New South Wales Supreme Court CITATION : Sultana Investments Pty Ltd v Cellcom Pty Ltd [2009] NSWSC 392 HEARING DATE(S) : 13/05/09 JUDGMENT DATE : 15 May 2009 JURISDICTION : Equity Division Corporations List JUDGMENT OF : Barrett J DECISION : Order varying statutory demand by reducing amount thereof to $121,000 CATCHWORDS : CORPORATIONS - winding up in insolvency - statutory demand - application for order setting aside - alleged off-setting claim - foreshadowed claim under s 52 of Trade Practices Act - where claim relates to events fully litigated in Queensland proceedings - where those events most unlikely to support s 52 claim - virtual certainty in any event of successful Anshun defence - off-setting claim not established - alternative claim of defect in statutory demand or genuine dispute about existence of debt - demand claims fixed sum as debt arising from judgment for specified amount together with interest for specified period up to judgment - no specification of rate of interest - no means of ascertaining amount or rate of interest - principal judgment sum nevertheless clear - no defect in demand - but dispute as to amount of debt beyond principal judgment sum - statutory demand reduced to principal judgment sum. Corporations Act 2001 (Cth), ss 459G, 459H(1)(a), 459H(1)(b), 459H(2), 459H(5), 459J(1)(a) LEGISLATION CITED : Property Agents and Motor Dealers Act 2000 (Qld) Supreme Court Act 1995 (Qld), s 47 Trade Practices Act 1974 (Cth), s 52 CATEGORY : Principal judgment Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37 Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743 Oakland Property Holdings Pty Ltd v J P Morgan Trust Australia Ltd [2008] NSWCA 360; (2008) 69 ACSR 485 CASES CITED : Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589 Scanhill Pty Ltd v Century 21 Australasia Pty Ltd (1993) 12 ACSR 341 Secretary Department of Family and Community Services v Mourilyan [2001] FCA 1583; (2001) 67 ALD 347 Sultana Investments Pty Ltd v Cellcom Pty Ltd [2008] QCA 357 Topfelt Pty Ltd v State Bank of New South Wales Ltd (1993) 12 ACSR 381 PARTIES : Sultana Investments Pty Ltd - Plaintiff Cellcom Pty Ltd - Defendant FILE NUMBER(S) : SC 6202/08 COUNSEL : Mr D R Meltz - Plaintiff Mr M R Elliott - Defendant SOLICITORS : Mulally Mylott - Plaintiff Somerville & Co - Defendant IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST BARRETT J FRIDAY, 15 MAY 2009 6202/08 SULTANA INVESTMENTS PTY LIMITED v CELLCOM PTY LIMITED JUDGMENT 1 By originating process filed on 24 February 2009, the plaintiff ("Sultana") makes application under s 459G of the Corporations Act 2001 (Cth) for an order setting aside a statutory demand dated 25 November 2008 served on it by the defendant ("Cellcom"). 2 The debt to which the statutory demand relates is described in its schedule as follows: " Description of the Debt Amount of the debt Judgement Debt District Court of 26 October 2007 ) ) Court of Appeal 14 November 2008 ) $152,095.34" 3 Attached to and forming part of the statutory demand are orders of the Court of Appeal of Queensland made on 14 November 2008 which include the following: "Judgment for the appellant on its counterclaim in the sum of $121,000 together with interest from 19 April 2006 to judgment." 4 The "appellant" referred to in this order is Cellcom. The judgment is a judgment against Sultana, which was the respondent in the Court of Appeal. 5 Sultana attacks the statutory demand in two ways. First, it resorts to s 459H(1)(b) and the proposition that it has an "off-setting claim". Second, it resorts to s 459J(1)(a) and an allegation that there is a defect in the demand of such a nature that substantial injustice will be caused unless the demand is set aside; although, as will be seen, this second ground really resolves itself into a challenge under s 459H(1)(a) on the basis that there is a genuine dispute about the existence or amount of the debt. 6 I address first the claim based on s 459H(1)(b). It is necessary to go into some matters of background. Sultana conducts a financial planning business in New South Wales. Cellcom is a Queensland real estate developer. In or about 2002, Cellcom commenced selling 175 residential units in suburban Brisbane. It enquired of Sultana whether it was interested in introducing purchasers. At a meeting on 23 September 2002, a representative of Cellcom (Mr Vasiliou) agreed with a representative of Sultana (Mr Comer) a basis on which Sultana would be involved in the marketing of the units. It was also agreed that Sultana would receive $10,000 plus GST per unit for which it introduced a buyer to Cellcom, with $5,000 payable 30 days after the sale became unconditional and $5,000 payable 30 days after settlement. 