Albury Local Internet Pty Ltd v Independent Services Providers Pty Ltd [2007] NSWSC 63

New South Wales Supreme Court

CITATION : Albury Local Internet Pty Ltd v Independent Services Providers Pty Ltd [2007] NSWSC 63

HEARING DATE(S) : 09/02/07

JUDGMENT DATE : 9 February 2007

JURISDICTION : Equity Division Corporations List

JUDGMENT OF : Barrett J

EX TEMPORE JUDGMENT DATE : 9 February 2007

DECISION : Statutory demand set aside

CATCHWORDS : CORPORATIONS - winding up - statutory demand - application to set aside - whether plaintiff has offsetting claim of an amount greater than that for which statutory demand pressed

LEGISLATION CITED : Corporations Act 2001 (Cth), s.459G, 459H(1)(a) Trade Practices Act 1974 (Cth), s.51AC

CASES CITED : Burger King Corp v Hungry Jack's Pty Ltd [2001] NSWCA 187 Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743

PARTIES : Albury Local Internet Pty Ltd - Plaintiff Independent Service Providers Pty Ltd - Defendant

FILE NUMBER(S) : SC 4227/06

COUNSEL : Mr M.G. McHugh/Ms S.M. Leis - Plaintiff Mr F.F.F. Salama - Defendant

SOLICITORS : Harris Lieberman - Plaintiff Conomos & Spinak - Defendant

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

BARRETT J

FRIDAY, 9 FEBRUARY 2007

4227/06 ALBURY LOCAL INTERNET PTY LTD v INDEPENDENT SERVICE PROVIDERS PTY LTD JUDGMENT 1 The plaintiff makes application under s.459G of the Corporations Act 2001 (Cth) for an order setting aside a statutory demand dated 21 July 2006 served on it by the defendant. The statutory demand refers to a debt of $10,601.50 "as per accounts rendered" on five particular dates. 2 Further particulars of the debt are given in the affidavit accompanying the statutory demand. There is reference in the affidavit to five invoices having dates corresponding with those mentioned in the statutory demand. The amount of each invoice is given. The total of the five is $9,637.78. To this is added an amount designated as "interest due" to produce the total to which I have referred, namely, $10,601.56. 3 Since the statutory demand was served and the proceedings were commenced, the defendant has abandoned part of the claims represented in the way I have just described. I need not go into details. It is sufficient to say that the defendant now claims to be owed, by way of debt presently due and payable, a sum of $6,976.09 rather than $10,601.56. The parties accepted that the statutory demand should be approached accordingly. 4 The plaintiff's position is that, on the true state of the account between the parties, the sum of $6,976.09 needs to be reduced to take account of a payment disclosed by a credit card statement as having been made on 6 June 2006. The plaintiff accepts that there is an amount outstanding of the order of $2,357. 5 It is not necessary for me to come to a conclusion in any firm way about the respective contentions as to the current state of the indebtedness, that is whether it be $6,976.09 or something of the order of $2,357. I shall come back to the reason for this presently. 6 In pursuing its challenge to the statutory demand, the plaintiff relies on both the genuine dispute ground in s.459H(1)(a) and the offsetting claim ground under s.459H(1)(b). Bearing in mind the sums involved and that the "statutory minimum" for the purposes of s.459H is $2,000, the position is that, on the basis of the indebtedness for which the defendant now contends, the statutory demand will be set aside if it is found that there is an offsetting claim of the kind with which s.459H(1)(b) is concerned in an amount of more than $4,976.09. For that reason, the practical approach to the resolution of this application is to concentrate on the offsetting claim aspect. 7 The defendant was a supplier of internet services to the plaintiff. The defendant is in the nature of a wholesaler and the plaintiff is in the nature of a retailer. The plaintiff, in supplying its own customers, was dependent the due flow of services to it from the defendant. The defendant summarily terminated the supply of services to the plaintiff on 14 June 2006 on what appears to have been notice of a matter of hours only. This followed an apparently uneventful relationship between them to that point which had continued over a long period. 8 It appears that the defendant took exception to some conduct of the plaintiff in the carrying on of the plaintiff's own business, being conduct relevant to the way in which the plaintiff provided services sourced by it from the defendant. The sudden action of the defendant put the plaintiff to the trouble and expense of migrating its own customers to other facilities with some disruption and inconvenience. 