New South Wales Supreme Court CITATION : Lynch v S.R.Lynch Management v SR Electronics [2001] NSWSC 39 CURRENT JURISDICTION: Equirty Division FILE NUMBER(S) : SC 4067/2001 HEARING DATE(S) : 29/01/01 JUDGMENT DATE : 29 January 2001 PARTIES : Lynch Management Group Pty Limited v SR Electronics Co Pty Limited JUDGMENT OF : Master Macready at 1 COUNSEL : N.L. MCaffery for plaintiff R. Pepper for defendant SOLICITORS : Walker Madden Jenkins for plaintiff Home Wilkinson & Lowry, Melbourne, for defendant CATCHWORDS : Corporations Law. Application to set aside demand. Offsetting claim established and demand set aside. No matter of principle. DECISION : Paragraph 16 - 1 - THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION MASTER MACREADY MONDAY 29 JANUARY 2001 4067/00 - LYNCH MANAGEMENT GROUP PTY LIMITED -v- S.R. ELECTRONICS CO. PTY LIMITED JUDGMENT 1 MASTER: This is an application under section 459G to set aside a statutory demand. The statutory demand was dated 5 September 2000 and claimed an amount of $29,927 as the amount due. 2 The amounts were due for the pressing of various CD items pursuant to an agreement between the plaintiff and the defendant. That agreement, which was drawn up by one of the parties, set out a number of terms of the arrangement, important ones being that under Product Manufacturing, one sees - "The product moulding tool is the sole and exclusive property of LMG. Media Labs, as part of its agreement with LMG, is responsible for the installation and maintenance of the moulding tool and to ensure it is kept in optimum condition". 3 There is a further paragraph in these terms: "Media Labs, in entering into this legally binding agreement with LMG, agrees to manufacture the product solely and exclusively for LMG. Any direct inquiry to Media Labs from any individual or company will be forwarded by LMG for appropriate action". 4 There is also provisions for meeting specifications and provisions for any product being faulty being replaced in full at no cost to the plaintiff. 5 Payment was thirty days from the end of the month in which the invoice was received. 6 There are said to be several areas in respect of which there is a dispute. In paragraphs 11 and 12 of the affidavit of Mr Lynch of 27 September 2000 there is a claim for both loss of profit and rectification costs in respect of the return of certain product items which were said to be faulty. 7 It would seem to me on a reading of those paragraphs, the product has been repaired and accordingly that the loss of profit claimed would not be a reasonable one which could be mounted. 8 The rectification costs are $2805 and $3987.50 in respect of those two claims. Those amounts are expressed in US dollars and it seems it is conceded there is a dispute in respect of those items. They also apparently appear to be referred to in the last four invoices which would seem to have been included in the statutory demand prematurely. 9 The last four items in the demand are all invoices from August, the demand being dated 5 September and accordingly the amount which itself should not be included would be the sum of $6599.20. That may, because of the inclusion of those amounts in the demand, be a defect which would cause substantial injustice. If it did cause substantial injustice, then one could set aside the whole demand. 10 However, before dealing with the matter on that ground, I will look at one other matter in which it is said there is an offsetting claim. In paragraph 9 of the affidavit of Mr Lynch, there is a reference to the unavailability of the company to take orders for the products in July, August and September 2000. 11 This was due to a fault which occurred with the mould which, apparently, may have been damaged or, alternatively, needed servicing. 12 What little evidence there is suggests that the servicing of that mould, it having been sent to Germany for that purpose, would occur in a period of some two weeks. Accordingly, there is likely to be at least, one would have thought, a claim of the order of two months' loss of profit. This is because, it seems to me, that the obligation is squarely upon the defendant to have the mould serviced. 13 If one looks at the clauses which I have quoted, the liability is certainly on the defendant for the maintenance of the mould to ensure it is kept in optimum condition. 14 There are records showing sales for a period of six months up until the end of June which clearly, on their face, demonstrate the amount of profit, the profit being $33,348.00 per month on an average basis. 15 Even looking at that profit, even for a month, that exceeds the amount of the statutory demand. 16 In those circumstances I am satisfied that there is a genuine offsetting claim in respect of the amount and accordingly I make order 1 in the application and order the defendant to pay the plaintiff's costs. oOo Last Modified: 02/08/2001 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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