7 There was, from the beginning of the relationship, an awareness and concern that Sultana held no licence under the Property Agents and Motor Dealers Act 2000 (Qld). Certain steps were taken in structuring the contractual relationship between Sultana and Cellcom with a view to avoiding difficulties under that legislation. 8 In due course, Sultana introduced 22 buyers who entered into purchase contracts, of which some were later rescinded. 9 In 2005, Sultana commenced proceedings against Cellcom in the District Court of Queensland. Two issues were litigated: first, Sultana's claims to commission unpaid in respect of the several rescinded contracts; and, second, whether provisions of the Property Agents and Motor Dealers Act 2000 prevented Sultana from both recovering commissions in respect of the rescinded contracts and retaining commissions received on completed contracts. The second issue arose upon a cross-claim filed by Cellcom. 10 The District Court gave judgment on 26 October 2007 in favour of Sultana and against Cellcom in the sum of $77,000 plus interest. This related to commissions on the rescinded contracts. Cellcom's cross-claim based on breach of the legislation (and the proposition that no commissions ever became recoverable by Sultana) was dismissed. 11 Cellcom appealed to the Court of Appeal against the order that it pay Sultana $77,000 plus interest and against dismissal of its cross-claim. The appeal was upheld in both respects: see Sultana Investments Pty Ltd v Cellcom Pty Ltd [2008] QCA 357. It was in these Court of Appeal proceedings that the order attached to the statutory demand was made: see paragraph [3] above. 12 The off-setting claim upon which Sultana now seeks to rely is articulated as follows in the affidavit of Mr Comer filed in support of the present application: "(a) As the Plaintiff was concerned that it did not hold a Queensland Real Estate agent licence, it asked the Defendant to assist in formulating an arrangement which would enable it to act as a marketer on behalf of the Defendant to its clients in NSW without breaching the Property Agents and Motor Dealers Act in QLD or any other legal requirements; (b) Following this request, the Defendant consulted its then lawyers, namely, Chapman & Co, whose principal was Mr Greg Chapman. Mr George Vasiliou, the Sales and Marketing Manager for the Defendant, said to me, in words to the following effect: 'Our lawyer, Greg Chapman, has considered the restrictions of the Property Agents and Motor Dealers Act and we are advised that you are not prevented from marketing our properties. Cellcom has appointed PRD Realty Pty Limited as its sole and exclusive agent to sell units in the development. Sultana Investments will not be acting as Cellcom's agent, it will only be acting as a marketer of our units and for those services we will pay you the agreed fees.' (c) Relying on the Defendant's representation, the Plaintiff agreed to act as marketer for the Defendant's development to its clients in NSW in return for which it would be paid a fee for successful introductions; (d) Pursuant to this agreement, the Plaintiff successfully introduced 22 purchases [sic] to the Defendant entitling it to the fee of $110,000 plus GST; (e) According to the findings of the Queensland Court of Appeal, the representations made by the Defendant were incorrect, false and misleading in that the arrangements proposed by the Defendant and accepted by the Plaintiff were vitiated by the operation of the Property Agents and Motor Dealers Act ; and (f) The Plaintiff has suffered loss and damage as a result of relying on the Defendant's misrepresentation, including loss of fees, legal costs of the proceedings in the District Court and Court of Appeal of QLD and liability for interest." 13 Recognising that it must quantify its off-setting claim so that effect may be given to the aspects of s 459H that depend on the "amount" of an off-setting claim, Sultana put into evidence a form of statement of claim proposed to be filed in the District Court of New South Wales in which a case based on s 52 of the Trade Practices Act 1974 (Cth) is pleaded and the loss or damage suffered by the plaintiff is particularised as follows: "Unpaid fees pursuant to the Agreement $70,000 plus GST. Judgment against the Plaintiff in the Supreme Court of Queensland in the amount of $121,000 plus interest. Interest on judgment sums. Costs of the proceedings in the District Court of Queensland and the Supreme Court of Queensland, including the Defendant's costs." 