Auzcorp Pty Ltd v Alpha 1 Contracting Pty Ltd
[2017] WASC 34
•15 FEBRUARY 2017
AUZCORP PTY LTD -v- ALPHA 1 CONTRACTING PTY LTD [2017] WASC 34
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2017] WASC 34 | |
| Case No: | COR:200/2016 | 10 JANUARY 2017 | |
| Coram: | TOTTLE J | 15/02/17 | |
| 16 | Judgment Part: | 1 of 1 | |
| Result: | Application dismissed Statutory demand varied | ||
| B | |||
| PDF Version |
| Parties: | AUZCORP PTY LTD ALPHA 1 CONTRACTING PTY LTD |
Catchwords: | Corporations law Statutory demand Application to set aside statutory demand Whether a genuine dispute established Whether a genuine offsetting claim established Abuse of process |
Legislation: | Corporations Act 2001 (Cth) |
Case References: | Central City Pty Ltd v Montevento Holdings Pty Ltd [2011] WASCA 5 Colyer Fehr Tallow Pty Ltd v KNZ Australia Pty Ltd [2011] NSWSC 457 Crawford Fitting Co v Sydney Valve & Fittings Pty Ltd (1988) 14 NSWLR 438 Createc Pty Ltd v Design Signs Pty Ltd [2009] WASCA 85; (2009) 71 ACSR 602 Diploma Construction (WA) Pty Ltd v KPA Architects Pty Ltd [2014] WASCA 91 Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 Graywinter Properties Pty Ltd v Gas and Fuel Corporation Superannuation Fund [1996] FCA 822; (1996) 70 FCR 452 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
ALPHA 1 CONTRACTING PTY LTD
Defendant
Catchwords:
Corporations law - Statutory demand - Application to set aside statutory demand - Whether a genuine dispute established - Whether a genuine offsetting claim established - Abuse of process
Legislation:
Corporations Act 2001 (Cth)
Result:
Application dismissed
Statutory demand varied
Category: B
Representation:
Counsel:
Plaintiff : Mr M L Bennett
Defendant : Mr C Ko
Solicitors:
Plaintiff : Bennett + Co
Defendant : Trinix Lawyers
Case(s) referred to in judgment(s):
Central City Pty Ltd v Montevento Holdings Pty Ltd [2011] WASCA 5
Colyer Fehr Tallow Pty Ltd v KNZ Australia Pty Ltd [2011] NSWSC 457
Crawford Fitting Co v Sydney Valve & Fittings Pty Ltd (1988) 14 NSWLR 438
Createc Pty Ltd v Design Signs Pty Ltd [2009] WASCA 85; (2009) 71 ACSR 602
Diploma Construction (WA) Pty Ltd v KPA Architects Pty Ltd [2014] WASCA 91
Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785
Graywinter Properties Pty Ltd v Gas and Fuel Corporation Superannuation Fund [1996] FCA 822; (1996) 70 FCR 452
- TOTTLE J:
Introduction
1 The plaintiff, Auzcorp, has applied pursuant to s 459G of the Corporations Act 2001 (Cth) to set aside a statutory demand served by the defendant, Alpha, on 5 September 2016.
2 The statutory demand claimed the amount of $178,734.68, being a debt said to be due by Auzcorp to Alpha for catering services provided at a short-stay accommodation facility near Port Hedland International Airport (the Facility). The Facility is operated by Mia Mia Port Hedland International Airport Pty Ltd (Mia Mia). Mia Mia is a wholly-owned subsidiary of Auzcorp.
The evidence
3 Auzcorp relies on three affidavits sworn by Mr Mark Anthony Medlock on 23 and 27 September 2016, and 4 January 2017. Mr Medlock was a director of Auzcorp and of Mia Mia.
4 Alpha relies on three affidavits: one sworn by Mr Michael John Olsen on 27 October 2016; and two affidavits sworn by Mr Matthew Nicholas John Olsen on 1 and 2 November 2016.
5 Various objections were taken to the affidavit material but ultimately the parties agreed that any objections could be dealt with as matters of weight. I have taken that approach.
