New South Wales Supreme Court CITATION : Panel Tech Industries v Australian Skyreach (No 2) [2003] NSWSC 896 HEARING DATE(S) : 31/07/03 (plus written submissions on 15/08/03, 25/08/03 and 08/09/03), judgment reserved 08/09/03 JUDGMENT DATE : 3 October 2003 JURISDICTION: Equity Division Corporations List JUDGMENT OF : Barrett J DECISION : Statutory demand set aside conditionally CATCHWORDS : CORPORATIONS - winding up - application to set aside statutory demand - genuine dispute shown - significant doubt whether dispute will eventually be resolved in plaintiff's favour - condition requiring payment into court by plaintiff if defendant commences debt recovery proceedings LEGISLATION CITED : Corporations Act 2001 (Cth), ss.459G, 459H Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290 CASES CITED : Re Morris Catering (Aust) Pty Ltd (1993) 11 ACSR 601 Panel Tech Industries (Australia) Pty Ltd v AustralianSkyreach Equipment Pty Ltd (2003) 200 ALR 321 Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452 PARTIES : Panel Tech Industries (Australia) Pty Limited - Plaintiff Australian Skyreach Equipment Pty Limited - Defendant FILE NUMBER(S) : SC 5379/02 COUNSEL : Mr Michael Green - Plaintiff Mr C.D. Wood - Defendant SOLICITORS : The Bruce & Stewart Commercial Practice - Plaintiff Jason Li Lawyers - Defendant IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST BARRETT J FRIDAY, 3 OCTOBER 2003 5379/02 – PANEL TECH INDUSTRIES (AUSTRALIA) PTY LIMITED v AUSTRALIAN SKYREACH EQUIPMENT PTY LIMITED (NO 2) JUDGMENT 1 By its originating process filed on 4 November 2002, the plaintiff makes application under s.459G of the Corporations Act 2001 (Cth) for an order setting aside a statutory demand served on it by the defendant and dated 14 October 2002. 2 The plaintiff sought to rely on several grounds. Some of them were dealt with in my judgment of 4 July 2003: Panel Tech Industries (Australia) Pty Ltd v Australian Skyreach Equipment Pty Ltd (2003) 200 ALR 321. It remains to consider the plaintiff's contention based on s.459H that there exists a genuine dispute about the existence or amount of the debt to which the demand relates. 3 The debt asserted by the defendant in the statutory demand is described in the demand as follows: "The total amount of the debt in the sum of $27,989.66 claimed against the Company relates to the provision of equipment hire to the Company by the Creditor from [sic] a period between 11 April 2002 to 17 July 2002." 4 The statutory demand was accompanied by a supporting affidavit of Ms O'Connor. In my judgment of 4 July 2003, I made certain findings about that affidavit. In particular, I found that the affidavit, as served, was in a form testified to by the defendant's solicitor, Mr Li, and had annexed to it copies 42 pages of invoices ostensibly rendered by the defendant to the plaintiff in respect of charges for equipment hire. 5 The plaintiff provides services in the building industry. In the course of doing so, it retains subcontractors The defendant's contention is that the plaintiff placed orders with the defendant for the supply of various items of equipment on hire at locations where the plaintiff was engaged in building activities and that the plaintiff failed to pay charges regularly and properly invoiced for such hire. It points, of course, to the several invoices copies of which are attached to the affidavit accompanying the statutory demand. 6 The plaintiff acknowledges that the several delivery addresses specified in the invoices are addresses at which the plaintiff was engaged in relevant work at relevant times, being, I infer, work of a kind in which the particular items of equipment would normally be used. Apart from what it terms "anomalies" in some of the invoices (which I do not regard as matters of substance), the plaintiff relies on the evidence of Mr Murphy, its then New South Wales State Manager, in advancing the contention that there is a genuine dispute in relation to the debt. 7 It is Mr Murphy's evidence that, on receipt of the statutory demand, he undertook searches in the records of the plaintiff for references to dealings with the defendant. He found something in 1998 but nothing later. Mr Murphy also went through the plaintiff's purchase order records seeking references to the only two order numbers appearing in the invoices forwarded by the defendant. He identified one as associated with an order apparently placed with the defendant (order 11160 - $1,278.31). The other appeared to relate to an order upon an entity called "Skyview Rental". 