Buzd Pty Ltd v Acurix Networks Pty Ltd - [2019] WASC 388

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   BUZD PTY LTD -v- ACURIX NETWORKS PTY LTD [2019] WASC 388
CORAM:   MASTER SANDERSON
HEARD:   18 SEPTEMBER 2019
DELIVERED          :   29 OCTOBER 2019
FILE NO/S:   COR 137 of 2019
BETWEEN:   BUZD PTY LTD
Plaintiff
AND
ACURIX NETWORKS PTY LTD
Defendant

Catchwords:

Corporations law - Application to be set aside a statutory demand - Turns on own facts

Legislation:

Nil

Result:

Application to set aside statutory demand dismissed

Category: B

Representation:

Counsel:

Plaintiff	:	Mr C Ko
Defendant	:	Mr K M McNally

Solicitors:

Plaintiff	:	Trinix Lawyers
Defendant	:	McNally & Co

Case(s) referred to in decision(s):

Nil

MASTER SANDERSON:

This is the plaintiff's application to set aside statutory demand. The application is supported by three affidavits of Glenn Leslie Weiland. The first sworn 28 June 2019, the second sworn 13 August 2019 and the third sworn 30 August 2019. In opposition to the application the defendant relied on two affidavits of Grant Alan Farrow. The first sworn 31 July 2019 and the second sworn 20 August 2019. Although there was a significant amount of documentation lodged by both parties in fact the resolution of this application is relatively straightforward.
A copy of the statutory demand appears as attachment GLW1 to Mr Weiland's first affidavit. In the schedule to the demand under the heading 'Descript of the debt' there appears the following:
The debt arises from a R&D Development Agreement dated 16 September 2015 between the Company and the Creditor and invoices dated from 1 September 2015 to 1 November 2018.
The amount of the demand is $316,621.60. By par 7 of the affidavit accompanying the demand the defendant says it rendered invoices to the plaintiff between 1 September 2015 and 1 November 2018 totalling $850,976.54. A list of the invoices rendered is included in par 7 of the affidavit. Between 1 October 2015 and 1 April 2016 a monthly amount of $17,936.11 was rendered. Thereafter the monthly invoices were for an amount of $18,150. Between 1 October 2015 and 1 April 2016 ten invoices were rendered, the most significant of which was invoice 807 for $101,930.00 issued on 24 December 2015. So really the demand is based upon what the plaintiff says was an obligation to make regular monthly payments plus payments of a specific amount being $213.90. These accounts being rendered from time to time. Further additional accounts were rendered on an ad hoc basis. The demand makes it plain all of these amounts were due pursuant to the 'R&D Development Agreement' (the Agreement).
In par 6 of his first affidavit Mr Weiland explains the nature of the plaintiff's business. That paragraph reads as follows:
The Plaintiff is in the business of supplying data analytics services to brick‑and‑mortar retail business clients. The Plaintiff utilises sensors installed within its clients' businesses to capture location‑based data from consumer smartphones, including where and how long consumers spend time within businesses. This data is processed and delivered to clients through a data analytics engine, which assists clients to assess consumer activity and maximise marketing efficiency. The Plaintiff relies entirely on working sensors to capture and deliver accurate data in real-time.
During the course of the hearing I explored with both counsel the nature of the plaintiff's business as outlined in the above paragraph. In practice what happens is this. A customer walks into a store and provided he or she has a smartphone – and it seems most phones are 'smartphones' – his or her movements are tracked. So, for instance, if the customer enters a newsagency and browsers car magazines or home renovation magazines the sensors supplied by the defendant will track the customer's movements through their smartphone. The smartphone does not have to have any particular 'app'. So long as the phone is switched on the information will be connected by the sensors. That information is then transferred to a computer – usually a laptop – which has a 'dashboard'. The proprietor of the store can track not just what product is being sold – that can be done by the barcode reader at the point of purchase – but using these sensors the proprietor is able to ascertain what particular product interests the customer and presumably adjust the items on display accordingly. The persons who do not carry a smartphone are of course not recorded. However, I was assured by counsel the percentage of such individuals is 'statistically insignificant'. For their part, the customer has no idea their movements are being tracked. Given these sensors are tiny, virtually every customer would be blissfully unaware information is being collected about their shopping habits which will affect the way the proprietor runs the business.
What would George Orwell have made of all this?
The plaintiff, through Mr Weiland, says that pursuant to the Agreement the defendant was to supply sensors to the plaintiff and those sensors were to have a Wi‑Fi capacity. The plaintiff says the sensors supplied did not have that capacity and were not fit for purpose. As the defendant did not meet a central requirement of the Agreement the plaintiff says it is not entitled to the payment as claimed. Further, the plaintiff says because the sensors failed it has suffered loss and damage in that it has not been able to take advantage of business opportunities.
At par 26 of his first affidavit Mr Farrow has this to say about the mini sensors:
Put simply, the mini sensors work in the following way:
a.The access points (which are larger) have full Wi-Fi capability. This means that the access point can send and receive information. When access points are in 'sensor mode' they can collect data (such as where people are standing, and for how long) and send that information to wherever it is directed to;
b.A problem with access points is that they are quite expensive to purchase (approximately AUD$377) and there are expensive continuing licencing costs to the manufacturer, such as Cisco Meraki and Xirrus;
c.A mini sensor is a scaled down version of the access point;
d.A mini sensor is a lot cheaper than an access point, and costs around AUD$120;
e.The Plaintiff's original specification to the Defendant for the mini sensor was for it not to have Wi-Fi ('transmit') capability; and
f.A mini sensor can receive information (such as where people are standing, and for how long) and can send that information to the access point. The mini sensor does not need Wi-Fi and can send the information to the access point either through hard wiring or connecting the mini sensor and the access point to the same network in a location (such as a shop).
