available in the first container. The second container arrived after Christmas, and that is still retained by the plaintiff. 18 The defendant puts a picture of the defendant then trying to obtain payment for the goods in advance of the delivery as a whole, and ultimately trying to change the terms of payment to COD in respect of the balance when they arrived in Australia. 19 The timing has been pointed to, to suggest the dispute is not genuine. The order was received for the large amount, and that admittedly was after the conversation first deposed to by the plaintiff. The story put by the defendant, so far as the timing is concerned, suggests that it was only later that there was a need for 20 foot containers. 20 Although the order was placed on 12 September that may not necessarily be inconsistent with the discussion in paragraph 8, because that could well be accommodated in the sense that the parties knew what the total amount was that they wanted to receive, and were happy to take it in separate shipments. 21 The real question concerns the truth of what is asserted in paragraph 8. That conversation is of course denied, but it is a clear dispute between the parties on the terms of what was the arrangement for shipping in containers. No doubt the parties are well aware of what might flow if it is found that one of these versions is not truthful. It is not for me however on this application to form a judgment on that matter. Accordingly it would seem to me that there is a genuine dispute in respect of this matter. 22 The next matter is the claim for AUD$5,479. Once the parties were in dispute in January there are a lot of goods sitting in the plaintiff's premises, and according to the plaintiff there was discussion in January when the defendant wanted to take a certain number of cartons of the goods that were still waiting there. According to the plaintiff it was agreed that they could take those at a cost price by way of offsetting the present indebtedness. There is evidence that these were provided. 23 The defendant says that in fact all there was was a swapping of goods on a barter basis. However, he does not say what was the swap that he provided. In the circumstances it seems to me that absent that sort of evidence the plaintiff has established that there is an offsetting claim for some goods supplied, to be offset against the admittedly owed debt. Accordingly that is an appropriate offsetting claim. 24 The claim for AUD$733 is conceded, and there is then the claim for AUD$713. That is a claim for loss of profits on the sale which was the subject of the return which I first mentioned at the start of this judgment. Although there is a basis for the calculation of $713, there is no evidence in my view sufficient for me to form the view that the reason for the loss of profit is something to be laid at the feet of the defendant. There is clearly some return of goods, but there is no evidence about what was the nature of the problem at all. Accordingly I would not allow this as an offsetting amount. 25 There is also an amount for an exchange rate loss of $486.96, which I think is conceded. Accordingly that should be taken into account. 26 Having regard to my findings, the disputed amount is AUD$59,939.18 and the substantiated amount of demand is AUD$3,775.05. Accordingly I vary the demand by reducing it to AUD$3,775.05, to take effect from 21 days from the date of service of the demand. 27 I have heard submissions on costs. The plaintiff was substantially successful. The parties clearly were in dispute about this matter and they knew the commercial facts of the dispute from January on, and the first affidavit did in fact set out the basis. Accordingly the order is that the defendant pay the plaintiff's costs. Last Modified: 07/17/2001 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.