INTERGROUP v THE MORNING SHIFT [2001] NSWSC 288

New South Wales Supreme Court

CITATION : INTERGROUP v THE MORNING SHIFT [2001] NSWSC 288 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 1549/2001 HEARING DATE(S) : 12, 18 April 2001 JUDGMENT DATE : 18 April 2001

PARTIES : INTERGROUP ADVERTISING PTY LIMITED v THE MORNING SHIFT PTY LIMITED JUDGMENT OF : Master Macready at 1

COUNSEL : R.M. McHugh for plaintiff J.T. Johnson for defendant SOLICITORS : Cornwall Stodard for plaintiff Watson Mangioni for defendant CATCHWORDS : Corporations Law. Application to set aside statutory demand. No matter of principle. CASES CITED : Eyota Pty Limited v Hanave Pty Limited (1994) 12 ACLC 669. DECISION : Paragraph 25

1 MASTER: This is an application to set aside a statutory demand pursuant to s 459G of the Corporations Law. The demand is dated 6 February 2001 and is said to be in respect of a dishonoured cheque in payment of invoice 07/1089 dated 31 July 2000 for $66,528. The application has been made within time. 2 The applicant company is an advertising agent. The plaintiff booked air time with the defendant which was responsible for broadcasting of certain advertisements on Channel 7. The advertisements were advertising products of the plaintiff's client, Mobiltron Pty Limited trading as No Bull Phones. Over a period of time the plaintiff submitted media purchase orders to the Channel 7 programme. These orders identified the client as Mobiltron t/a No Bull Phones. The dispute in the present case concerns the advertisements during the month of July 2000. 3 The plaintiff claims that in placing these orders and doing other matters which it attended to during the course of the relationship it was doing so as agent on behalf of its client, Mobiltron Pty Limited. The defendant puts the case that it is abundantly plain from the course of dealing between the parties that the plaintiff was contracting with it as principal and there thus can be no genuine dispute. 4 On 15 March 2000 there was a contract between Mobiltron Pty Limited on the one part and Infobreak Pty Limited and The Morning Shift Pty Limited on the other part. The first is an agent for the purposes of these matters of the second company. The contract contained a number of clauses dealing with the regulation of the lodging of the appropriate advertisements or as they were described in the evidence "advertorials". Clause 7 provided that The Advertiser must pay to Infobreak all fees and costs set out in the advertorial booking form on or before the due dates the payment of same set out in that form. Clearly enough this contract if it stood by itself would indicate a contract solely between the client and the defendant. However, that was not what happened in practice according to the plaintiff. It did, as a matter of convenience to its client, in fact pay the monthly accounts which were received from the defendant during March, April, May and June 2000. It was also during those months invoicing the client on a fortnightly basis for these services. 5 As I have mentioned the dispute in this case arises from the booking of air time in relation to July 2000. The plaintiff having had doubts about the credit worthiness of Mobiltron Pty Limited decided not to pay for that air time on behalf of its client and also cancelled the remaining air time which had been booked with the defendant. 6 Three separate invoices were issued by the defendant in respect of the July air time. One dated 28 July was addressed to Mobiltron at Bankstown and was for an amount of $67,200 which was calculated by taking the charges for the appropriate air time, adding GST and then deducting the commission that was entitled to be charged which also was at the rate of 10% like the GST. An invoice for a similar amount arrived at in the same way was also sent on 31 July but to the plaintiff company. That was dated 31 July and is the date of the invoice referred to in the Notice of Demand. There was also sent on 28 July an invoice having the same number addressed to No Bull Phones care of the plaintiff company for $66,528. This calculation used the same base amount but wrongly deducted the commission before adding the GST thus explaining the difference in figures. 7 Notwithstanding its decision to cease paying the defendant the plaintiff drew a cheque on 11 September 2000 in favour of the agent of the defendant, Pacific Media Sales & Marketing Pty Limited. It realised that there had been a mistake according to it in issuing the cheque and on 30 October 2000 it issued a stop order to its bank. They did not advise the defendant of this fact. On 14 November 2000 there was a demand for payment of the relevant invoice from the defendant as it had not received a cheque at that stage. On 27 November 2000 the plaintiff's solicitors then disputed there was any obligation to pay. For some reason, which is not explained in the evidence, the cheque was received by the defendant on 18 January 2001. The company immediately presented it and it was dishonoured as it had been stopped. 8 The defendant particularly relied on the following points to suggest that the dispute was not genuine. 9 1. The course of the parties dealing whereby the plaintiff company paid the invoices which were issued to it by the defendant over the period March to June. 10 2. That it charged its client by invoicing for the relevant amount including appropriate GST. 11 3. That the plaintiff has in fact been paid by its client in respect of the July invoices. 12 4. That the delivery of the cheque is an admission of liability such delivery having occurred after the raising of the dispute. 13 Apart from disputing some of the matters set out above the plaintiff clearly relied upon the existence of the written contract which showed that the correct parties to the contract for the payment of the advertising costs were the client and the defendant. 14 Before dealing with these various submissions in a little more detail I should remind myself of the nature of the expression "genuine dispute". 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 considerations 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 improbably 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 Mibor 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 will examine the merits or settle the dispute. The specified limits of 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 a claim (not the likely result of it) and to identify the genuine level of an offsetting claim (not the likely result of it).'