Reported Decision : (2002) 20 ACLC 301 New South Wales Supreme Court CITATION : Denet Pty Limited v Global Marketing Group International Pty Limited [2001] NSWSC 904 FILE NUMBER(S) : SC 2808/01 HEARING DATE(S) : 5 October 2001 JUDGMENT DATE : 5 October 2001 PARTIES : Denet Pty Limited (Plaintiff) Global Marketing Group International Pty Limited (Defendant) JUDGMENT OF : Master McLaughlin COUNSEL : G. Lucarelli (Plaintiff) M. Young (Defendant) SOLICITORS : Minter Ellison (Plaintiff) Dixon Dupont Lawyers (Defendant) LEGISLATION CITED : Corporations Act 2001 CASES CITED : Expressway Spares v CTK Engineering (2000) NSWSC 1200 (12 December 2000) DECISION : 1. I make an order as in prayer 1 in the originating process.; 2. I order that, subject to any costs orders already made, the defendant pay the costs of the plaintiff, such cost to be on the party and party basis. IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION 2808 of 2001 Master McLaughlin Friday, 5 October 2001 DENET PTY LIMITED -V- GLOBAL MARKETING GROUP INTERNATIONAL PTY LIMITED Judgment 1 MASTER: By originating process filed on 28 May 2001, the plaintiff, Denet Pty Limited, seeks substantively an order in the following terms: (1). An order that the creditor's statutory demand for payment of debt dated 9 May 2001 and served on Consolidated Credit Network Pty Limited ACN 073569007, now called Denet Pty Limited, on 10 May 2001, by Global Marketing Group International Pty Limited ACN 094353116, be set aside. 2 The defendant named in the originating process is Global Marketing Group International Pty Limited. 3 The plaintiff brings the present proceedings pursuant to the provisions of Division 3 of Part 5.4 of the Corporations Law, which has now been replaced by the identical Division and Part of the Corporations Act 2001. 4 The plaintiff asserts that there is a genuine dispute between itself and the defendant about the existence or the amount of the debt to which the demand relates, and further that the plaintiff has an offsetting claim against the defendant. 5 The statutory demand was placed in evidence as Exhibit A at the hearing of the proceedings. It had not been annexed to any of the affidavits which had been filed in the proceedings. The absence of the statutory demand from the evidence until the hearing is a matter to which I shall return later in this judgment. 6 By the statutory demand the defendant claims payment to it by the plaintiff of an amount of $331 432, being the amount of the debt described in the schedule. The schedule to the demand contains under the heading "Description of Debt" the following: "Amount owing for marketing services from 31.10.00 to 28.2.01 as follows: Amended tax invoice no. 010 $295,132 Amended tax invoice no. 012 $36,300 Total owing $331,432" 7 The plaintiff conducts the business of a real estate agent. The amount claimed in the amended tax invoices addressed to it by the defendant relates to commissions asserted to be due by the plaintiff to the defendant in respect to marketing sales services asserted to have been performed by the defendant for the plaintiff. 8 The plaintiff in an application of the nature presently before the Court must establish only that there is a genuine dispute as to the existence or the amount of the debt to which the demand relates. Once the Court is satisfied as to the existence of such a genuine dispute, it is no part of the Court's function to consider the strengths or weaknesses of the cases for the respective parties, let alone to attempt to arrive at any conclusion as to the likely outcome of such dispute. 9 In the instant case I have had the benefit of receiving a written outline of submissions from Counsel for the plaintiff. That written outline will be retained in the Court file. 10 Essentially, the plaintiff relies upon four grounds in support of its submission that the demand should be set aside. Three of those grounds relate to the existence of a genuine dispute and the fourth asserts the existence of an offsetting claim. 11 In respect of the genuine dispute, the plaintiff submits firstly that the defendant is not the party with whom the plaintiff had its contract. Secondly, that if the defendant did have a contract with the plaintiff, the defendant cannot recover under that contract because of the prohibitions contained in sections 20(3), 39A and 42(1) of the Property Stock and Business Agents Act 1941 (New South Wales). 12 The plaintiff submits, thirdly, that, if the defendant was the contracting party and is not prohibited from recovery by the foregoing Act, then the amount claimed by the defendant is genuinely disputed by the plaintiff. That third submission is grounded upon the asserted necessity for a process of co-operation and reconciliation between the parties relating to amounts which ultimately might be liable to be paid by the defendant to the plaintiff in respect of commissions. 13 It is not necessary for me to set forth in detail my conclusions concerning each of the separate areas of the evidence upon which the plaintiff relies in support of the foregoing submissions. Suffice it to say, that I am of the view that it is arguable that each of those submissions will ultimately be established as correct. 14 As to the offsetting claim, it has been submitted on behalf of the plaintiff that if the defendant was the contracting party and is not prohibited by Statute from recovering its fees, and the amount of such fees is found to be not genuinely disputed, then the plaintiff has an offsetting claim exceeding the defendant's claim. There is evidence to support the existence of such an offsetting claim. However it has been submitted on behalf of the defendant that whatever offsetting claim might ultimately be found to exist in the plaintiff, it cannot be an offsetting claim against the defendant, which was not in existence at the time of the original agreement. 