8 Mr Murphy gave evidence of events surrounding the opening of an account by the plaintiff with the defendant. It appears that this was done by means of a standard form entitled "Account Facility Application" used by the defendant for the purpose. This form contains a question, "Are order numbers required?" Against the question are a "yes" box and a "no" box. In the copy of the form put into evidence by the plaintiff and identified as having been faxed to the defendant, there is a cross in the "yes" box. Also in evidence is a copy of what is said to be the form submitted by the plaintiff which had been returned by the defendant so that some unrelated particular might be completed. This shows the "no" box marked with a tick. It appears that the document was faxed back and forth on several occasions, from which it may be inferred that anyone minded to make changes to the content of boxes might do so by means of correction fluid. The version propounded by the plaintiff contains a cross in the "yes" box against the question concerning order numbers, while the version propounded by the defendant contains a tick in the "no" box. Another unrelated box in both versions is also marked. It contains a tick in each version. The original document (which I take to be the version Mr Murphy completed and put through his fax machine) is in evidence. It accords with his propounded version. 9 The earliest time at which the plaintiff's application for an account with the defendant could have been accepted was 31 May 2002. A number of the sums claimed relate to alleged hirings before that date. These could not have been affected by the account opening form. They would have been dealt with according to whatever terms of trade prevailed between the parties before 31 May 2002, assuming that any trading activity took place between them. 10 The invoices on which the defendant relies specify, in each case, a delivery address. With one exception, the invoices specify an address at Kingsgrove or an address at Caringbah. The exception specifies an address at Chullora. The plaintiff was engaged in work at these addresses at relevant times. 11 Each invoice also names a person as "contact". Several names are common to more than one invoice. The names are "Dale" (also "Dale Beard"), "Pere", "Tony Fontana", "Gary Johnson", "Ron Virco" (also "Ron Verko"), "Steve Capling", "Steve Sulliavan" and "Mark". Of these, Mr Murphy testified that only Johnson and "Capling" (assumed by Mr Murphy to be a mis-spelling of "Chaplin") were employees of the plaintiff. Each was a project manager of the plaintiff. The other persons named are identified by Mr Murphy as associated with various subcontractors. 12 The defendant filed and read affidavits of two persons associated with subcontractors of the plaintiff. Mr Ronald Francis Verko (obviously the "Ron Verko" or "Ron Virco" named as "contact" in several of the invoices) is a director of Architectural Awnings & Cladding Pty Ltd, a subcontractor engaged by the plaintiff on its project at Kingsgrove. Mr Verko deposes that it was not part of the responsibility of his company to supply hired equipment needed by it to perform its subcontract and that this responsibility rested with the plaintiff. Annexed to Mr Verko's affidavit is a fax dated 8 July 2002 to him from Mr Merryfull of the plaintiff confirming that Mr Merryfull has "off hired the forklift and it will be picked up tomorrow morning", from which it may be inferred, in relation to forklift of unknown ownership, that it was Mr Merryfull of the plaintiff who dealt with the owner regarding "off hiring" and collection by the owner, not Mr Verko of the subcontractor company. 13 The other affidavit is that of Mr Patterson, the principal of JGP Maintenance Pty Ltd, another subcontractor on the Kingsgrove project "during the first half of 2002". He deposes that he used equipment supplied by the defendant, which equipment was made available to him by the plaintiff. He did not hire equipment from the defendant. 14 It is important, in the context just discussed, to refer to an aspect of Mr Murphy's evidence in his affidavit of 13 December 2002 concerning the invoice showing number 11160 to which I have already referred: "The plaintiff accepts only the Tax Invoice Number BS13475.001 dated 9 July 2002 in the amount of $1,278.31 which contains the Plaintiff's Order Number 11160. The plaintiff has today paid that outstanding amount to the Defendant." I shall return to this matter. 