No 96 Factory Bargains v Kershel Pty Ltd [2003] NSWSC 146

New South Wales Supreme Court

CITATION : No 96 Factory Bargains v Kershel Pty Ltd [2003] NSWSC 146 HEARING DATE(S) : 17/02/93, 19/02/93 JUDGMENT DATE : 13 March 2003

JURISDICTION: Equity Division Corporations List JUDGMENT OF : Barrett J DECISION : Statutory demand set aside

CATCHWORDS : CORPORATIONS - winding up - application for order setting aside statutory demand - alleged genuine dispute - alleged offsetting claim for misleading or deceptive conduct LEGISLATION CITED : Corporations Act 2001 (Cth), ss.459G, 459H Trade Practices Act 1974 (Cth), ss.51AC, 52, 87 Chadwick Industries South Coast Pty Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37 Edge Technology Pty Ltd v Lite-on Technology Corp (2000) 34 ACSR 301 CASES CITED : Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 Kizbeau Pty Ltd v W G & B Pty Ltd (1995) 184 CLR 281 Macleay Nominees Pty Ltd v Belle Properties East Pty Ltd [2001] NSWSC 743 PARTIES : No 96 Factory Bargains Pty Ltd - Plaintiff Kershel Pty Ltd - Defendant FILE NUMBER(S) : SC 5288/02 COUNSEL : Mr M R Elliott - Plaintiff Mr J T Johnson - Defendant SOLICITORS : Clive Potts & Associates - Plaintiff Macedone Christie Willis - Defendant