Background
6 Mr Medlock deposed that Auzcorp, 'by its wholly owned subsidiary' Mia Mia, operated the Facility, which contained 255 rooms and various ancillary facilities, and provided accommodation for a variety of clients, including fly-in/fly-out workers.
7 In early 2016 occupancy rates at the Facility had fallen. In response, Auzcorp considered the engagement of contract camp managers.
8 In March 2016, Precision Catering & Equipment Pty Ltd (Precision) - of which Mr Michael Olsen was a director - provided a proposal to Auzcorp to provide services at the Facility. Auzcorp did not engage Precision and Precision is now in liquidation.
Arrangements between Auzcorp, Mia Mia and Alpha
9 On 31 March 2016 Mr Matthew Olsen, acting on behalf of Alpha, sent Mr Haniff Kassim, the Chairman of Auzcorp, a quotation for the provision of facilities management, catering and janitorial services.
10 On or about 4 April 2016, Mr Kassim agreed to Alpha providing services at the Facility.
11 On 11 April 2016, various emails were exchanged between Ms Stacey Olsen, Mr Matthew Olsen and Mr Kassim and his executive assistant, Ms Melissa Marsh. The emails record that a conference telephone call was to be held on that day. The email exchange commenced with an email from Ms Marsh to Mr Michael Olsen in which she referred to a request made by her by an SMS message requesting an agenda if there was anything he wanted to discuss with Mr Kassim. Ms Marsh also wrote: 'We do need to finalise the agreement between both parties'. Ms Marsh's email signature block referred to her position as 'Executive Assistant to the Chairman - Auzcorp'. There was no reference in any part of the email to Mia Mia. Ms Olsen replied to Ms Marsh's email and set out an agenda for a conference call. The agenda included 'Notification of Auzcorp employee terminations' and 'Finalise agreement/contract between Alpha and Auzcorp'. The final email in the exchange was an email sent by Mr Kassim to Ms Olsen, copied to Mr Matthew Olsen, Mr Kassim wrote:
who do you want to keep
when can we let go the rest
what rate can we get our suites filled
and normal rooms
we are ready for a major major internet blitz when alpha is in there
12 On 13 April 2016, Alpha began to provide services at the Facility. At this time, Auzcorp claims $70,000 worth of consumable stock was at the Facility.
13 On 18 April 2016, Mr Matthew Olsen sent Mr Kassim and Mr Medlock a draft catering contract for their review. Auzcorp was identified as the Principal and Alpha as the Contractor.
14 Alpha rendered invoices to Auzcorp for its services and these were paid. At no stage did Auzcorp contend that it was not the party to which invoices should be addressed.
15 On 5 August 2016, Mr Medlock sent Mr Michael Olsen a version of the draft contract (previously provided by Mr Matthew Olsen) showing a large number of proposed amendments. The identity of the contracting parties had, however, not been amended.
The dispute
16 The dispute between the parties began on 19 August 2016. On that day, Mr Medlock sent a number of letters (on Mia Mia letterhead) to Mr Michael Olsen. In the first, Mr Medlock notified Alpha of a complaint received regarding the quality of the food served at the Facility. In the second, Mr Medlock notified Alpha that it had exceeded its authority by allegedly negotiating accommodation rates with potential clients. The final sentence of the second letter read as follows:
Mia Mia International Airport Pty Ltd and its parent company reserves all of its rights including the right to recover losses caused by Alpha 1's conduct.
17 Mr Matthew Olsen responded that day by letter to Auzcorp, purporting to give 24 hours' notice that Alpha would stop providing services from 4.00 pm on 20 August 2016. Mr Matthew Olsen stated that Alpha would cease to provide services unless:
(a) the notice of breach of authority dated 19 August 2016 was withdrawn;
(b) a contract or purchase order for the month of August was issued; and
(c) invoices rendered between May and August were paid.
18 In his letter, Mr Matthew Olsen disputed that Alpha had acted without authority, and contended that Mia Mia or Auzcorp had promised to provide a written services agreement to reflect the arrangement between Alpha and Auzcorp or Mia Mia.