14 (For reasons which need not be covered here, this form of statement of claim was admitted only as evidence of the manner of quantification of Sultana's claim; and the description of Mr Comer's affidavit of the substance of and basis for the claim was not supplemented by reference to the content of the form of statement of claim) 15 It is the contention of Sultana that Items (a) to (f) in Mr Comer's affidavit, as set out at paragraph [12] above, coupled with the particulars stated in paragraph [13] above, establish an off-setting claim of at least $191,000, being the aggregate of the specific sums mentioned in the first two items of the particulars. 16 Mr Elliott of counsel submitted on behalf of Cellcom that, having regard to the matters thus put forward, Sultana has failed to establish the existence of an off-setting claim in the way that is necessary to attract the benefit of s 459H(1). 17 The first point made by Mr Elliott is that, according to the description in Item (b) in Mr Comer's affidavit quoted at paragraph [12] above, the representation made by Mr Vasiliou on behalf of Cellcom was wholly and solely a representation about what he or Cellcom had been told or advised by the lawyer, Mr Chapman. To the extent that Mr Vasiliou said that Sultana "will not be acting as Cellcom's agent, it will only be acting as a marketer of our units", it was obvious, in Mr Elliott's submission, that Mr Vasiliou was reporting something that had been communicated to him or Cellcom by Mr Chapman. As a matter of construction I accept that submission. Mr Elliott then says that, in the absence of any evidence about what Mr Chapman actually said or advised, there is simply no basis on which to conclude that the representation made by Mr Vasiliou for Cellcom – a representation as to what he or Cellcom had been informed or advised by Mr Chapman – was inaccurate or false or otherwise misleading or deceptive. 18 Given the description of the alleged actionable wrong, this criticism is well founded. Only if Mr Vasiliou misrepresented or failed to report fully and faithfully what Mr Chapman had in fact said could there be a possible basis for an allegation of breach of s 52 of the Trade Practices Act in relation to Mr Vasiliou's statement about what Mr Chapman had said or advised. 19 Mr Elliott also submitted that the proposed proceedings by Sultana against Cellcom based on s 52 of the Trade Practices Act will inevitably fail on the ground that Sultana acted unreasonably in refraining from raising the s 52 claims in the proceedings brought by it against Cellcom in the District Court of Queensland in 2005. The subject matter of the proposed s 52 claims is, it is submitted, so closely and intimately connected with the subject matter of the 2005 Queensland proceedings that it ought to have formed part of the totality of the claims brought on that occasion. This submission is, of course, based on Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589. 20 Bearing in mind the description of the proposed s 52 claims at paragraph [12] above, it is pertinent to note that there was, in the Queensland proceedings, an estoppel claim by Sultana based on an allegation that Sultana had "acted to its detriment in relying on the appellant [Cellcom] to ensure that the agreement was in conformity with Queensland law" (I am here quoting from paragraph [44] of the Court of Appeal judgment). It is also pertinent to note Sultana's contention in the Queensland proceedings described as follows by the Court of Appeal (also at paragraph [44]): "(1) The Agreement was drafted by the appellant who, during negotiations, told the respondent that it would be (and was) checked by its solicitors. (2) Full disclosure was to be included in any contract of sale to show the respondent's benefit from the contract. (3) The respondent duly performed its part of the bargain for which it was to receive remuneration. (4) The appellant encouraged the respondent to engage in further marketing of The Mews and made payments on the footing that the respondent was entitled to its remuneration. (5) There was no suggestion until an amended defence was filed that the respondent was precluded by PAMDA from recovering its fee." 21 The Court of Appeal, dealing with the meeting between Mr Comer and Mr Vasiliou on 23 September 2002, referred (at paragraph [46]) to Mr Comer's evidence in the District Court as follows: "Was the legislation about real estate agents something that you were previously aware of?—Yes. And was it something that you were concerned about?