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

BARRETT J

THURSDAY, 13 MARCH 2003

5288/02 – NO. 96 FACTORY BARGAINS PTY LIMITED v KERSHEL PTY LIMITED JUDGMENT Introduction 1 The plaintiff claims an order setting aside a statutory demand served on it by the defendant on 8 October 2002. The demand is in the form contemplated by s.459E of the Corporations Act 2001 (Cth) and relates to two separate sums – one of $30,000 and the other of $7,734.30 – said to be due and payable by the plaintiff to the defendant. The first sum is described as "the deposit in respect of the lease between the creditor as Lessor and the debtor as Lessee dated on or about 1 January 2002 being registered lease 8975277". There is a reference to the relevant provision of the lease. The second sum is described as "Amount of stamp duty payable by the debtor in accordance with clause 13.1.3 of the Lease", with a reference to the relevant sum having been paid by the defendant to the Office of State Revenue "on behalf of" the plaintiff. It is common ground that the plaintiff and the defendant are respectively lessee and lessor under a registered lease of certain warehouse or factory premises. 2 The plaintiff asserts an entitlement to an order setting aside the statutory demand on two alternative bases, namely, the existence of a genuine dispute as to the existence of the debt (s.459H(1)(a) and the existence of an offsetting claim on the plaintiff's part (s.459H(1)(b)). 3 The plaintiff's originating process was filed on 29 October 2002. The affidavit in support is an affidavit sworn on 28 October 2002 by Mr Norbury, manager and director of the plaintiff. It emerges with sufficient clarity from that affidavit that the alleged dispute and the alleged offsetting claim arise from the same facts and circumstances and centre upon certain representations allegedly made on behalf of the defendant by Mr Lowe, a director. 4 The essence of the s.459H(1)(a) case is an alleged misrepresentation by Mr Lowe to Mr Norbury that the lease would not start to run until the parties agreed it should start running and there has been no such agreement. The offsetting claim case is advanced on the basis of alleged causes of action under ss.51AC and 52 of the Trade Practices Act 1974 (Cth). The genuine dispute case 5 The genuine dispute the plaintiff asserts is a dispute as to the existence of the debt. That case is advanced on the basis that the defendant is estopped from asserting that the plaintiff is bound by the lease until such time as the parties expressly agree that it is to operate; also that the plaintiff is entitled to an order avoiding the lease (based on s.87 of the Trade Practices Act). Those forms of relief are said to arise because of a representation by Mr Lowe, on behalf of the defendant, that the lease would not start running until the parties agreed that it should. The representation is said by the plaintiff to have been made in the following conversation that Mr Norbury deposes to having had with Mr Lowe at Mr Lowe's office "at on [sic] about mid December 2001" ("Penny", it should be noted, is Ms Zhou, Mr Norbury's partner): "Lowe said: 'This is the Lease that Kershall wants. I want you and Penny to sign it before I give you the keys.' I said: 'I can't get legal advice now because everyone is on holidays.' Lowe said: 'We don't need solicitors. I told you there is a Cooling Off period. We'll hold the Lease undated, so it won't have any legal effect until we all agree it should start running.' I said: 'That sounds fair. Besides Kerry, you have to do quite a few things to the roof and it is conditional on us working out a proper deal for the sale of your Mylow Stock. If there were any problems there we would probably want to back out or water down the terms. I'm not going to get stuck here for 5 years if these things don't all add up.' Penny said: 'Roy you have to be careful it's a lot of money. We got to sell a lot of stuff.' Lowe said: 'If you have any problems I am a fair man. Give me a cheque for $36,000 for the stock. We are going away on holidays. You can then have the key; now sign the lease.' " 6 Mr Norbury says in his affidavit that He and Ms Zhou then signed the lease in the presence of one John Hosking-Rowell (an employee of the plaintiff) and Mr Lowe. Mr Norbury also says that the plaintiff was incorporated "around late November 2001". It is by reference to that event that he places the conversation and signing at mid-December. 7 The defendant's position is that any conversation in "mid December 2001" when it was impossible to get legal advice "because everyone is on holidays" could not have been the source of anything that would cut across the clear provisions of the lease as to payment of the bond and stamp duty. This is because such a conversation, if it took place at all, took place long after the lease had been executed and had become binding on the parties. 8 It is the defendant's contention that the lease was signed on 31 October 2001. Mr Lowe, in his affidavit sworn on 3 December 2002, says that he signed it on that date. Mr Hosking-Rowell, in his affidavit of 4 February 2003, says that he signed on that day. His signature appears in the lease in each of the spaces reserved for the signatures of the witnesses to the signatures of the lessee's guarantors, being Mr Norbury and Ms Zhou. The signatures of Mr Norbury and Ms Zhou as guarantors are appended. The statement by the witness is the usual attestation that the guarantors signed in the witness's presence. Mr Hosking-Rowell pinpoints the date as 31 October 2001 because it is his daughter's birthday and he recalls having taken an item of furniture from the factory as a present for her. Mr Hosking-Rowell's affidavit does not mention any conversation as alleged by Mr Norbury having taken place when the lease was signed. 9 Ms Zhou deposes that she returned to Sydney from China on 30 October 2001. She says that she did not sign any lease on 31 October 2001. She says she signed it in mid-November 2001 when she, Mr Norbury, Mr Lowe and Mr Hosking-Rowell were all present. She does not recount any conversation in the terms stated by Mr Norbury. 10 With the evidence in this state, I do not consider it possible to say that there is a serious question to be tried on the issue of the alleged representation by Mr Lowe as to the deferral of the effectiveness of the lease. Four persons were supposedly involved, being Mr Norbury, Ms Zhou, Mr Lowe and Mr Hosking-Rowell. None of the others asserts any conversation in the terms alleged by Mr Norbury. Two of the persons (Mr Lowe and Mr Hosking-Rowell) say that the lease was signed by them on 31 October 2001, with Mr Hosking-Rowell pinpointing it by reference to his daughter's birthday and the present he took for her. Mr Hosking-Rowell's attestation on the document is that Mr Norbury and Ms Zhou signed in his presence. Ms Zhou returned to Australia the previous day but says she signed, with the other three present, in "mid November". Mr Norbury alone maintains that he signed in "mid December" when absences on holidays meant he could not get advice. 11 The substantial weight of the evidence is against Mr Norbury's version of events. That version does not have sufficient prima facie plausibility to merit further investigation as to its truth, to adopt one of the formulations followed by McLelland CJ in Eq in Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785. The consequences, in terms of possible avoidance of the lease on the basis of the alleged representation that there was to be a delayed commencement, therefore have not been shown to have the degree of real possibility of emerging to warrant a finding of genuine dispute as to the existence of the debt. The plaintiff has failed to show a genuine dispute as to the time of commencement of liability under the lease and accordingly fails in its claim to have the statutory demand set aside on the basis of a genuine dispute as to the existence of the debts for the bond and stamp duty payments expressly called for by the lease. The offsetting claim case 12 The offsetting claim asserted by the plaintiff is based on certain representations said to have been made by the defendant to the plaintiff or, more precisely, by Mr Lowe on behalf of the defendant to Mr Norbury and Ms Zhou on behalf of the plaintiff. The representations are said to have been to the effect that: