Salmon v Asphalt [2009] NSWSC 689

New South Wales Supreme Court

CITATION : Salmon v Asphalt [2009] NSWSC 689

HEARING DATE(S) : 20/05/09

JUDGMENT DATE : 23 July 2009

JURISDICTION : Equity Division

JUDGMENT OF : Macready AsJ at 1

DECISION : Paragraph 32

CATCHWORDS : Corporations Law. Application to set aside statutory demand under s 459G of Corporations Act. Held there was a genuine dispute in respect of the claims. No matter of principle.

PARTIES : Salmon & Speck Pty Ltd v Asphalt Haulage Pty Ltd & Anor

FILE NUMBER(S) : SC 4697/2008

COUNSEL : Mr R Alkandamani for plaintiff Mr JT Johnson for defendant

SOLICITORS : Patterson Houen & Commins for plaintiff Proctor Phair Lawyers for defendant

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

Associate Justice Macready

Thursday 23 July 2009

4697/2008 SALMON & SPECK PTY LIMITED v ASPHALT HAULAGE PTY LIMITED AND ANOR

JUDGMENT 1 HIS HONOUR: This is an application under 459G of the Corporations Act 2001 to set aside a statutory demand served by the defendant on the plaintiff dated 26 August 2008 for $187,000. The plaintiff raised what it says is a genuine dispute and alleges that it has offsetting claims against this amount. Background 2 The defendants were the vendors under a Deed of Agreement dated 20 June 2007 for the sale of a business to the plaintiff. The sale of the business included the manufacture and wholesale of potato chips, vegetables and other foods. 3 The consideration was the sum of $2,400,000 together with stock at valuation. The relevant clause for the payment of the purchase price was clause 3.1 which was in the following terms:

"3.1 Apportionment and payment of purchase price. (a) The parties agree that the Purchase Price shall be apportioned to between the Assets and the Vendor on the basis set out in Schedule 5. (b) The Purchase Price shall be paid: (i) As to the sum of $1,350,000.00 plus or minus any adjustments on Completion; (ii) As to the sum of $250.000.00 within 10 Business Days after the Vendor delivering to the Purchaser; A. A letter from Integra Water (The Contractor) for the Water Treatment Works confirming that the Water Treatment Works have been satisfactorily completed; and B. A written report from Labpoint confirming that the water sample analysed meets the guidelines of the Trade Waste Agreement (such water sample being supplied after completion of the Water Treatment Works); and (iii) As the balance of $800,000.00 (plus interest) after the first, second and third anniversaries of Completion subject to adjustment as provided in Clause 3.2 (Deferred Consideration)." 4 The initial sum of $1,350,000 was paid. The dispute arose between the parties as to the payment of the next installment of $250,000. It can be seen from clause 3.1(b)(ii) that there were two requirements before the sum was payable. 5 According to the defendants the appropriate conditions were satisfied. 6 It can be seen that they allege this in the way they have described the debt in the statutory demand, which was as follows: "By Deed of Agreement for Sale of Business dated the 29 June 2007 (the "Deed") the debtor company agreed to pay the creditor the sum of $250,000 within 10 working days of receiving a completion letter from Integra Water and a confirmation report from Labpoint. The creditor subsequently received a letter from Integra Water that was delivered to the debtor company confirming that the waste water treatment plant had been successfully completed and commissioned and on the 17 October 2007 the second of two written reports from Labpoint was delivered to the debtor company confirming that the water samples analysed met the guidelines of Sydney Water's Trade Waste Agreement. In accordance with the Deed, the sum of $250,000 was to be paid by the debtor company to the creditor on 27 October 2007. The debtor company paid the sum of $63,000 to the creditor on the 8 April 2008 in reduction of the amount owing leaving the sum of $187,000 due and owing by the debtor company to the creditor. On the 11 August 2008 the Creditor again served on the Debtor Company a further letter from Integra Water and the confirmation report from Labpoint that was served on the debtor company on 17 October 2007. In accordance with the Deed, the sum of $187,000.00 was to be paid by the Debtor to the Creditor on 25 August 2008. The sum of $187,000 is still due and owing by the debtor company to the creditor." Genuine dispute 7 It was the plaintiff's contention that there was a genuine dispute in respect of both arms of the relevant clause. Dealing with the requirement in 3.1(b)(ii)(A), the evidence of the defendants was that on two occasions such a letter was delivered. 8 The first occasion when the defendants allege that the letter was delivered in accordance with the contract was early September 2007. Mr Peter James Ross who at that stage was a director of the defendants and was employed by the plaintiff in the operation of the plant, gave evidence that he received a letter from Integra Water, the contractors for the waste water treatment plant, which said words to the effect, "water treatment works have been satisfactorily completed." He says he delivered the letter to Mr Geoffrey Salmon the purchaser and said, "Here is confirmation from Integra that the plant is complete." He did not retain a copy of the letter. For his part Mr Salmon responded in these terms: "I refer to paragraph 11 of the Ross Affidavit to which inadvertently I did not respond to in my earlier affidavits. I do recall Mr Ross showing me a letter from Mr Louskas of Integra Water but I do not recall him giving it to me and I do not have that letter or a copy of it now. When Mr Ross said, "Here is confirmation from Integra that the plant is complete" I immediately responded in words to the following effect: "I dispute that, the works have not been satisfactorily completed and continue to cause problems."" 9 The effect of this evidence is that there is a dispute about delivery of the letter and there may be a dispute about it contents. See s 48(4) of the Evidence Act. 10 There was further complaint about the failure to pay $250,000 and a letter dated 8 August 2008 was sent by Integra Water Treatment Solutions to the plaintiff which was as follows: "Dear Sir