9 The plaintiff puts its offsetting claim case on three bases. First, it says that it was a breach of contract for the defendant to withdraw its services in the way in which it did at very short notice. The defendant, for its part, points to the fact that its invoices carry a notation to the effect that payment is required within 7 days "to avoid suspension". There is an issue as to what "suspension" here means and the difference between suspension on the one hand and termination or cancellation on the other. There is also, no doubt, a question about the precise scope of any contractual term reflecting the notation. 10 The plaintiff next says that there is to be implied into the commercial contract a term requiring good faith dealing and, in particular, a term to the effect that any power of suspension or termination should be exercised in good faith. That, as a general proposition, is fairly arguable: see, for example, Burger King Corp v Hungry Jack's Pty Ltd [2001] NSWCA 187. There is an arguable case that the summary action of the defendant breached any such term. 11 Thirdly, the plaintiff points to s.51AC of the Trade Practices Act 1974 (Cth) and to the statutory proscription of conduct by a corporation in the particularly described commercial context which is "in all the circumstances, unconscionable". The defendant made some submissions about the meaning of s.51AC and whether some of its excepting provisions might be activated, but there was no submission that the relationship between the parties and the context in which they operated were not within the purview of that section. 12 Based on those three sources, the contention of the plaintiff is that it has a claim against the defendant for damages flowing from sudden denial of services by the defendant and the consequent need for the plaintiff, in order to continue to supply its own customers, to make urgent alternative arrangements to obtain the necessary services. 13 I am satisfied that there is a serious question to be tried on the availability to the plaintiff of causes of action under each of the three headings that have been outlined. There is a serious question to be tried, in particular, as to whether action the defendant took on 14 June amounted to suspension of services - something about which there was a warning in the invoices, the precise import of which need not be decided – or, by contrast, termination or discontinuation or disconnection of services. 14 In addition, there is a plausible contention, to put it at the least, that the plaintiff suffered loss or damage by reason of the defendant's conduct, which may be actionable on any one or more of the three bases mentioned, and that such loss or damage was in an amount exceeding the figure of $4,976.09 which, as I have said, is, as it were, the threshold the plaintiff must cross in its offsetting claim case in order to secure an order setting aside the statutory demand. 15 The full extent of the claimed loss or damage does not appear with great particularity from the material before me. I do, however, have paragraph 25 of Mr Wheeler's affidavit of 11 August 2006, in particular paragraph 25(b), which itemises heads of loss or claim totalling $13,394.55. To some extent, these are unsupported. They are nevertheless figures provided by the director of the plaintiff who, on the evidence, was intimately involved in the events that happened. 16 But even if there is some softness, as it were, to the paragraph 25(b) total of $13,394.55, there is a degree of solidifying particularity with respect to one item of it, being the sum of $6,640.90 by way of reconnection costs. Mr Wheeler's affidavit makes it clear that the plaintiff actually incurred an expense of $108.90 in arranging with an alternative supplier to obtain the services needed to satisfy the needs of each of 61 of the plaintiff's customers. At that rate of $108.90 per customer, the expenses associated with arranging servicing of those 61 customers by alternative means can be seen to have entailed loss or damage for the plaintiff in the sum of $6,640.90. 17 For these reasons I am satisfied that the plaintiff has succeeded in making out its claim as to the existence of an offsetting claim, as mentioned in s.459H(1)(b) – that is, as Palmer J put it in Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743, "a claim in a cause of action advanced in good faith, for an amount claimed in good faith". 18 Furthermore, the amount of the offsetting claim – something that the court must find in order to apply the definition of "offsetting total" in s.459H(2) – can be seen to be at least $6,640.90. It follows that when the formula in s.459H(2) is applied, the "substantiated amount", having regard to the defendant's present claim of $6,976.09, is less than the statutory minimum of $2,000, with the result that the court is directed by s.459H(3) to make an order setting aside the statutory demand. I therefore make that order.