New South Wales Supreme Court CITATION : Inglas Pty Ltd v MacBell Collections Pty Ltd; Sobay Pty Ltd v MacBell Collections Pty Ltd [2008] NSWSC 713 HEARING DATE(S) : 11/07/08 JUDGMENT DATE : 11 July 2008 JURISDICTION : Equity Division Corporations List JUDGMENT OF : Barrett J EX TEMPORE JUDGMENT DATE : 11 July 2008 DECISION : Section 459G application dismissed. CATCHWORDS : CORPORATIONS - winding up - statutory demand - application for order setting aside - alleged offsetting claim - not rational quantification of that claim - no matter of principle LEGISLATION CITED : Corporations Act 2001 (Cth), ss 459G, 459H(1)(b), 459H(2), 459H(5) CATEGORY : Principal judgment (1) Inglas Pty Limited - Plaintiff PARTIES : MacBell Collections Pty Limited - Defendant (2) Sobay Pty Limited - Plaintiff MacBell Collections Pty Limited - Defendant FILE NUMBER(S) : SC (1) 2860/08; (2) 2861/08 COUNSEL : Mr P J Beazley, Solicitor - Plaintiffs Mr J F Boyle, Solicitor - Defendant SOLICITORS : Beazley Singleton - Plaintiffs Boyle Associates - Defendant - 3 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST BARRETT J FRIDAY, 11 JULY 2008 2860/08 INGLAS PTY LIMITED v MACBELL COLLECTIONS PTY LIMITED 2861/08 SOBAY PTY LIMITED v MACBELL COLLECTIONS PTY LIMITED JUDGMENT 1 In each of these proceedings the plaintiff makes application under s 459G of the Corporations Act 2001 (Cth) for an order setting aside a statutory demand dated 29 April 2008 served on it by the defendant. The two proceedings were heard together. Attention was devoted mainly to one of them but on the basis that the outcome in one would also be the outcome in the other. 2 The two plaintiffs are associated companies. They are retailers of women's apparel. The defendant is a supplier or wholesaler of such merchandise. 3 The statutory demand served by the defendant is in each case for a sum said to be due and payable by the relevant plaintiff for goods sold and delivered by the defendant: $975,049.23 in the case of Sobay Pty Limited and $1,439,747.41 in the case of Inglas Pty Ltd. 4 Although each plaintiff purports to rely on the ground specified in s 459H(1)(a) and alleges a genuine dispute as to the amount of the debt, the true position seems to be that the claim is of the kind contemplated by s 459H(1)(b) and is based on the existence of an off-setting claim. 5 Each plaintiff's case is in essence that the terms of trade between the parties included terms set out in a letter of 1 July 2006 sent jointly by the plaintiffs and another retailing company associated with them and addressed "Dear Suppliers". Evidence of Mr Wilson, a director of each plaintiff, is that this letter was sent to the defendant. The defendant, through Ms Moore, denies having received any such letter. 6 There is an unresolved factual issue here. There are factual disputes about other matters as well. One that is of central importance is that the plaintiffs say that they submitted to the defendant a number of purchase orders contained in the exhibit KW1. The defendant says that with nine exceptions these were never received by it. The plaintiff further says that none of the orders was satisfied; also, however, that the moneys that might have been due under the invoices were not paid. 7 These proceedings are not the occasion for the determination of these or any other disputed factual questions. For the moment, I assume that matters would ultimately be found to be as the plaintiffs allege and, on that assumption favourable to the plaintiffs, I proceed to consider whether they have made out the case for the relief they seek. 8 On that assumed footing, the case the plaintiff puts is really that it is entitled to off-set against the debt the defendant claims for goods supplied the amounts of the rebates to be allowed according to the terms of trade. That, it seems to me, is the way the alleged rebate system works: that goods will be invoiced at full or list price but that, as certain conditions are satisfied or trading milestones are passed, there will arise a right of the plaintiff to an off-set calculated under the arrangement. That is why I say the case is really a s 459H(1)(b) case. 9 When a statutory demand is challenged on the off-setting claim ground the things the challenging plaintiff must show include, first, that the claim is genuine and, second, what the amount of the claim is. The first matter is made essential by the words "genuine claim" in the definition of "off-setting claim" in s 459H(5). The second matter is made essential by elements (a) and (b) of the definition of "off-setting total" section 459H(2). 10 As to the genuineness of the alleged off-setting claim, Mr Wilson accepts that the claim was never advanced or articulated in written form before he swore his affidavit in support of each originating process. He said in the witness box that credit notes had been raised, yet he has not sought to put any of those into evidence. He also said that oral claims or complaints had been made in conversation with Ms Moore, yet there was no reference to any such conversations in his affidavit. 11 One might also wonder how it could be that these claims and complaints were made in the past when Mr Wilson makes it clear that the matters on which the plaintiffs now seek to rely came to light only as a result of a complete review undertaken recently. 12 The lack of reference in Mr Wilson's affidavit to oral claims and complaints and written claims and complaints tells heavily against the genuineness of the countervailing claims sought to be advanced in support of the proposition that the statutory demand should be set aside. I say this even assuming that the contractual basis for those claims was eventually shown. 13 I have already mentioned the sums the subject of the statutory demands: $975,049.53 in one case and $1,439,747.41 in the other. It follows that if the s 459H(3) calculation is to lead to the making of an order setting aside the particular demand, it must be seen that the "amount" of the off-setting claim for the purposes of the definition of off-setting total is at least of the amount stated in the demand. 14 The best evidence the plaintiff puts forward on quantification is contained in paragraphs 23, 25 and 26 of Mr Wilson's affidavit: "23. I have reviewed the value of the orders and determined that the at cost value of not supplied orders over the past 12 months is in excess of 1.5 million so far. 25. I have yet to ask forensic accountants to exactly determine the loss caused by the defendant's failure to supply but say that three million in gross profit and or 6 million in lost revenue has dramatic effects on our companies. 26. In addition to the liquidated damages, owing pursuant to annexure 'B', the rebates and credit notes owing to the companies $2million and payments are not due until the orders are delivered." 15 Mr Wilson made it clear in the witness box that the figures given in paragraph 23 relate to both plaintiffs together. There is no dissection between the two. It is conceivable that the whole could relate to one to, the entire exclusion of the other. 16 The particulars given in paragraph 25 have no basis and must again be assumed to relate to both plaintiffs, likewise in relation to paragraph 26. 17 The statements made by Mr Wilson as to amounts are entirely unsupported. They are mere assertion on his part. There is no attempt whatsoever to explain any quantification even in broad terms or by way of reasoned estimate or even resort to rough methods of calculation. There is bare assertion without any factual basis or methodological rationale attached to it; and fundamentally there is no attempt to apportion global figures between different entities. 18 That being so, the plaintiff has failed in each proceeding to show that, even if all its other contentions are accepted in full, its off-setting claim is of a magnitude or even a general order of magnitude such as to allow the court to make a calculation which under s 459H(5) leads to an order setting aside the statutory demand. 19 The plaintiff has failed in each proceeding to establish a case for the making of the order it seeks setting aside the defendant's statutory demand. That order is, in each proceeding, therefore refused. (Addresses on costs) 20 The defendant submits that it should have a costs order and that costs should be assessed on the indemnity basis. As to the first part of this, no submission in opposition is offered by the plaintiff. 21 As to the second part, I am of the opinion that the proceedings cannot be said to have been so manifestly hopeless that they ought never to have been brought, and on that basis I will not order that costs be assessed on the indemnity basis. 22 The outcome on costs is that the plaintiff in each matter is ordered to pay the costs of the defendant. ********** 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.