—Yes. Were there discussions between you and Mr Vasiliou about that?—Yes. What were they?—Well, when we first met with George we – we said, 'Look, you know, we understand that there's a problem because we're not real estate agents and we're not licensed to – to sell real estate in Queensland, right, where the – where market is.' And he says, 'Oh.' I said, 'Look, you'll – you'll need to make sure that that's correctly identified so that it complies with the Queensland Act, right.' So, he said, 'Look, I'll go and see my solicitor, Mr Chapman, right, and he'll design a suitable contract that will comply, right.' Right?—I said, 'Okay.' So, that's when he went off and saw Mr Greg Chapman who designed the paperwork and he said that was suitable for the compliance of the Queensland Act." 22 It is thus perfectly clear that Sultana relied upon and pursued in the Queensland proceedings the very allegations of faulty or inaccurate representations by Cellcom to Sultana that Sultana now proposes to put forward as the foundation of the proposed action in the District Court of New South Wales based on s 52 of the Trade Practices Act. The factual questions about what Cellcom, through Mr Vasiliou, represented to Sultana, through Mr Comer, played a central part in the Queensland proceedings. There is no reason why Sultana could not have pursued to finality there the claims that it now (and subsequently) proposes to agitate in the New South Wales court. 23 Mr Elliott made other submissions in relation to the off-setting claim aspect. There is no need to deal with them. The two matters already canvassed are, to my mind, sufficient. I accept his submissions in relation to both of them. Even if Sultana successfully adduced evidence to substantiate its proposed s 52 claim, that claim would virtually certainly fail for both of the reasons outlined by Mr Elliott. Indeed, either alone would, in my view, make failure virtually certain. 24 It was submitted by Mr Meltz of counsel, who appeared for Sultana, that exploration of these matters is really something that should await the foreshadowed District Court proceedings. I disagree. The task of this court, upon the present application based on s 459H(1)(b), is to decide whether the plaintiff has put forward a "genuine" claim which gives rise to a serious question to be tried (Scanhill Pty Ltd v Century 21 Australasia Pty Ltd (1993) 12 ACSR 341), is based on a cause of action advanced in good faith for an amount claimed in good faith (Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743) and is not frivolous or vexatious (Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37). The strength of available defences is obviously relevant to this assessment. 25 In this case, the two obstacles to which Mr Elliott has pointed by way of potential defence are so clear and so formidable that it cannot be said that there is any serious question to be tried. The challenge to the statutory demand based on s 459H(1)(b) therefore fails. 26 I turn now to the allegation that there is a genuine dispute about the amount of the debt (s 459H(1)(a)) or a defect in the demand of such a quality that substantial injustice will be caused unless the demand is set aside (s 459J(1)(a)). 27 In this part of its case, Sultana places emphasis on the form of order set out at paragraph [3] above and, in particular, the words "together with interest from 19 April 2006 to judgment". 28 As Mr Meltz pointed out on behalf of Sultana, the order prescribes no rate of interest and does not indicate how the relevant rate is to be ascertained. Section 47 of the Supreme Court Act 1995 (Qld) empowers a court there mentioned to "order that there shall be included in the sum for which judgment is given interest at such rate as it thinks fit on the whole or any part of that sum for the whole or any part of the period between the date when the cause of action arose and the date of the judgment." 29 As Dowsett J observed in Secretary, Department of Family and Community Services v Mourilyan [2001] FCA 1583; (2001) 67 ALD 347: "An award of interest pursuant to s 47 of the Supreme Court Act (statutory interest) is in the discretion of the court: it must choose an appropriate rate …" [emphasis added]. 30 On the materials before me, the Queensland court has not chosen any rate of interest. Nor have I been referred to any provision of an Act, regulation or rule of court that supplies a rate of interest in default of specification in the court's order. 31 Mr Meltz submitted that, with no rate of interest stated or ascertainable, the recipient of the demand had no means of knowing precisely how much it was required to pay to satisfy the demand. That, he said, amounts to a defect warranting an order under s 459J(1)(a). 