New South Wales Supreme Court CITATION : Wise v Imports [2001] NSWSC 929 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 3614 of 2000 HEARING DATE(S) : 19/10/01 JUDGMENT DATE : 19 October 2001 PARTIES : Wise Property Group Investments Pty Limited v Imports International Pty Limited JUDGMENT OF : Master Macready at 1 COUNSEL : Mr R.N. Gye for plaintiff SOLICITORS : Mr T. Orlizki of Selby Anderson for plaintiff Proctor Phair Lawyers for defendant CATCHWORDS : Corporations Law. Application to set aside statutory demand. Demand set aside. No matter of principle. DECISION : Paragraphs 16 and 18 - 1 - 1 MASTER: This is an application under s 459G to set aside a statutory demand. The statutory demand describes the debt which is sought to be recovered in these terms: "Amount payable to the creditor pursuant to special condition 12(e) of the contract for sale of land between the creditor being the vendor and the company being the purchaser for the property at 1/132 Victoria Road, Bellevue Hill, dated 21 February 2000." 2 The amount of the debt is $85,625. The parties were respectively the purchaser and the vendor of property which is referred to in the description in the details I have just quoted. The property was the subject of a contract for sale dated 21 February 2000 at a sale price of $1,712,500. 3 The contract contained the usual conditions which on the front page defined the price, the deposit and the balance. The deposit was shown as $85,625 and in the area in brackets the 10 percent has been crossed out and 5 percent inserted. In Clause 9 of the standard conditions, in 9.1 there is provision that if the purchaser does not comply it "may keep or recover the deposit (to a maximum of 10 percent of the price)". 4 There is also a special condition 12 Deposit, and sub-clause (e) of that is in the following terms: "Notwithstanding the provisions contained herein, the deposit shall be reduced to 5% of the purchase price, and in the event of the Contract being terminated in circumstances where the deposit, if forfeited to the vendor, the vendor be entitled to recover from the Purchaser any outstanding deposit as liquidated." 5 In this matter the contract proceeded until the plaintiff, which is the purchaser, had difficulty in complying. Completion was due on 1 May and completion was extended until 31 May. That was pursuant to an arrangement between the two parties that the deposit would be released early. In the letter from Mr Jarrett, who is the managing director of the defendant, he agreed to the extension to 31 May on these conditions, "The above has only been agreed provided the purchaser releases the deposit forthwith". 6 The deposit was released, part of it was applied to pay the advertising expenses of the agent and the defendant was paid the balance. Settlement was due on the 31st. The vendor moved out of the property and was ready to settle but the purchaser did not settle. In due course a Notice to Complete was given. Settlement did not take place and in accordance with the appropriate provisions of the contract the vendor then terminated the contract. 7 The question that arises is whether there is in fact a debt due to the defendant who is the vendor and it must be remembered in this context that a claim for unliquidated damages is not a debt which will support a statutory demand, see Rothwells v Nommack (No 100) 6 ACLC 1199 at 1200, and First Line Distribution v Paul Whiley 13 ACLC 1216 at 1218. 8 The actual form of the statutory demand which I have referred to seems to contemplate that there is an amount pursuant to Clause 12(e). That was put in two ways in submissions. One, it was said that what the clause was designed to do was to allow, if there had been a termination by the vendor, to recover the balance of the 10 percent which is normally paid. That claim runs into two problems. Firstly, the actual terms of the clause itself which refers to any outstanding deposit and also the terms on the front page of the contract where the deposit is defined as "$85,625 (5% of the price, unless otherwise stated)". 9 I can hardly see how it can be argued that there is an operation of that clause which would allow the recovery of the difference between 5 and 10 percent. Clause 9 does not help. All it sets out is the upper limit which can be classified as a deposit under the contract. The clause has some use. It may be that if a deposit is paid and the cheque is dishonoured, it gives the right to recover it. 10 I note Clause 2.5 of the standard terms gives a right to terminate if not paid in full. Accordingly there would be some work for the clause to allow recovery rather than termination. In any event it is necessary to decide if there might be some genuine dispute on this submission. 11 Then there were references in submissions as to what is the nature of a genuine dispute and probably the most useful summation is what was said 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 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 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 simple – 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." 12 In my view there is no genuine dispute on the first submission. 13 The other way in which it was said that either there was no debt or at least a genuine dispute in respect of the debt is the second way of construing the clause. It was suggested by the defendant that the release of the deposit meant that that was the price of the extension and that therefore there was an unpaid deposit under the contract. It was said that the amount that was released, $86,625, was paid in consideration of that extension. 14 Having regard to correspondence, it would seem to be that the appropriate considerations were firstly the vendor would receive an early payment of the deposit and that the purchaser would receive an extended month in which to settle. It was the actual deposit under the contract which was released. Accordingly I find it almost impossible to think that Clause 12 (e) could be construed to say that a separate obligation to pay another deposit arose if the contract had to be terminated. At least if I am not right on that it is very clearly very arguable and subject of a dispute. 15 Although I am satisfied that the demand should be set aside if there were proceedings to try to recover on one of the two bases that I have articulated then clearly there would be no doubt claims for relief from forfeiture. That perhaps that is another reason why there is a genuine dispute. 16 However, on the basis that I have first articulated, I am satisfied that there is a genuine dispute as to whether there is in fact any debt and accordingly the orders that I make are: 1. Order 1 in the summons filed on 16 August 2000. 2. I order the defendant to pay the plaintiff's costs. 3. The exhibits may be returned. 17 There have been further submissions on costs. Basically the plaintiff's argument that succeeded today was the one that was articulated today for the first time in submissions. I appreciate the background factual material was there. However, the matter really arose today. I think what I will do is I will not order the defendant to pay the plaintiff's costs generally but will take into account whether the matters could have been anticipated. 18 I order that the defendant pay the plaintiff's costs of today only. oOo Last Modified: 10/25/2001 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. 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