As I understand it then, the defendant says it supplied mini sensors which did not have a Wi‑Fi capacity and it was never intended they would have Wi‑Fi capacity. The mini sensors could be hardwired – that is not difficult to understand. Or it seems they could connect to the access points through what the uninitiated might regard as a Bluetooth capacity. What is important is the fundamental disconnect between the positions of the plaintiff and the defendant. On the one hand the plaintiff says the mini sensors had to have a Wi‑Fi capacity and the fact they did not have that capacity meant they did not work. On the other hand, the defendant says it was never intended the mini sensors would have a Wi‑Fi capacity and what was supplied was consistent with the contractual agreement. The Agreement appears as attachment GLW3 to Mr Weiland's first affidavit. The Agreement is a two page document and was clearly not drafted by lawyers. It does anticipate payment by the plaintiff to the defendant of a monthly fee for 'development costs'. There is no mention in the Agreement of the mini sensors and whether or not they will have Wi‑Fi capacity. Confusingly cl 5 of the Agreement is titled 'Entire Agreement'. It reads as follows:
This Agreement constitutes the entire understanding of the parties as to matters set forth herein. No modification of this Agreement shall be valid or binding unless executed in writing by each of the parties on or after the date hereof. None of the parties shall be bound by any representations, warranties, promises, statements or information as to the matters set forth herein, unless such are specifically set forth herein.
In his first affidavit (par 10) Mr Weiland says that early in 2015 the plaintiff provided to the defendant a brief (the Brief) to supply sensors. He says these sensors were to provide 'a simple out of the box solution that was supposed to have Wi‑Fi capacity and could just be supplied to the plaintiff's customers to take it out of the box to instantly use without having to engage a technical IT consultant to install them'. He then refers to a number of parts of the Brief and says it is clear from that Brief that the sensors should have a Wi‑Fi capacity. That is disputed by Mr Farrow. But clearly there are two different issues which the parties appear to have conflated. First, is the obligation of the plaintiff to pay to the defendant a monthly payment of $16,500 (plus GST) per month from 1 September 2015 until the termination of the Agreement. That payment can be characterised as a 'research and development payment'. It is not in any way dependent upon supplying sensors. The dispute as to whether the sensors had to have a Wi‑Fi capacity or not feeds into the question of whether the plaintiff is able to establish it has an offsetting claim which is greater than or equal to the amount of the demand. In par 11 of his first affidavit Mr Weiland refers to the Brief. He makes three points. First, he refers to the section under the word 'Foreword' and points out it states that:
The purpose of this document is to provide an agreed technical and business requirement scope for the production and management of Wi‑Fi access points (hereinafter referred to as sensors).
He says this clearly indicates the sensors were to have Wi‑Fi capability. Although it is not entirely clear, I would accept that is one possible interpretation of what is said. But the other two points made by Mr Weiland do not support his proposition. Both talk about sensors and access points but neither refers to the sensors being Wi‑Fi capable. They are equally consistent with the defendant's position that the sensors would connect to the access points not using a Wi‑Fi system.
Counsel for the defendant made the point that at no stage did the plaintiff complain the sensors were not Wi‑Fi capable. This is a point of some significance. It is clear from a reading of the documents filed by both parties that what they were trying to do involved some technical complexity. At times the jargon is bewildering. But the concept of transmission of data via Wi‑Fi is relatively simple. If such a simple problem was standing in the way of the sensors working as was intended it was to be expected the plaintiff would have picked up on the problem and drawn it to the defendant's attention. It is clear from the correspondence both parties wanted this system to work – if it did they both stood to profit handsomely. If the difficulty lay in the lack of Wi‑Fi connectivity, and the plaintiff believed the defendant had contracted to supply that connectivity, then surely the plaintiff would have acted before the relationship turned toxic and the business opportunity was lost.
In determining whether or not a statutory demand ought be set aside the question is whether there is a genuine dispute about the debt. The statutory demand procedure is not a forum in which to determine issues of credibility. But a party who maintains there is a genuine dispute must establish its position is arguable. Not every contention in an affidavit, no matter how implausible, must be accepted. In my view, there is nothing in the affidavit material which established that it was arguably the case the fact the sensors did not have Fi‑Wi capacity was a breach of an agreement between the plaintiff and the defendant.
Attached to the affidavits of Mr Farrow – particularly his second affidavit – is much correspondence showing repeated promises by the plaintiff to make payment of the defendant's invoices. At first glance it may seem this material was included to establish the plaintiff's case that the sensors were defective was a recent invention. During the course of her submissions I put that to counsel. She indicated that was not the purpose of including the correspondence. Rather she made the point that the plaintiff repeatedly indicated it would pay the defendant's outstanding invoices without once mentioning any alleged defect in the sensors. That is the point I have highlighted above and counsel was quite correct to draw attention to the inconsistencies in the plaintiff's position.
There is no genuine dispute as to this outstanding debt. The application to set aside the statutory demand will be dismissed. The plaintiff should pay the defendant's costs of the application. There is, however, a question of costs thrown away by reason of an adjournment which was occasioned by the late filing of an affidavit on the part of the defendant. Accordingly, on publication of these reasons, I will give the parties the opportunity to make submissions on costs.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
DG
Associate to Master Sanderson
29 OCTOBER 2019