15 The defendant's principal witness was Ms O'Connor, credit controller. She deposed to certain facts concerning the faxing of the "Account Facility Application" (or copies of it), including the matter of a tick or cross in the box against "Are order numbers required?". Her account and that of Mr Murphy are inconsistent. Ms O'Connor also deposed to conversations she had had with Mr Murphy and another employee of the plaintiff over the period April to July 2002. This evidence conflicts with Mr Murphy's assertion that, on receipt of the statutory demand in October 2002, he had found no evidence within the plaintiff of dealings with the defendant. In particular, Ms O'Connor said that she spoke to Mr Murphy by telephone on 14 July 2002 to ask him, "When can I expect payment for April and May?", to which Mr Murphy said, "I have approved them for payment; I will call you back". In addition, Ms O'Connor testified to having spoken on 9 July 2002 with Stephen Dale, another employee of the defendant, who told her that the plaintiff wanted to hire a machine, to which she replied, "No, I need the balance of April and May paid first". Mr Murphy has deposed that he does not recall ever having had a conversation with Ms O'Connor of the kind she said occurred on 12 June 2002. 16 The defendant has adduced certain further evidence calculated to show financial unreliability on the part of the plaintiff. I attach no real weight to that. The question before me is not whether the plaintiff is a financially respectable and financially responsible company. It is whether it may properly be said, on the whole of the evidence, that a genuine dispute exists as to the existence of the debts the subject of the statutory demand. Because the plaintiff now accepts the invoice for $1,278.31 in respect of purchase order 11160, the inquiry as to genuine dispute relates to the balance. 17 The test to be applied in cases of this kind has been established in several well known cases, of which those most often quoted are Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290, Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452 and Re Morris Catering (Aust) Pty Ltd (1993) 11 ACSR 601. Those cases refer to tests of "plausible contention requiring investigation", "real and not spurious, hypothetical, illusory or misconceived" and "perception of genuineness (or lack of it)". 18 These tests, applied in the context of a summary procedure where it is not expected that the court will embark on any extended inquiry, mean that the task faced by a company challenging a statutory demand on the "genuine dispute" ground is by no means at all a difficult or demanding one. The company will fail in that task only if it is found upon the hearing of its s.459G application that the contentions upon which it seeks to rely in mounting its challenge are so devoid of substance that no further investigation is warranted. Once the company shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow. The court does not engage in any form of balancing exercise between the strengths of competing contentions. If it sees any factor that, on rational grounds, indicates an arguable case on the part of the company, it must find that a genuine dispute exists, even where any case apparently available to be advanced against the company seems stronger. 19 If the defendant were to sue at common law for the debts it alleges, it would have to prove the relevant contract with the plaintiff in respect of each of the separate hirings referred to in the invoices annexed to the affidavit that accompanied the statutory demand. If it was a term of trade applicable to all dealings between the parties (or all after a certain time) that a purchase order should not be recognised unless an order number was given, it would be for the defendant, as plaintiff, to show that that term had been complied with. The defendant would also have to show that the person who placed the order did so with actual or ostensible authority of the plaintiff. 20 The matters emerging from Mr Murphy's evidence relate to these aspects of the defendant's hypothetical cause of action in debt. They show that there is a serious question to be tried as to the terms of the standing arrangement that existed between the parties from late May 2002 by virtue of the Account Facility Application, at least so far as any requirement for the giving of order numbers is concerned. They also show that, with the exception of items in fact ordered by Johnson and Chaplin (or Capling), there is a triable issue as to whether the person who apparently acted for the plaintiff in placing orders did so with the actual or ostensible authority of the plaintiff. There is also a triable issue as to whether on 14 July 2002, the plaintiff, through Mr Murphy, acknowledged to the defendant, through Ms O'Connor, indebtedness of the plaintiff for "payment for April and May" and, if so, just what the acknowledgment meant. Beyond that, however, I do not think that the matters put forward by the plaintiff call in question the existence of the debts said to be evidenced by the several invoices. In particular, I do not accept Mr Murphy's statement – not ultimately pressed, I think – that, as at October 2002, there was no reference in the records of the plaintiff to dealings with the defendant, except one in 1998. Apart from anything else, there must have been evidence of the fax exchanges concerning the Account Facility Application. 