World Sports v TWI [2002] NSWSC 449

New South Wales Supreme Court

CITATION : World Sports v TWI [2002] NSWSC 449 CURRENT JURISDICTION: Equity Division Corporations List FILE NUMBER(S) : SC 5142/01 HEARING DATE(S) : 13/05/02 JUDGMENT DATE : 13 May 2002

PARTIES : World Sports Video Pty Limited - Plaintiff TWI Australia Pty Limited - Defendant JUDGMENT OF : Barrett J

COUNSEL : Mr J.A. Loxton - Plaintiff Mr J.T. Johnson - Defendant SOLICITORS : Colquhoun & Colquhoun - Plaintiff Corrs Chambers Westgarth - Defendant CATCHWORDS : CORPORATIONS - winding up - application to set aside statutory demand - genuine dispute LEGISLATION CITED : Corporations Act 2001 (Cth) Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 CASES CITED : Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290 Re Morris Catering (Aust) Pty Ltd (1993) 11 ACSR 601 Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452 DECISION : Statutory demand set aside

- 4 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

BARRETT J

MONDAY 13 MAY 2002

5142/01 - world sports Video Pty Limited v TWI Australia Pty Limited

JUDGMENT

1 The plaintiff, World Sports Video Pty Limited, applies under s.459G of the Corporations Act 2001 for an order setting aside a statutory demand dated 27 September 2001 served on it by the defendant, TWI Australia Pty Limited. The demand is expressed to relate to a debt of $US14,245.16 described as "moneys due by the company to the creditor pursuant to a video licensing agreement dated 6 August 1999 in respect of videos furnished by the creditor to the company." 2 There are in evidence as exhibit A a number of agreements concerning the distribution of tennis videos produced by the defendant and one or more apparently related entities of the defendant. The distributor or licensee under those agreements is variously described as "World Sports Video" and "World Sports Video Pty Limited", being the plaintiff. Some of the agreements were made before the plaintiff was incorporated on 4 November 1994 and some after, including the agreement of 6 August 1996 referred to in the statutory demand. 3 It is not in contention that a course of conduct was engaged in over a number of years whereby each of the plaintiff and Mr Barry Williams, its principal, who previously carried on business as a sole trader under the name "World Sports Video", distributed videos in circumstances giving rise to an obligation to pay royalties or fees to the licensors. 4 At the centre of the materials I have considered is a letter of 25 May 2000 signed by Mr Williams and addressed to Lucy Binns without, so far as I can see, any description of the company, if any, that Mr Williams intended to address by sending a letter to Miss Binns, although clearly enough the letter has something to do with the defendant or what might be described as the wider TWI organisation. I put it that way because there is no certainty about the corporate entities involved. 5 The letter of 25 May 2000 is on the letterhead of World Sports Video Pty Limited. In that letter Mr Williams gives to Miss Binns a statement about what he refers to as "outstanding royalties". Among these is a sum of $US14,245.16 for the period 1 July 1996 to 24 May 2000. The statement of Mr Williams that there are outstanding royalties of that amount is qualified to the extent that he says "a few last figures are to be confirmed, however, the figures stated will not change by much, if at all". 6 It has been submitted on behalf of the plaintiff that the letter of 25 May 2000 should not be regarded as a statement by World Sports Video Pty Limited, or at least should not be taken as representing a statement about royalties due only by that company, given the other relationships to which I have referred. 7 The letter was followed by further correspondence in which "Transworld International", whose address is in London and whose precise legal status does not appear, notes the statement in Mr Williams' letter of 25 May as to the sum of $US14,245.16. That "Transworld International" letter is signed by Lucy Binns. Thereafter, TWI Australia Pty Limited appears to have submitted a pro forma invoice for that sum to "World Sports Video", the address of which is given as "Barry Williams" followed by a street address in Leichhardt. 8 Passing over intermediate correspondence, which I think adds nothing to what I have said, I come to a letter of 14 March 2001 on the letterhead of World Sports Video Pty Limited to Ms Binns at "Transworld International" explaining difficulties that have been encountered in the payment of royalties. Thereafter, on 18 May 2001, Transworld International (UK) Inc, an Ohio company with an address in London, wrote to "World Sports Video" at the address in Leichhardt demanding payment of $US14,245.16. World Sports Video Pty Limited on 25 June 2001 wrote to Mr Pitt of "TWI" in Clarence Street, Sydney, enclosing a bank cheque in favour of "Transworld International" for $US1,000. 9 In an affidavit of 25 January 2002, Mr Williams gives the result of investigations he has made as to royalties due for the titles the subject of the agreement of 6 August 1996. Those royalties, according to his affidavit, amount to $A16.00 and three sums in UK pounds which add up to something less than £70. 10 It is clear that several issues will require further probing and investigation before any reliable view can be formed about the state of the account between the particular parties to the statutory demand, that is, World Sports Video Pty Limited and TWI Australia Pty Limited. It will be necessary to identify which sums are truly referable to the titles covered by the agreement of 6 August 1996 between those parties as distinct from sums referable to other agreements between, on the one hand, either World Sports Video Pty Limited or Mr Williams trading under the name "World Sports Video" and, on the other, one or other of the "Transworld" or "TWI" entities based in Ohio, London and Australia. In short, the evidence shows that there is a plausible contention on the part of World Sports Video Pty Limited that, despite what was said in the letter on its letterhead dated 25 May 2000, some or all of the sum of $US14,245.16, if due at all, is not due by World Sports Video Pty Limited or, if it is, is not due to TWI Australia Pty Limited. 11 The cases make it clear that the threshold to be satisfied in a matter such as this is quite low. In Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290, Hayne J said, after referring to certain factors which identify the summary nature of the s.459G procedure: "These matters, taken in combination, suggest that at least in most cases, it is not expected that the court will embark on 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." 12 In Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, McLelland J said: "It is, however, necessary to consider the meaning of the expression 'genuine dispute' where it occurs in s.450H. 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." 13 The formulation preferred by Northrop, Merkel and Goldberg JJ in Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452 is as follows: "In our view a 'genuine' dispute requires that · the dispute be bona fide and truly exist in fact; · the grounds for alleging the existence of a dispute are real and not spurious, hypothetical, illusory or misconceived." 14 In Re Morris Catering (Aust) Pty Ltd (1993) 11 ACSR 601, Thomas J emphasised that it is not the task of the court, in a case such as this, to "examine the merits or settle the dispute"; and that "beyond a perception of genuineness (or 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." 15 The appropriate finding in this case is that the conditions activating sub-s.(3) of s.459H are satisfied, with the result that the court must set aside the demand. That is the order of the court.