Electic v Todaytech

[2003] NSWSC 211

CITATION:	Electic v Todaytech [2003] NSWSC 211
HEARING DATE(S):	14/03/03
JUDGMENT DATE:	14 March 2003
JURISDICTION:	Equity Division
JUDGMENT OF:	Master Macready at 1
DECISION:	Paragraph 13
CATCHWORDS:	Corporations Law. Application to set aside statutory demand. Summons dismissed. No matter of principle.
PARTIES :	Electic Australia Pty Limited v Todaytech Distribution Pty Limited
FILE NUMBER(S):	SC 1035/03
COUNSEL:	Mr T. Hancock for plaintiff Mr K. Smark for defendant
SOLICITORS:	Conway MacCallum for plaintiff Chris Lai Solicitors for defendant

- 1 -

THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

MASTER MACREADY

FRIDAY 14 MARCH 2003

1035/03 - ELECTIC AUSTRALIA PTY LIMITED v TODAYTECH DISTRIBUTION PTY LIMITED

JUDGMENT

1 MASTER: This is an application to set aside a statutory demand which is dated 16 December 2002 and claims a sum of $753,472.17. There had earlier been another statutory demand, which was issued and withdrawn at a time after the relevant events which occurred, which I have to consider in this case.

2 The plaintiff and the defendant had traded together for some time in the buying and selling of electronic equipment and the action arises from the trade between them for the sale and purchase of goods. There is no dispute between the parties as to the amount and the real question is whether the amount referred to in the demand is presently due and owing.

3 The plaintiff raises two matters. First, it says that there is a genuine dispute because of a contractual term which was supported the consideration allowed it a further period of a year from 8 October 2002 to repay the debt.

4 The other matter which it raises is an offsetting claim for which there is some evidence to support some damages which it has sustained arising from events which occurred after the discussions in October. The problem with this claim is it is not quantified and accordingly could only be valued, if at all, at $1 and in the context of this case that is almost irrelevant. This is not to say that there might not be some appropriate claim but that is a matter which will have to be dealt with at another time and another place in some other proceedings.

5 The real question concerns the discussions of 8 October. Different versions were given in evidence but it is plain that I cannot resolve any differences in the relevant conversations and accordingly I will assume for the purposes of the discussions, to which I will now refer, that the conversations were as set out at paragraphs 11 through to 13 of the affidavit of Mr Yang of 13 March 2003. Those paragraphs are in the following form:-

"11. At the meeting on 8 October 2002, I met with Michael Chong of the defendant who I had met previously. I observed that there was another gentleman present at the meeting who I had not met before. He was introduced to me as Mark Knox. I do not recall Mark Knox saying anything at the meeting. At the meeting Michael Chong and I had a conversation to the following effect:

Chong: ‘What is going on with these debts? We need them paid now.’

Yang: ‘There is some happenings in Korea. The Korean banks have started to pull credit line from my customers. Based on the last history, it has happened in Korea before. Eventually line of credit was given again to customers. Based on this history, we expect the Korean banks to open line of credit again in 2 months. I can't be sure. I can only pay you when my customers pay. Since the amount of our receivables and payables of CPU business is too big, I can't raise funds from other small businesses, I can pay you only when I receive payment from Korea.’

Chong: ‘What is the schedule now? Do you have any schedule?’

Yang: ‘I am not sure. I cannot be definite about time of payment. It could take a year. It could be much shorter. I am expecting to get funds, based on what my Korean customer's input of around 18 October 2002 I may get $200,000.00 US and the rest by the end of this month.’

Chong: ‘What is the banking issue? What happened in Korea?’

Yang: ‘Early September, Koram Bank announced it would be acquired by Shin Han Bank, because the staff in Koram Bank were worried about losing their job due to their wrong practice. The wrong practice that not taking enough mortgage for line of credit.

Koram Bank not pull line of credit first. What Koram Bank did is they received payment for used LC and didn't allow to use that amount of credit line. When a customer ask bank to allow bank to open LC bank kept asking payment for due LC as well. They say you pay LC and I then talk to my boss. Koram Bank repeat same practice to many customers as it result in cash flow shortage to my customers.

This situation spreaded to other banks. Other Korean banks started to worry about payment for due LC from same customers. So other banks started chase payment not to allow to use customers credit line.’

12. I then handed to Michael Chong a cheque in the sum of $100,000.00.

13. Our conversation then proceeded to the following effect:

Yang: ‘I am prepared to offer this cheque to show our sincerity in paying these debts but I also need time. Because amount is too big, I don't have fund to cover these receivables. Only when I collect money from Korean customer can I pay you. But I promise Electic will do best to pay up as soon as possible. You know Todaytech also owe us money. We not want that money now if you give us time.’

Chong: ‘That's fine.’

The meeting ended."

