New South Wales Supreme Court CITATION : Artis Group Pty Ltd v Hubnet Global Resources Pty Ltd [2009] NSWSC 935 HEARING DATE(S) : 04/09/09 JUDGMENT DATE : 4 September 2009 JURISDICTION : Equity Division Corporations List JUDGMENT OF : Barrett J EX TEMPORE JUDGMENT DATE : 4 September 2009 DECISION : Statutory demand reduced. CATCHWORDS : CORPORATIONS - winding up - application for order setting aside statutory demand - whether genuine dispute - whether defect - no matter of principle LEGISLATION CITED : Corporations Act 2001 (Cth), ss 459G, 459H(1)(a), 459H(3), 459J(1)(a) and (b) CATEGORY : Principal judgment PARTIES : Artis Group Pty Limited - Plaintiff Hubnet Global Resources Pty Ltd - Defendant FILE NUMBER(S) : SC 2128/09 COUNSEL : Mr J J Young - Plaintiff Mr N Jain, Director of Defendant in person SOLICITORS : Harris & Company - Plaintiff Mr N Jain, Director of Defendant in person IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST BARRETT J FRIDAY 4 SEPTEMBER 2009 2128/09 ARTIS GROUP PTY LIMITED v HUBNET GLOBAL RESOURCES PTY LIMITED JUDGMENT 1 The plaintiff applies under s 459G of the Corporations Act 2001 (Cth) for an order setting aside a statutory demand dated 9 March 2009 served on it by the defendant. 2 The debt or alleged debt, or perhaps there were two, to which the statutory demand relates is in the sum of $16,692.06 and is described in its schedule as: " Description of the debt Amount of the debt Tax Invoice 00003372 dated 10 December 2008 for contract to permanent conversion fee for Lyn Balchin contract $16,546.20 Short paid invoices 00003363 & 00003386, for contract services of Lyn Balchin, for the period 17.11.08 – 30.11.08 and w.e. 21.12.08 $145.86 Total amount outstanding: $16,692.06" 3 The plaintiff accepted that the second element amounting to $145.86 was due. It has paid that amount. As to the balance of $16,546.20, the plaintiff says that there is, for the purposes of s 459H(1)(a) a genuine dispute as to the amount or existence of the debt. The plaintiff also raises an alleged defect in the statutory demand with s 459J(1)(a), a matter to which I shall come. 4 I must emphasise in relation to the first ground of challenge that I am not required in this case to decide whether the sum of $16,546.20 is owing due and payable by the plaintiff to the defendant. The question before me is whether there is a dispute as to the amount or existence of the debt, that is, whether there is an arguable case that the money or some of it is not owing due and payable. If there is a plausible contention to that effect and it has a cogent basis, then the question whether a genuine dispute exists is answered in the affirmative and that is the end of the inquiry in this particular kind of case. 5 On or about 30 June 2008, the plaintiff and the defendant entered into an agreement entitled "service agreement". It was an agreement for the provision by the defendant to the plaintiff of project management services. Pursuant to that agreement, the defendant provided to the plaintiff the services of Ms Lyn Balchin and the plaintiff on-provided Ms Balchin's services to a customer of its, CSA. 6 There were provisions in the agreement controlling or regulating what might be termed "poaching" of Ms Balchin by the plaintiff or its client to which her services were provided. In particular, clause 11.4 was in the following terms: "Artis or the customer may directly employ or engage the Consultant (subject to the Consultant willing to accept the offer) on expiry of the term of this contract as permanent employee subject to the condition that Artis shall pay to the Contractor a lump sum free ("contract to permanent fee") calculated as set out at item 12 of the Schedule. Such fee shall become payable on the date the Consultant commences direct employment/engagement with Artis or the customer. Such fee shall only be payable should the commencement of direct employment/engagement take place within six (6) months after expiry or termination." 7 The fee provided for in clause 11.4 is referred to as a "contract to permanent fee". 8 The defendant's contention is that CSA, the plaintiff's customer for which Ms Balchin actually worked, employed or engaged her as a permanent employee on the expiry of the term of her placement covered by the services agreement and that the plaintiff thereby became liable under clause 11.4 to make a payment to the defendant calculated in accordance with that clause. 9 The relevant employment of Ms Balchin, according to the defendant, was employment at a base salary of $115,000 per annum plus 9 per cent superannuation, to make a total package of $125,350, with Ms Balchin occupying a project manager position. On that basis, the defendant says, the amount payable under clause 11.4 was $16,546.20. The start date of the employment was stated to be 12 January 2009. This is in the defendant's invoice dated 10 December 2008 which is expressed to be payable 9 January 2009. 10 There is evidence that CSA, by a letter dated 31 October 2008, offered Ms Balchin a project manager position at the salary of $115,000 per annum plus 9 per cent superannuation. According to the plaintiff, however, Ms Balchin did not actually take up that position. Instead, the plaintiff says she was employed by CSA as a programme coordinator at a smaller salary attracting, therefore, a smaller fee under clause 11.4. An offer of a 30 hours a week position was apparently conveyed by CSA to Ms Balchin by a letter of 19 December 2008. 11 The plaintiff accepts (and accepted at an early stage in correspondence) that, by virtue of Ms Balchin's employment at the lower rate, a fee of $10,934.88 became payable by the plaintiff to the defendant. It is to be noted that under clause 11.4 the fee becomes payable at the date Ms Balchin commences direct employment or engagement. At that point, it is no doubt, assumed that the nature and terms of the employment will be crystallised. The plaintiff says that this happened on 12 January 2009. Ms Balchin's account, to the extent to which it appears from the evidence, is that she was offered the higher level position at the higher salary but did not take it up, and that was superseded by the replacement letter of offer which she did accept, so that she commenced on 12 January 2009 at the lower rate of salary. 12 It is relevant, however, to note that there is an indication that Ms Balchin took up the higher paid position, that is, the position originally offered at $115,000 per annum, about 3 months later, that is, 3 months after her employment with CSA began. 13 The plaintiff approaches this matter on the basis that the question to be determined is whether the particularly described debt in the invoice on which the statutory demand is based exists as to its whole. That is not, in my view, the correct question. The correct question is whether a debt exists by virtue of clause 11.4 and if so, whether the amount of that debt is as stated in the invoice. 14 The plaintiff accepts that a debt exists as to $10,934.88. Indeed it appears that the plaintiff's own client, CSA, has put it in funds to that extent. Beyond that, there is a dispute. The dispute extends to the balance of the invoiced amount over and above $10,934.88. The dispute comes from both the construction of clause 11.4, that is, to discover what its actual meaning and operation are, and from the facts regarding whether Ms Balchin ever got to the clause 11.4 crystallisation point in relation to the more highly paid employment position or whether that crystallisation only ever occurred in relation to the less highly paid position. 15 There are clearly arguments both ways on that. Mr Jain has produced documents subpoenaed from CSA indicating that there are factual questions outstanding about Ms Balchin's relationship with that company and the work she actually did and, perhaps, about the salary she was actually paid. They are not matters that can or should be addressed on this application except to note that they give rise to a dispute – a dispute, I might say, that needs to be resolved in proceedings other than proceedings under s 459G. 16 Turning to the s 459J(1)(b) aspect, I do not accept the submission that just because the demand is based on an invoice stating what the plaintiff says is the wrong amount and a wrong date for payment is stated in the invoice, there is a defect in the statutory demand within s 459J(1)(b). The real question, in that connection is whether the demand itself leaves any doubt in the recipient's mind as to what must be done to comply with the demand. There is no doubt in this case. The clear requirement was that the sum of $16,692.06 be paid. That was quite straightforward. There is no defect in the demand. This was so, whatever the invoice might have said. 17 Mr Jain has referred to a number of matters involving clause 11.3 and supposed obligations of the plaintiff's own client, CSA. These are irrelevant to the present inquiry which is whether a dispute exists as to the existence or amount of the particular debt. Clause 11.3 could not be the source of a debt. If it has been breached, and I make no comment one way or the other on that, there may be a claim for damages, but a claim for damages does not mean there is a debt. 18 In the result therefore, the plaintiff has shown that there is a genuine dispute as to the difference between $16,546.20 and $10,934.88, but there is no genuine dispute as to that last mentioned amount, that is, $10,934.88. 19 The situation is thus as described in s 459H(3) and the court makes the following order: "Order that the statutory demand dated 9 March 2009 served on the plaintiff by the defendant be varied by reducing the amount thereof to $10,934.88." [Submissions on costs] 20 The plaintiff seeks costs on the basis of pre-trial correspondence offering to settle the matter. I am not satisfied that that order should be made. Since the defendant has succeeded to some extent in sustaining the statutory demand and the plaintiff has succeeded to some extent in challenging it, the appropriate outcome with respect to costs is that there should be no order as to costs. ********** 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.