19 Mr Medlock states that he sent a third letter (on Auzcorp letterhead) dated 19 August 2016 to Mr Michael Olsen, providing a response to Alpha's proposed suspension of services. In that letter, Mr Medlock noted that Alpha would be in breach of its obligations if it suspended its services at the Facility. There is some uncertainty as to whether this letter was sent.
20 Also on 19 August 2016, Mr Medlock sent a letter to Ms Angela Sharma, in which he authorised Ms Sharma to act on behalf of Mia Mia. Ms Sharma travelled to the Facility on 20 August 2016, where she oversaw the replacement of Alpha staff.
21 Ms Sharma prepared a report on her work at the Facility on 20 August 2016. In particular, Ms Sharma states that 'the purpose of the trip … was to protect the interests of Auzcorp based on the letter sent to [it] by Alpha 1 on 19 August 2016 …'. Ms Sharma reports that she spoke to Ms Olsen, and advised staff at the Facility to continue their work as Auzcorp took over management from Alpha.
22 Auzcorp alleges that, during this changeover of management on 20 August 2016, Alpha's staff disposed of or took away consumable stock.
23 The following day, 21 August 2016, Mr Matthew Olsen sent an email to Mr Medlock and Mr Kassim requesting a meeting for the purpose of discussing outstanding payments owed by Auzcorp to Alpha. Mr Medlock replied on 22 August 2016, stating that all communications should be directed to Auzcorp's solicitors.
24 On 22 August 2016, Auzcorp's solicitors wrote to Mr Matthew Olsen, noting that Alpha had repudiated any agreement with Auzcorp, and that Auzcorp was having its accountants calculate the final balance owed to Alpha. In this letter, Auzcorp's solicitors alleged that Mr Matthew Olsen had made criminal threats against Mr Medlock.
25 Mr Medlock states that earlier on 22 August 2016, Mr Matthew Olsen sent him an SMS, which demanded payment of amounts Mr Matthew Olsen said were owing to Alpha. Mr Medlock states that the SMS read:
Mark I see the childish coward games that you and your company like to play and have consequently instigated. I really have no idea what you are required to engage your lawyers for as our performance or conduct has never been disputable. True to form this is laughable and typical of Auzcorp looking for a settlement option to avoid paying your bills. I will give you one last time to pay my account in full before you initiate action between you and I that you will regret and lose. Pay what you owe me or you will wish that you never knew me Mark.
26 Mr Matthew Olsen replied by email to Auzcorp's solicitors on 23 August 2016, disputing that any comments he had made constituted criminal threats. Auzcorp's solicitors responded later that day, stating in particular:
… [Auzcorp] is receiving details from suppliers in respect of which your company has pledged [Auzcorp's] credit.
27 On 5 September 2016, Alpha served the statutory demand. It was signed by Mr Matthew Olsen.
28 On 24 September 2016, Mr Medlock alleges that he received a telephone call from Mr Matthew Olsen, in which Mr Matthew Olsen used abusive language and made various threats against Mr Olsen, his wife and his daughter. Mr Medlock further alleges that, during this call, Mr Matthew Olsen threatened Ms Sharma.
Auzcorp's claims
29 Auzcorp claims that there was some $70,000 worth of consumable stock located at the Facility when Apha began to provide its services. In a letter dated 4 May 2016 to Mr Kassim, Mr Matthew Olsen stated that the first invoice rendered by Alpha to Auzcorp included a deduction with respect to:
surplus food stock and consumables that belonged to Auzcorp which are now being utilised on site by Alpha National.
30 Auzcorp claims that, as a result of Alpha's suspension of services, it incurred expenses including the costs of:
(a) airfares to fly its managers and staff to the Facility;
(b) providing staff for the Facility from 20 August 2016; and
(c) replacing stock, food and other consumables disposed of or
removed by Alpha.
31 Auzcorp claims that these expenses amount to $72,493.22 made up of:
(a) wages of $41,850;
(b) superannuation of $3,975.77;
(c) payroll tax of $2,520.43;
(d) food of $19,305.92; and
(e) airfares of $4,841.10.