6 Before turning to the form of the conversations it is necessary to see the basis upon which they might be put forward to give rise to a contractual term which would lead to there being a contract which contained a term that the debt was not to be repaid within a particular year or for at least a year. This involves two elements, one which involves an ability to extract from what is in the conversation a contractual term for which the plaintiff contends. Secondly, there must be some consideration, because one is, in fact, dealing with nothing more than a past consideration for payment of part of a past debt.

7 I have referred to a number of cases which indicate that forbearance to sue can be an appropriate consideration. See for instance Wigan v English and Scottish Law Life Assurance Association (1908) 1 Ch D 291; Fullerton and Anor v Provincial Bank of Ireland (1903) AC 309; Edwin v Williams (1998)QCA 439. In essence they indicate that forbearance to sue for a reasonable time, either if it is agreed or if it is not, in fact may give rise to appropriate in respect of the person who is suing. The inference of forbearance is illustrated by the comments at page 315 in the speech of Lord Davey in Fullerton’s case.

8 One must, in the context of the present case, look at whether there is any consideration moving from the plaintiff itself. Payment of the $100,000 which is referred to is really nothing more than past consideration for payment of part of a past debt.

9 When one looks at the conversation at paragraph 11, it really contains a series of statements by Mr Yang which indicate his difficulties and the fact that he cannot be definite about payment. It might take a year, could be much shorter, in terms of contractual contention that is extremely vague and I would think it would be difficult to read into that a contractual term for up to a year.

10 However, I think the biggest problem is, in fact, the consideration. The consideration can best be illustrated by the fact that in the conversation there was nothing further put forward by the plaintiff. For instance, it did not promise to pay interest on the debt. If it had at that stage promised to pay some interest there would have been consideration in law which would have been sufficient to support the contractual term contended for.

11 In my view there is no consideration and accordingly I do not think that there is any genuine dispute. So that there can be no misunderstanding about a genuine dispute, I refer to the fact that these principles have been referred to and developed in a number of cases and I have applied the principles that were usefully summarised by his Honour McLelland CJ in Eq (as he then was) in Eyota Pty Limited v Hanave Pty Limited (1994) 12 ACLC 669. At page 671 his Honour made the following comments in respect of the expression “genuine dispute”:-

“It is, however, necessary to consider the meaning of the expression ‘genuine dispute’ where it occurs in s 459H. In my opinion that expression connotes a plausible contention requiring investigation, and raises much the same sort of considerations as the ‘serious question to be tried’ criterion which arises on an application for an interlocutory injunction or for the extension or removal of a caveat. This does not mean that the Court must accept uncritically as giving rise to a genuine dispute, every statement in an affidavit ‘however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be’ not having ‘sufficient prima facie plausibility to merit further investigation as to (its) truth’ (cf Eng Mee Yong v Letchyumanan (1980) AC 331 at 341), or ‘a patently feeble legal argument, or an assertion of facts unsupported by evidence’ (cf South Australia v Wall (1980) 24 SASR 189 at 194).

But it does mean that, except in such an extreme case, a Court required to determine whether there is a genuine dispute should not embark upon an inquiry as to the credit of a witness or a deponent whose evidence is relied on as giving rise to the dispute. There is a clear difference between, on the one hand, determining whether there is a genuine dispute and, on the other hand, determining the merits of, or resolving, such a dispute. In Mibor Investments (at ACLC 1066; ACSR 36607) Hayne J said, after referring to the state of the law prior to the enactment of Division 3 of Part 5.4 of the Corporations Law, and to the terms of Division 3:

‘These matters, taken in combination, suggest that at least in most cases, it is not expected that the Court will embark upon any extended inquiry in order to determine whether there is a genuine dispute between the parties and certainly will not attempt to weigh the merits of that dispute. All that the legislation requires is that the Court conclude that there is a dispute and that it is a genuine dispute.’”

In Re Morris Catering (Australia) Pty Limited (1993) 11 ACLC 919 at 922; (1993) 11 ACSR 601 at 605 Thomas J said:

‘There is little doubt that Division 3 .prescribes a formula that requires the Court to assess the position between the parties, and preserve demands where it can be seen that there is no genuine dispute and no sufficient genuine offsetting claim. That is not to say that the Court will examine the merits or settle the dispute. The specified limits of the Court’s examination are the ascertainment of whether there is a “genuine dispute” and whether there is a “genuine claim”.
It is often possible to discern the spurious, and to identify mere bluster or assertion. But beyond a perception of genuineness (or the lack of it) the Court has no function. It is not helpful to perceive that one party is more likely than the other to succeed, or that the eventual state of the account between the parties is more likely to be one result than another.
The essential task is relatively simple - to identify the genuine level of a claim (not the likely result of it) and to identify the genuine level of an offsetting claim (not the likely result of it).'

I respectfully agree with those statements.”

12 In the circumstances, I am satisfied that there is no genuine dispute in respect of the debt and accordingly unless I am asked to reduce the demand by $1 I will just simply dismiss the application with costs.

13 I note that there is no claim to have the amount of the demand reduced by $1 and I dismiss the application with costs.

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Last Modified: 03/27/2003