32 Mr Meltz referred, in this connection, to Topfelt Pty Ltd v State Bank of New South Wales Ltd (1993) 12 ACSR 381. In that case, the party issuing the statutory demand relied on the unpaid balance of a judgment debt. That balance was $179,782.73. The statutory demand referred to a debt of $179,782.73 "together with interest from 11 March 1993 to date and continuing" – in other words, interest after judgment. There was thus no fixed or quantifiable sum claimed by the statutory demand. 33 Because, in the Topfelt case, the demand did not specify as applicable to the fixed sum of $179,782.73 either an amount of interest or a rate of interest (or an accruing daily figure), the recipient of the demand was left in a position where it simply did not know how much it was expected to pay to comply with the demand and thereby to avoid the creation of a presumption of insolvency against it. That, it was said, amounted to a defect of the kind with which s 459J(1)(a) is concerned. The demand was set aside on that basis. 34 This case is different. The statutory demand refers to a specific sum of $152,095.34. The recipient of the demand is informed in unambiguous terms that it must, according to the issuer, pay $152,095.34 in order to comply with the demand. There is no inability to calculate. There is no room for doubt about what the issuer requires. There is accordingly no defect of the kind dealt with in the Topfelt case. This case is, in this respect, the same as Oakland Property Holdings Pty Ltd v J P Morgan Trust Australia Ltd [2008] NSWCA 360; (2008) 69 ACSR 485. 35 There remains, however, the significant point that the basis on which the judgment is the source of an obligation to pay $152,095.34 is unexplained and, on the materials before me, inexplicable. Sultana accepts, as it must, that there was a judgment in the sum of $121,000 and that interest on that sum was also awarded. What it does not know and cannot ascertain is how the additional $31,095.34 – that is, the difference between the $121,000 that must, of its nature, be undisputed and the claimed $152,095.34 - has been calculated; and whether it in truth represents the interest element of the judgment. 36 That being so, Sultana's position is really that it accepts that it is required to pay $121,000 but not that it must pay any greater amount. It therefore disputes the amount of the debt, as distinct from the existence of the debt. A debt exists. It is of an amount that is at least $121,000. Beyond that, however, there is dispute as to the amount. 37 The court is therefore satisfied that there is a genuine dispute between Sultana and Cellcom about the amount (as distinct from the existence) of the debt to which the statutory demand relates. It is also satisfied, however, that $121,000 out of the total of $152,095.34 specified in the demand is not the subject of that dispute. The "admitted amount", as defined by s 459H(5) is accordingly $121,000. 38 It is then necessary to apply s 459H(2) to ascertain the "substantiated amount". Because there is, in terms of that section, no "off-setting total", the "substantiated amount" is the "admitted amount" (which alone is the "admitted total") without deduction, that is, $121,000. 39 Because the "substantiated amount" of $121,000 is "at least as great as" the "statutory minimum" of $2,000 (see the s 9 definition of "statutory minimum"), it is open to the court to proceed in the manner specified in s 459H(4). Because there can be no doubt about Sultana's liability, as judgment debtor, to the extent of $121,000, that is the appropriate course for the court to take. 40 It will accordingly be ordered that the statutory demand dated 25 November 2008 served on the plaintiff by the defendant be varied (a) by omitting from paragraph 1 "$152,095.34" and inserting instead "$121,000.00"; and (b) by omitting the whole of the content of the schedule and inserting instead "Judgment debt in the sum of $121,000.00 pursuant to order 3 of the orders annexed hereto"; and it will be declared that the statutory demand has had effect, as so varied, as from when the statutory demand was served on the plaintiff. 41 Since the defendant has successfully resisted the plaintiff's claim for an order setting aside the statutory demand which will remain operative for almost 80% of the demanded sum, the plaintiff will be ordered to pay the defendant's costs of the proceedings. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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