21 As far as the subcontractors' evidence is concerned, I think the most that can be said about it is that it tends to support the plaintiff's contention that representatives of subcontractors did not have actual authority of the plaintiff to hire equipment from the defendant and that any equipment owned by the defendant and made available to a subcontractor by the plaintiff was, on the balance of probabilities, hired by the plaintiff from the defendant. However, as the subcontractors' evidence does not identify particular items of equipment, it is not possible to make any connection between the items to which they referred and the items in the invoices in question. 22 Against this, however, must be balanced a particular aspect of Mr Murphy's evidence. I have quoted part of his affidavit of 13 December 2002 concerning the invoice raised by reference to order number 11160. I have also referred to Mr Murphy's evidence that Mr Johnson and Mr Chaplin were, at relevant times, employees of the plaintiff. There is no reference in his evidence to the "contact" person shown in this particular invoice, being "Steve Sulliavan" (presumably "Sullivan"). It is thus not known whether he was an employee of the plaintiff or of a subcontractor. 23 I proceed now to consider the several invoices, copies of which are the annexures to the affidavit of Ms O'Connor of 10 October 2002 which in turn is an annexure to the affidavit of the defendant's solicitor, Mr Li, of 4 July 2003. For reasons stated in my judgment of 4 July 2003, I consider that version of the annexures to Ms O'Connor's affidavit to be the correct one. It is appropriate to consider the invoices in two groups, one for hirings commencing before 31 May 2002 (the earliest date on which a contract in terms of the Account Facility Application was in force) and the other for subsequent hirings. 24 The first group consists of 26 invoices showing "date and time out" entries ranging from 11 April 2001 to 10 May 2002. In none of these is an order number shown. That, however, is of no moment since, on the evidence before me, any requirement that the defendant recognise only those orders accompanied by an order number did not arise until the terms of the Account Facility Application became binding as between the parties. In two cases, the space labelled "Order No" contains "Gary Johnson", with another name appearing under "contact". The "contact" spaces in the several invoices show various names including, in four cases, "Gary Johnson". Mr Johnson is acknowledged by Mr Murphy to have been an employee of the plaintiff. Indeed, he was a project manager and, whatever may have been the plaintiff's internal protocols as to authority to enter into hiring agreements (a matter as to which both Mr Murphy and the plaintiff's managing director gave evidence), a person in that position would have to be regarded as possessing ostensible authority in that regard. There is in evidence a purchase order of the plaintiff's upon another supplier placed by Gary Johnson. 25 The second group consists of 16 invoices bearing "out" dates between 4 June 2002 and 17 July 2002. Among these is the invoice for $1,278.31 which has been paid. Of the others, four bear an order number (being 11117 in each case) and the remainder show no order number. The four, however, show Mr Verko as "contact". 26 My conclusion in relation to the sums claimed in the invoices (other than the one that has been paid) is that no genuine dispute has been shown in respect of those pre-dating 31 May 2002 in which Gary Johnson, the plaintiff's project manager, is shown as "contact". These are invoices for $1,202.52, $2,087.86, $2,087.86 (again) and $943.60, being a total of $6,321.84. In respect of the remaining invoices, there is a triable issue in relation to the authority of the person who placed the order and, in the case of those relating to orders after the Account Facility Application terms were in force, in relation to the absence of order numbers in those cases where there was no number shown in the invoice. 