15 In response, on behalf of the plaintiff, it has been submitted that Mr Martin, the principal of the defendant, made a representation in his capacity as promoter of the defendant, and it has been submitted that an inference can be drawn of what was described as a "pre-incorporation contract" in respect of an entity to be formed. 16 I consider that that submission on behalf of the plaintiff is, at least, arguable, and therefore I am satisfied that the plaintiff has what is, at least arguably, an offsetting claim. 17 I referred earlier to the fact that the statutory demand was placed in evidence before the Court only at the hearing of the proceedings. It is strange that the plaintiff did not choose to place the statutory demand in evidence in any of the relatively substantial affidavits which have been filed in support of the application to set aside the statutory demand. 18 Although there has been no evidence in this regard, it has been stated from the Bar table by Counsel for the plaintiff that the absence of the statutory demand from any of the affidavit evidence was in fact an oversight. 19 Had the statutory demand not been placed in evidence (and I would here observe that the defendant did not oppose the tender of the document), then the plaintiff would be bound to fail, because the Court cannot set aside something which has not been proved to exist. 20 In this regard I would refer to the decision of Austin J in Expressway Spares v CTK Engineering (2000) NSWSC 1200 (12 December 2000). 21 However, the absence of the statutory demand from the evidence until its tender at the hearing raised concern in my mind as to whether the proceedings had been constituted in accordance with the requirements prescribed by Division 3 of Part 5.4 of the Corporations Law. 22 Section 459G sets forth the manner in which a company may apply to the Court for an order setting aside a statutory demand. Subsection (3) of that section provides: "An application is made in accordance with this section only if, within those 21 days: (a) an affidavit supporting the application is filed with the Court; and (b) a copy of the application and a copy of the supporting affidavit, are served on the person who served the demand on the company." 23 The Statute does not require in express terms that the affidavit supporting the application should annex a copy of the statutory demand. Neither is there at the present time any such requirement in the Corporation Rules. Nevertheless, it will be appreciated that there is a certain degree of logical difficulty in establishing whether or not a debt is disputed unless the nature of the debt is revealed. 24 The affidavit in support of the application must contain at least some evidence indicating the nature of the dispute. There is a great deal of evidence in the affidavit of Franklin Winkler sworn 28 May 2001, being the affidavit filed in support of the application. That affidavit annexes in paragraph 23(h), a facsimile of a letter dated 19 April 2001, enclosing what are described in that sub-paragraph as being "amended tax invoices, the subject of the statutory demand". 25 Those two documents set forth details of the various commissions being claimed by the defendant in two total amounts of respectively $295 132 and $36 300, being the two amounts which are referred to in Exhibit A. 26 It has been submitted on behalf of the defendant that the nature of the debt in question must be established to enable the Court to see whether the debt is disputed. I am in agreement with that submission. There would have been no problem whatsoever if the statutory demand had been annexed to Mr Winkler's affidavit, and quite clearly the material contained in that affidavit would establish the existence of a dispute as to the alleged debt. 27 Had Mr Winkler's affidavit annexed only documents described as "amended tax invoices" otherwise not described, I would have had a considerable problem in concluding what was, at the time when the proceedings were instituted, the subject of the alleged debt, and I would have had considerable doubt as to whether or not that affidavit constituted an affidavit of the nature contemplated by subsection (3) of section 459G. 28 However, the description in paragraph 24(h) of those amended tax invoices as being "the subject of the statutory demand" is, in my conclusion, sufficient, but only just sufficient, to overcome this problem. 29 In consequence therefore, I am satisfied that the proceedings were properly instituted and that the affidavit of Mr Winkler sworn 28 May 2001 does constitute an affidavit of the nature required by section 459G(3). 30 For the reasons which I have earlier expressed, I am satisfied that the plaintiff has established the existence of a genuine dispute as to the debt which is claimed in the statutory demand, and further, that the plaintiff has established the existence of at least an arguable offsetting claim. 31 For those reasons, therefore, I propose to set aside the statutory demand and to make an order of the nature sought in prayer 1 in the originating process. The exhibit will remain in the Court file. 32 I make the following orders: (1). I make an order as in prayer 1 in the originating process. (2). I order that, subject to any costs orders already made, the defendant pay the costs of the plaintiff, such costs to be on the party and party basis. ******** Last Modified: 01/18/2002 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.