32 Auzcorp further claims that, after 20 August 2016, Alpha began providing services to The Landing, a competitor of Auzcorp/Mia Mia. Auzcorp alleges that Alpha acquired confidential information from Auzcorp, and has encouraged Auzcorp's clients to contract with The Landing, instead of the Facility. Mr Matthew Olsen denies that Alpha has provided services to The Landing
33 Auzcorp submits that these events give rise to genuine disputes as to the existence of a debt owed by Auzcorp to Alpha, genuine offsetting claims which reduce the amount of any debt, and a claim that Alpha's statutory demand amounts to an abuse of process.
Legal principles
Purpose of Pt 5.4 of the Corporations Act
34 In Createc Pty Ltd v Design Signs Pty Ltd [2009] WASCA 85; (2009) 72 ACSR 602 at [2], Martin CJ summarised the purpose of Pt 5.4 of the Corporations Act as follows:
That purpose is to provide a means whereby the insolvency of a company may be established for the purposes of an application to wind up that company. Its purpose is not to provide a means whereby those claiming a genuinely disputed debt can avoid the obligation of establishing their entitlement to that debt in a court of appropriate jurisdiction by placing commercial pressure on the party resisting payment.
Genuine dispute
35 Where there is a genuine dispute about the existence or the amount of a debt the subject of a statutory demand, the statutory demand will be set aside: Corporations Act s 459H.
36 A statutory demand will also be set aside if a company has a genuine offsetting claim which would reduce the amount of the statutory demand below the statutory minimum: Corporations Act s 459H(3). Alternatively, if the amount of the genuine offsetting claim is not large enough for the demand to be set aside, the amount of the statutory demand may be reduced by the amount of the genuine offsetting claim: Corporations Act s 459H(4).
37 Further, a court may order that a statutory demand be set aside if it is satisfied that 'there is some other reason why the demand should be set aside': Corporations Act s 459J.
38 The principles applicable to determining whether there is a genuine dispute were set out by Martin CJ in Createc at [43] - [46]. In summary:
(a) The test for 'genuineness' which enjoys the greatest judicial support is that of McLelland CJ in Eq in Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, where he described the expression 'genuine dispute' as connoting 'a plausible contention requiring investigation', and equated it to the criterion of 'serious question to be tried' which arises on an application for an interlocutory injunction.
(b) An applicant for an order setting aside a statutory demand must establish that the dispute is bona fide and truly exists in fact, and that the grounds alleging the existence of the dispute are real and not spurious, hypothetical, illusory or misconceived.
(c) The only function of the court is to determine whether there is a genuine dispute; it is not expected to undertake an extended inquiry nor attempt to weigh the merits of the dispute.
39 I was referred to two further cases by counsel for Alpha.
40 In Graywinter Properties Pty Ltd v Gas and Fuel Corporation Superannuation Fund [1996] FCA 822; (1996) 70 FCR 452, 459, Sundberg J stated that to demonstrate a genuine dispute exists, a supporting affidavit must disclose facts, and not merely assert that such a dispute exists nor make a bare claim that a debt is disputed. His Honour further stated that an affidavit 'which exhibits a range of correspondence between the parties or between their solicitors from which it appears that a claim is made and rejected for reasons given can qualify as a supporting affidavit'. In particular, his Honour found that an affidavit need not contain sufficient material to make out a case, but should set out the material facts on which the applicant intends to rely to show a genuine dispute exists.
41 In Central City Pty Ltd v Montevento Holdings Pty Ltd [2011] WASCA 5 [9] - [17], Murphy JA (with whom Buss JA, as his Honour then was, agreed) recited the principles set out in Createc and other cases concerning genuine disputes. Nothing said by his Honour affects the test for a genuine dispute set out in Createc.
Offsetting claim
42 In Diploma Construction (WA) Pty Ltd v KPA Architects Pty Ltd[2014] WASCA 91, Pullin JA (with whom Newnes J & Murphy JA agreed) considered at [52] that the test for whether an offsetting claim is genuine is relevantly identical to that for whether a dispute is genuine. His Honour cited Createcin reaching that conclusion. Additionally, his Honour at [78] stated that a 'cross-claim must be capable of being quantified in money terms before it can qualify as a genuine off-setting claim' (citations omitted).
Is there a genuine dispute?
43 Auzcorp contends that there are a number of genuine disputes, which are:
(a) whether there was an agreement between Auzcorp and Alpha for Alpha to provide services at the Facility;
(b) whether a term of such an agreement allowed Alpha to suspend its services; and
(c) whether Alpha was a fiduciary of Auzcorp, and is now improperly using information acquired in the course of that relationship.
44 Alpha makes an overarching submission to the effect that the disputes identified by Auzcorp involve unsubstantiated allegations.
45 While the amount of the debt claimed by Alpha was disputed in Auzcorp's written submissions, the parties now do not dispute that Alpha correctly claims payment of $178,734.68. The questions to be resolved here are whether it is Auzcorp that owes the debt and, if so, how much of that debt (if any) is offset by claims Auzcorp has against Alpha.
Dispute as to the identity of the contracting parties
46 I do not accept that there is a genuine dispute about whether Alpha contracted with Auzcorp for the following reasons.
47 First, Alpha's quotation was provided to Auzcorp. Mr Kassim, who was a director of Auzcorp but not of Mia Mia, accepted the quotation. The emails exchanged on 11 April 2016 make it clear that Mr Kassim was the decision-maker. This is corroborated to an extent by Mr Medlock, who deposed in his affidavit sworn on 27 September 2016 that he told Mr Matthew Olsen on 24 September 2016 that the decision to pay Alpha's invoices was not his. In her email of 11 April 2016, Ms Marsh refers to the need to finalise an agreement between 'both parties'. Read in context, this was clearly a reference to Alpha and Auzcorp.
48 Second, no objection was taken to Alpha submitting invoices to Auzcorp.
49 Third,even though no formal contract was concluded, the first draft contract prepared by Alpha and the draft contract amended by Auzcorp record Auzcorp as the proposed principal.
50 Fourth,in his letter to Alpha sent on 19 August 2016 complaining that Alpha had exceeded its authority, Mr Medlock was careful to preserve the rights not only of Mia Mia but also of Auzcorp, its parent company. If Auzcorp was not a contracting party, it would have had no right to complain about a breach of authority.
51 Fifth,in a letter sent to Alpha on 22 August 2016, Auzcorp's solicitor wrote:
I act for Auzcorp Pty Ltd…
Your conduct on 19 August 2016 repudiated any agreement with Auzcorp Pty Ltd.
Auzcorp Pty Ltd is having its accountants, RSM, calculate a final balance owing to your company. [emphasis supplied]
52 In a letter sent to Alpha on 23 August 2016, Auzcorp's solicitor gave Alpha notice that Auzcorp was investigating a concern that Alpha had pledged its credit to suppliers. No mention was made in either letter of Mia Mia.
53 Sixth, seen in the overall context of the communications between the parties, the fact that Mr Medlock's letters of 19 August 2016 were on Mia Mia letterhead and that there are references to Mia Mia in the documents are not sufficient to sustain the contention that it was Mia Mia and not Auzcorp that was the contracting party. At best, they provide some support for the possibility that there was a tri-partite agreement between Auzcorp, Mia Mia and Alpha.
Dispute as to implied term for suspension of Alpha's services
54 While raised by Auzcorp as an issue giving rise to a genuine dispute, this contention is more accurately characterised as giving rise to an offsetting claim. That is because it is not a dispute about whether Auzcorp owes an amount to Alpha but, rather, whether Auzcorp has a counterclaim against Alpha arising from Alpha's conduct. Accordingly, I deal with this issue in that context in the reasons which follow.
Dispute as to Alpha improperly using information
55 For the same reasons, this contention is more accurately characterised as giving rise to an offsetting claim, and is dealt with in that context in the reasons which follow.
Is there a genuine offsetting claim?
56 Auzcorp contended that there were a number of offsetting claims, namely that Alpha:
(a) falsely represented it would increase the occupancy rate at the Facility;
(b) did not account adequately for stock left at the Facility when it began to provide its services;
(c) suspended its services without appropriate notice and disposed of or retained stock the property of Auzcorp; and
(d) misused confidential information acquired in the course of its relationship with Auzcorp.
57 In broad terms, Alpha submits that Auzcorp has not adduced evidence to establish its offsetting claims, and has therefore failed to provide more than mere assertions in support of what it says Alpha owes to it.
Occupancy representation
58 In his affidavit dated 23 September 2016 Mr Medlock states that Mr Michael Olsen made a representation to Mr Kassim that if Mia Mia engaged either Precision or Alpha, either company would increase the occupancy rate at the accommodation facility to 160 guests per night. Mr Michael Olsen denies that he made this representation.
59 I am not satisfied that the alleged representation about the capacity to increase occupancy rates is a foundation for an offsetting claim. My reasons are as follows.
60 First, there is no mention of the alleged representation in any of the contemporaneous documentation. There is no mention of it in Auzcorp's solicitor's letters.
61 Second, Mr Kassim has not sworn an affidavit stating when the representation was made and in what terms it was made. Mr Medlock's hearsay evidence about the alleged representation is very general. In the absence of any mention of the representation in the documentary evidence, I cannot accord it any weight.
62 Third, there is no evidence that the alleged representation was relied upon or that if it was relied upon it caused any loss.
63 Independently of the alleged representation claim, Auzcorp makes the further claim that Alpha turned away potential clients. The foundation for this claim is an email apparently sent on 16 August 2016 from Mia Mia Reception/Administration to 'Admin' that reads as follows:
Re Stephen Caruana Accommodation
Hi Caitie
unfortunately We have no room for bookings tonight.
We are at max capacity.
Kind regards,
Reception/Administration
64 This exiguous evidence is not sufficient to support a genuine offsetting claim.
Stock acquisition
65 Auzcorp claims that, on Alpha taking over management of the Facility, there was some $70,000 worth of stock owned by Mia Mia which Alpha acquired and used.
66 In a letter to Auzcorp sent by email on 4 May 2016, Mr Matthew Olsen stated:
Please note that we have included a deduction of $6.50 Excluding GST per chargeable man-day during [13 April 2016 - 30 April 2016] to compensate for surplus food stock and consumables that belonged to Auzcorp which are now being utilised on site by Alpha National.
Please revert back to us in writing by close of business next Wednesday 11th May 2016 with any discrepancies, queries or your approval prior to us issuing a tax invoice for the amount specified above.
67 Auzcorp did not query the amount of the allowance at the time. It has only been challenged after the statutory demand was served. In my view, Auzcorp has not established that the allowance made by Alpha did not fully compensate it for stock used by Alpha. The fact that Auzcorp has raised this claim so long after the event - and after it had paid invoices rendered in the interim - leads me to the conclusion that this is not a genuine offsetting claim.
Suspension without notice and disposal of stock
68 Alpha submits that the contract between it and Auzcorp did not contain a term which would have prevented Alpha from suspending its services if it was not paid by Auzcorp.
69 Auzcorp submits that such a term, if implied, would have required Alpha to provide reasonable notice of any suspension of services. Further, it submits that 24 hours was not a reasonable period of notice.
70 A term which allows a party, in the position of Alpha, to suspend its services after providing reasonable notice to the other party can be implied into an oral contract: see Colyer Fehr Tallow Pty Ltd v KNZ Australia Pty Ltd [2011] NSWSC 457 [65] - [67]; Crawford Fitting Co v Sydney Valve & Fittings Pty Ltd (1988) 14 NSWLR 438, 444. In my view, it is a plausible contention that such a term was implied in the agreement between Auzcorp and Alpha for the following reasons.
71 Arguably, such a term is necessary for the reasonable and effective operation of the contract in circumstances where - amongst other possibilities - Auzcorp may over a period of time fail to make payments to Alpha. In that situation, it would be reasonable for Alpha to cease providing services until it received overdue payments for its work. Given, however, the location of the Facility, it is arguable that more than 24 hours' notice is required. As this case demonstrates, with only 24 hours' notice, Auzcorp was placed in a difficult position.
