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).' I respectfully agree with those statements." 15 I turn to each of the steps. 16 1. The course of the parties dealings whereby the plaintiff company paid the invoices which were issued to it by the defendant over the period March to June. 17 Although there was a course of dealing the question that arises is whether the client was the disclosed principal. Bowstead on agency describes the general rules in this case as follows: "Article 104 GENERAL RULE In the absence of other indications, when an agent makes a contract, purporting to act solely on behalf of a disclosed principal, whether named or unnamed, he is not liable to the third party on it. Nor can he sue the third party on it. Article 105 WHEN AGENT HAS RIGHTS AND LIABILITIES An agent who makes a contract on his principal's behalf is liable to or entitled to sue the third party in accordance with the terms of any contractual engagement, whether upon the same contract or upon some independent contract, into which he has entered." The more particular rule which is appropriate is Article 106 which together with its commentary is as follows: "Article 106 WRITTEN CONTRACTS The question whether the agent is to be deemed to have contracted personally, in the case of a contract in writing other than a deed, bill of exchange, promissory note or cheque, depends upon the intention of the parties, as appearing from the terms of the written agreement as a whole, the construction of which is a matter of law. COMMENT In the context of a written contract, an agent may be held liable and entitled rather more easily than in unwritten contracts, because of the interpretation put by the court on words used. There is also a sizeable body of case law in this area which can be cited as precedent in disputes. The cases on this topic should only be treated as single instances exemplifying the application of a rather imprecise principle; much turns on the particular context of each contract. Some of the older cases have been overruled, and some may not be able to stand - in particular those which turned on the assumption, at one time held, that the agent must be liable if the principal was not, for it has long been clear that in such cases his liability is based on a separate contract, a warranty of authority. Generalisations about particular formulae are dangerous. The following rules have, however, appeared in previous editions and still seem valid starting points. (i) If the contract is signed by the agent in his own name without qualification, he is deemed to have contracted personally unless a contrary intention plainly appears from other portions of the document. (ii) The mere fact that the agent is described as an agent, director, secretary, manager, broker, etc., whether by words connected with or forming part of the signature, or in the body of the contract, and whether the principal is named or not, raises no presumption that the agent did not intend to contract personally; but here again an intention to contract as agent only may be gathered from the whole document and surrounding circumstances. (iii) But if the agent adds words to his signature, indicating tat he signs an agent, or for or on behalf or on account of a principal, he is deemed not to have contracted personally, unless it is plain from other portions of the document that, notwithstanding such qualified signature, he intended to bind himself. But this proposition should be read subject to Article 107(2) regarding the liability of agents under trade custom. As in other cases, care should be taken to ascertain exactly what liability an agent undertakes, if he does appear to contract personally. Although most of the cases assume that the agent is the only party to the contract, this need not necessarily be so. Extrinsic evidence is admissible to clarify a written contract, provided that it is not inconsistent with the contract. It is not impossible for a person to sign both for himself and also as agent of another. In the case of signatures for companies, a further distinction must be taken between cases where an agent signs as agent, which are governed by the above rules, and those where he signs as the company, viz. simply purports to authenticate the company's signature and so does not even sign as agent. In this latter case the agent's liability or right to sue will be difficult to establish." 18 Given the existence of the contract between the client and the defendant the use of the words "client and reference No Bull Phones" could well be an arguable reason why the contract may be concluded as one where the plaintiff has no personal liability. See the various cases referred to in example 9 on the commentary to Article 106, where the description of sales "on account of a principal" were construed to show that the brokers were not liable. 19 2. That it charged its client by invoice including the relevant amount of GST. 20 This seems to me to be a neutral matter. If the parties choose to show the matter as a sale then the legislation would apply and they would have to comply with it. Ultimately the legal position is to be determined as a result of the proper construction on an objective basis of the documents that were issued. 21 3. That the plaintiff has in fact been paid by its client in respect of the July invoice. 22 The records of the plaintiff show it charging amounts of $17,976 per fortnight to its client and receiving similar amounts. In the period from 1 February 2000 to 15 March 2001 it charged fifteen such amounts to its client and received seven payments of such amounts from its client. The records do not allow one to determine to which charge the payment was in fact allocated. The fact that there were 15 amounts charged and seven received I would have thought is fairly powerful evidence that the July invoice, which included four charges of $17,976, have not been paid. It is consistent with the evidence sworn to by an officer of the plaintiff. 23 4. That the delivery of the cheque is an admission of liability, such delivery having occurred after the raising of the dispute. 24 The evidence clearly shows that the cheque was not received until 18 January 2001. The evidence also shows that it was likely to have been sent on 11 September 2000. This is because of the note which appears on the 'With Compliments" slip attached to the cheque. If it was sent on 11 September and was simply lost in the post for a period until it was received in January, there certainly would be an argument based upon the postal acceptance rule, that the actual fact of admission occurred on 11 September and there would thus be an admission. Clearly the posting of the cheque occurred before the decision to stop its payment. It seems to me that there is probably an admission given the fact that the evidence seems to indicate the most likely result is the posting of the cheque on 11 September. 25 However, one has to look at the whole matter to see whether in fact one can decide whether there is a genuine dispute. I have earlier in talking about the rights of principals and agents referred to a possible construction of the documents. I have indicated that this is a powerful reason why there may be no personal liability. There is also the evidence of an admission. In the circumstances the motion should be set aside and I would make order 1 in the originating process. I order that the defendant pay the plaintiff's costs of the proceedings. (Counsel addressed on costs.) 26 MASTER: I have heard submissions on costs and particularly I have been addressed on the effect of the admission constituted by the sending of the cheque which was received by the defendant in January 2001. That is probably a fairly powerful reason why the defendant might think that there was no genuine dispute. Even though the cheque was dishonoured when it was eventually presented, the plaintiff's evidence became available in February. It was appropriately addressed by the defendant in their affidavit of 19 March. Prior to that there had been a letter of 13 March 2001 in which there is a suggestion from the plaintiff that the demand be set aside and that appropriate costs be paid. The issue of the cheque is a matter which I would have thought would at least generate in the defendant a reasonable belief that there was no genuine dispute. Suddenly they receive the payment of the amount even though the cheque was later stopped. However, ultimately the decision in the case has been made on the whole of the evidence with the result that followed. It seems to me that an appropriate time was 13 March when the defendant was in a position where it could have made a decision whether to proceed by assessing the evidence at that stage. 27 Accordingly what I propose to order is that the defendant pay the plaintiff's costs on and from 13 March 2001. I make no other order. oOo Last Modified: 05/03/2001 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.