EOC Group Pty Limited v Harry the Hirer Pty Ltd

[2007] NSWSC 1358

CITATION:	EOC Group Pty Limited v Harry the Hirer Pty Ltd [2007] NSWSC 1358
HEARING DATE(S):	23 November 2007
JUDGMENT OF:	Hammerschlag J
EX TEMPORE JUDGMENT DATE:	23 November 2007
DECISION:	The statutory demand be set aside. Defendant to pay plaintiff's costs of the proceedings.
CATCHWORDS:	CORPORATIONS - Statutory demand - application to set aside under s 459H - genuine dispute - whether plaintiff became liable to defendant by novation - novation not established - genuine dispute that debt not owed by plaintiff
LEGISLATION CITED:	Corporations Act 2001 (Cth)
CASES CITED:	Barclay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743 Solarite Air Conditioning v York International Australia Pty Ltd [2002] NSWSC 411
PARTIES:	EOC Group Pty Limited (ANN 125 319 486) Harry the Hirer Pty Ltd (ACN 004 959 362)
FILE NUMBER(S):	SC 4375/2007
COUNSEL:	M. Ashhurst SC with S. O'Brien (Plaintif) M.J. Cohen (Defendant)
SOLICITORS:	Gye Associates (Plaintiff) Gadens Lawyers (Defendant)

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IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

HAMMERSCHLAG J

23 NOVEMBER 2007

4375/2007 EOC GROUP PTY LIMITED v HARRY THE HIRER PTY LIMITED

EX TEMPORE JUDGMENT

1 HIS HONOUR: This is an application under s 459H of the Corporations Act 2001 (Cth) to set aside a statutory demand dated 14 August 2007 for $148,965.48 made by the defendant on the plaintiff.

2 The defendant is an event specialist, servicing Australia’s event, party and exhibition industry.

3 The plaintiff asserts a genuine dispute as to the existence of the debt to which the demand relates. It says that the defendant has made demand on the wrong entity. It says that the true debtors are two other entities, EOC Events Pty Ltd (in liquidation) (“Events”) and EOC Media Pty Ltd (in liquidation) (“Media”).

4 The plaintiff was incorporated on 9 May 2007.

5 By a Business Sale Agreement dated 30 May 2007 the plaintiff (as Buyer) acquired, as a going concern from the EOC Group of companies, (which included Events and Media and other entities whose names commenced with the letters EOC) (as Seller) all their physical and intangible assets.

6 It is not in dispute that the defendant had a contractual relationship with both Events and Media and provided hiring services to them, before the plaintiff acquired the assets of the group. It would appear that after the plaintiff took over their businesses it wished to ensure that services which had previously been provided by the defendant to Events and Media would continue to be provided to it.

7 On about 10 July 2007 Events and Media were placed under voluntary administration and subsequently were placed under winding up.

8 On or about 16 July 2007 the defendant lodged a proof of debt for $346,433.46 with the administrator.

9 That amount comprised of $337,662.40 claimed from Events and $8,771.06 claimed from Media. Those amounts were derived from invoices summarised in statements from the defendant to Events and Media respectively which were attached to the proof. The proof included amounts which were subsequently included in a statement directed to the plaintiff to which I shall refer shortly.

10 On 17 July 2007 Michelle Dean, the plaintiff’s finance coordinator, sent an email to Angeleen Clark, the accounts receivable manager for Victoria of the defendant. The email reads as follows:

“Hi Angeleen, how are you? I am flat out as per usual.

Is possible (sic) for you to change all invoices that are dated from the 1/6/07 onwards to EOC Group Pty Ltd as EOC Events is no longer trading?

Hope this is not too much an issue.

Thanks Heaps.”

11 On 6 August 2007 amended statements (summarising invoices) were sent by the defendant to Events and Media for services up to and including 24 June 2007 in the reduced amounts of $218,519.69 to Events and $6,146.16 to Media. The invoices in respect of Events ranged from 20 April 2007 to 25 May 2007 and those in respect of Media ranged from 20 April 2007 to 18 June 2007.

12 Also on 6 August 2007 there was directed to the plaintiff a statement summarising invoices totalling $148,965.48, being the debt claimed under the statutory demand. The invoices referred to in the statement ranged from 22 June to 29 June 2007.

13 The defendant put that $148,965.48 of the debt previously owed by Events and Media was novated to the plaintiff which took upon itself that indebtedness.

14 The plaintiff disputed any novation and any obligation to pay the debt.

15 Mr Cohen of counsel for the defendant put that a novation of the debt to the plaintiff was to be derived from a combination of the following two things:

a as between the plaintiff on the one hand and Media and Events on the other, from clauses 6(b) and 10.1.2(a) and (b) of the Business Sale Agreement which he put reflected an assumption by the plaintiff of the liability to the defendant the subject of the statutory demand; and

b as between the plaintiff and the defendant, from the terms of the 17 July 2007 email which he put reflected the same assumption.

16 I shall deal with the two elements of the combination in turn.

17 Clause 6(b) of the Business Sale Agreement provided as follows:

“The Buyer may at its election, without liability, in relation to the supply of any goods or services by the Seller prior to Completion in connection with the Sale Business:

(i) remedy any defect:

(ii) perform any service which the Seller agreed to perform; or

(iii) perform any liability created by the Seller under any guarantee, product warranty or service undertaking.

at any time subsequent to Completion."

18 Clauses 10.1.2(a) and (b) of the Business Sale Agreement provided as follows:

“(a) The Seller discloses that it has a practice of invoicing for services to be provided or performed in the future (after and up to 12 months into the future) and, pending performance of the invoices services, those debts are not provable against the clients of the Business.

(b) The Buyer undertakes the obligation to provide those client contracted services.

(c) …”

19 The difficulty with the first element asserted is that these provisions do not do the work which the defendant relies upon them to do. They both concern the plaintiff assuming a liability to a third party where Events or Media had been the supplier of goods or services to that party, not where they (as is the case here) were the acquirers of goods or services from that party (in this case the defendant).

20 So far as the second element based on the 17 July 2007 email is concerned (insofar as it is necessary to consider its effect having regard to my conclusion that the provisions of the Business Sale Agreement reflect no relevant assumption as between the plaintiff and Events and Media of any liability) it too has difficulties.

21 Firstly, Events and Media are not parties to it, and there is no suggestion in the evidence that Ms Dean had any authority to agree to anything on their behalf.

22 Secondly, subsequent to 17 July 2007, notwithstanding the request to change all invoices dated after 1 June 2007, the defendant nevertheless lodged a proof of debt seeking payment of the same amounts from the administrators. This is conduct inconsistent with the novation asserted.

23 On a final hearing it may be that the defendant is able to establish a novation. However, to satisfy the court that there is a genuine dispute as to the existence or amount of the debt to which a demand relates, the plaintiff need only show one issue having a sufficient degree of cogency to be arguable. The test is not a difficult or demanding one. The court does not embark upon any extended enquiry. The court does not also seek to resolve competing claims but to determine whether the claim is made in good faith, which means arguable on the basis of the fact asserted with sufficient particularity to enable the court to determine that the claim is not fanciful. See, for example, Barclay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743 per Palmer J, and Solarite Air Conditioning v York International Australia Pty Ltd [2002] NSWSC 411 at [23] per Barrett J.

24 In my view, the plaintiff has more than met the low threshold required for applications of this nature. The material before the Court does not establish a novation (which requires completed agreement between all parties) under which the plaintiff undertook the liabilities of Events or Media to the defendant.

25 In those circumstances the statutory demand is to be set aside. I so order. The defendant is to pay the plaintiff's costs of the proceedings.

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