72 In my view, Auzcorp has raised a plausible contention that Alpha breached its contract with Auzcorp by threatening to suspend its services on 24 hours' notice and thus has raised the basis for a genuine offsetting claim.
73 Mr Medlock's evidence is that Alpha's conduct caused it to incur expenses of $72,493.22. I have referred to the breakdown of this sum earlier in these reasons. Mr Medlock's explanation of how the expenses relate to the alleged breach of contract is limited. The expenses claimed appear to include expenses that would have been incurred even if Alpha had provided reasonable notice of its intention to suspend services. In that event, it would have been necessary for Auzcorp to incur the expense of mobilising a replacement workforce to site and thereafter paying the wages of the replacement workforce. I have concerns that the expenses claimed by Auzcorp are inflated, but I am not in a position to make an informed assessment of the quantum of the claim, and my task is to determine whether there is a genuine offsetting claim. I think that there is sufficient evidence to establish Auzcorp's offsetting claim for amounts it claims it incurred as a consequence of this arguable breach.
74 I consider that Auzcorp has established a genuine offsetting claim in the amount of $72,493.22. Accordingly, I will exercise the discretion in s 459H of the Corporations Act to reduce the amount of Alpha's statutory demand.
Use of confidential information
75 Auzcorp alleges that, after 20 August 2016, Alpha began to provide services to The Landing and solicited Auzcorp's clients. Auzcorp points to an email sent on 30 August 2016 from 'Guest Services' to the Guilmartin Group. In that email, it appears an officer or employee of The Landing wrote:
I've been passed your details from a colleague and would like to present an accommodation proposal to you for your team in Port Hedland.
76 Mr Matthew Olsen states that Alpha has not provided services to The Landing, or otherwise used information it acquired concerning Auzcorp's clients. Alpha further submits that, in any event, its agreement with Auzcorp did not prevent it from using such information.
77 In my view, this email does not sufficiently establish that there is a plausible contention that a representative of Alpha attempted to solicit Auzcorp's clients to use The Landing instead of the Facility. In the absence of an adequate evidentiary basis for the allegation that Alpha has misused Auzcorp's confidential information, Auzcorp's claim is no more than a mere assertion. Accordingly, Auzcorp has not established this offsetting claim.
Abuse of process
78 Auzcorp submits that the issuing of the statutory demand by Alpha constitutes an abuse of process, because it was not issued in good faith and for proper purposes.
79 The demand claims for amounts outstanding in relation to invoices rendered in May, July and August 2016. The parties accept that these amounts are correct, though, of course, Auzcorp maintains it has genuine offsetting claims.
80 The statutory demand expressly excludes from the amount claimed some $8,999.92, which is identified as a potential offsetting claim that Auzcorp may have against Alpha.
81 I am not persuaded that Alpha served the statutory demand knowing that the debt was the subject of a genuine dispute. Thus it was not served for an improper purpose. In reaching this conclusion, I have taken into account the content of the SMS message Mr Medlock deposes Mr Matthew Olsen sent to him on 22 August 2016. I do not consider that this is sufficient to render the service of the statutory demand an abuse of process. I add, however, that the making of any kind of personal threat in the context of a commercial dispute is to be condemned in the strongest possible terms. I do not propose to comment upon the alleged threats made by Mr Matthew Olsen to which Mr Medlock refers in his affidavit evidence. These were allegedly made after the statutory demand was served. They are matters that may be considered by another court and I will refrain from further comment.
Conclusion
82 Auzcorp applied to set aside a statutory demand served on it by Alpha. Auzcorp has not established that a genuine dispute exists regarding that demand, or that Alpha's service of the statutory demand amounted to an abuse of process. Auzcorp has, however, established a genuine offsetting claim for $72,493.22.
83 I therefore refuse Auzcorp's application to set aside the statutory demand, but exercise the discretion in s 459H of the Corporations Act to vary the amount of Alpha's statutory demand from $178,734.68 to $106,241.46.
84 I will hear the parties in relation to the form of the orders and costs.
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