27 In terms of s.459H, I am satisfied that there is no genuine dispute in relation to the sum of $6,321.84 mentioned in the preceding paragraph plus the sum of $1,287.31 the subject of the invoice already paid by the plaintiff. I am satisfied that there is a genuine dispute as to so much of the total of $27,989.66 specified in the statutory demand as exceeds the sums to which I have just referred, that is, as to $20,389.51. On that basis, the court is compelled by s.459H to set aside the statutory demand. 28 There is, however, an aspect of this case that warrants more than simply an order setting the demand aside. I have quoted the passage from Mr Murphy's affidavit of 13 December 2002 in which liability was accepted for the sum of $1,278.31 covered by the invoice showing order number 11160. I have also mentioned that the "contact" named in that invoice is Steve Sullivan. What I have not mentioned is that, at the time he swore his affidavit and accepted responsibility for the sum of $1,278.31, Mr Murphy did not know who was named as "contact" in the invoice. This is because, he said, a copy of that invoice was not served on the plaintiff with the statutory demand. 29 The evidence does not show whether Steve Sullivan was an employee of the plaintiff or an employee of a subcontractor on the Chullora project to which the invoice related. The point is that Mr Murphy was willing to accept, at that point, an invoice containing an order number, regardless of the identity of the "contact". This has particular significance in relation to the four invoices dated 4 June 2002 in which order number 11117 was quoted but the contact was shown as Mr Verko. These are four of a total of nine invoices containing Mr Verko's name. It is clear, as stated in my earlier judgment, that Mr Murphy had before him only some of the invoices annexed to the affidavit accompanying the statutory demand. He refers to five as carrying Mr Verko's name. The absence of reference by him to an order number on any of these suggests that the five he had did not include the four showing the order number 11117 as well as Mr Verko's name. The emphasis placed by Mr Murphy in an earlier part of his affidavit upon the significance of order numbers might well have left him no credible option but to adopt in relation to those four the approach he took to the invoice which carried both an order number and Mr Sullivan's name. 30 In short, while I have concluded that there is a genuine dispute, I have significant doubt, based on the quality of the plaintiff's evidence, whether the contest between the parties will eventually be resolved in favour of the plaintiff. This, in my view, makes it appropriate that the order setting aside the statutory demand not be unconditional. Because a genuine dispute has been established, action by the defendant to vindicate the rights it considers itself to have as a creditor of the plaintiff must be by way of debt proceedings at common law. In the particular circumstances to which I have referred, however, the defendant should not have to pursue those proceedings on an entirely speculative basis, assuming it chooses to pursue them at all. It is appropriate that they be pursued in a context where the plaintiff causes funds sufficient to meet the claim to be set aside and held pending its resolution. This should be achieved by making the s.459H order subject to an appropriate condition under s.459M. 31 The order of the court is accordingly that the statutory demand a copy of which forms part of the annexure A to the affidavit of Jason Li affirmed 4 July 2003 and filed in court that day be set aside on condition that if within 28 days after the making of this order the defendant serves on the plaintiff an originating process filed in a court of competent jurisdiction by which the defendant sues the plaintiff to recover any of the debts claimed in invoices copies of which form part of the affidavit of Brenda O'Connor affirmed 10 October 2002 a copy of which affidavit forms part of the annexure A to the said affidavit of Jason Li the plaintiff shall within 14 days after such service pay into court in the proceedings initiated by that originating process a sum equal to the aggregate of the debts sought to be recovered in the proceedings, such payment in being on the footing that the sum paid in shall remain in court to abide the outcome of those proceedings. 32 There remains the question of costs. In light of the results both in my earlier judgment and in this judgment, I direct that written submissions on costs be filed by the parties by delivery to my Associate within 21 days. ********** Last Modified: 10/07/2003 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.