Hyundai Multicav Pty Ltd v United Electrical Engineering Pty Ltd - [2005] SASC 129

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
HYUNDAI MULTICAV PTY LTD v UNITED ELECTRICAL ENGINEERING PTY LTD
Reasons of Judge Lunn a Master of the Supreme Court
12 April 2005
CORPORATIONS
Statutory demand - application to set aside - held part of sum demanded not due for payment at time of demand and thus a genuine dispute about it - held this ground could be raised as the material on which it was based was in plaintiff's affidavit but it was not referred to in the affidavit specifically as a ground - held genuine offsetting claim for balance of demand established - demand set aside.

HYUNDAI MULTICAV PTY LTD v UNITED ELECTRICAL ENGINEERING PTY LTD
[2005] SASC 129
JUDGE LUNN
Reasons on plaintiff’s application to set aside the statutory demand

The defendant served a statutory demand under s 459E of the Commonwealth Corporations Act 2001 (“the Act”) dated 22 June 2004 on the plaintiff claiming $164,135.99. The plaintiff instituted this action under s 459G of the Act seeking to set aside that demand. The application was supported by an affidavit of Aron Jackson, the sole director of the plaintiff, sworn on 9 July 2004 (“the Jackson affidavit”).
Since September 2001 the plaintiff has carried on the business of selling new personal computers. The defendant is a company which specialises in servicing computers. On 29 July 2003 the plaintiff and the defendant entered into a warranty service agreement in writing (“the Service Agreement”) for the defendant to provide warranty service for 12 months to purchasers of computers from the plaintiff. In broad terms the defendant contracted to perform the maintenance work required for the plaintiff to fulfil its warranty obligations to its customers. Upon the plaintiff selling a computer it became liable to pay to the defendant an amount fixed by the terms of the Service Agreement to cover the defendant’s work for the whole of the warranty period. When that amount became due for payment by the plaintiff is contentious, and will be dealt with later. It is not necessary to go into the other detailed provisions of the Service Agreement.
The statutory demand of 22 June 2004 stated that it was made up of a debt resulting from four invoices. The affidavit of a director of the defendant which verified the demand, and which was exhibited to the Jackson affidavit, had annexed to it the four invoices referred to in the demand. One of the documents was not an invoice, but a statement referring to numerous other invoices which showed a balance claimed by the defendant of $73,385.99 as at 30 April 2004. (Nothing turns on this document being a statement rather than an invoice). Also exhibited were three invoices, two of which were dated 20 May 2004 and one 24 May 2004, for amounts totalling $90,705. Those invoices gave no details of which contracts between the plaintiff and its customers were the subject of the invoices or when they had been entered into.
The clause “Pricing & Trading Terms” in the Service Agreement provided, inter alia:
“HYUNDAI will then pay United Electrical Engineering Pty Ltd the full amount of invoice net 30 days from end of month”.
The plaintiff contends that this term meant that the amounts which were the subject of the three invoices of 20 and 24 May 2004 did not become due for payment until 30 days from the end of May, ie until 30 June 2004. If so, those amounts were not due for payment at the date of the demand, or when it was received by the plaintiff on 28 June 2004. The defendant’s counsel contended that these three invoices were not invoices of the type referred to in the Service Agreement and that there were other earlier invoices for the contracts included in them which had previously become due for payment. He did not refer me specifically to the alleged earlier invoices which he said were part of the voluminous exhibits to the affidavit of the defendant’s director, Andrew Forster. If they were not truly invoices, no explanation was offered by the defendant as to why such documents were labelled invoices and sent to the plaintiff. In any event it is inconsistent with the defendant’s running account as at 30 April 2004 that the contracts to which these invoices relate were made prior to that date.
I am satisfied that the plaintiff has shown a genuine dispute for $90,750 in the amount claimed in the demand on the basis that this sum was not due for payment at the time of the demand. It is irrelevant for this purpose that it has subsequently become due for payment or that other amounts have since become due for payment by the plaintiff to the defendant. Where s 459H(1)(a) speaks of “the evidence … of a debt to which the demand relates” it encompasses the issue of whether the debt was due for payment when the demand was made.
The defendant’s counsel submitted that this point was not open to the plaintiff because it was not expressly referred in the Jackson affidavit. However, all the facts needed to establish it were referred to in the exhibits to that affidavit. S 45G(3)(a) of the Act requires that the affidavit supporting the application to set aside the demand must be filed within 21 days of service of the demand. This has been interpreted as requiring that the grounds relied upon must be deposed to in that affidavit: Energy Equity Corp Ltd v Sinedie Pty Ltd (2001) 166 FLR 179; D & S Group v O’Connor Investments Pty Ltd (1997) 15 ACLC 1794. These authorities do not require that the grounds be expressly nominated in the affidavit, but merely that the evidence in support of them be set out in it. While it is preferable that the grounds be made clear, if the defendant is taken by surprise at the hearing because they are not explicit it would be a proper basis for it to seek an adjournment to prepare itself to answer and meet such grounds. The defendant here did not seek any such adjournment.
In early 2004 a number of disputes arose between the plaintiff and the defendant. It is not necessary to go into them. In about early May 2004 the defendants stopped performing warranty work under the Service Agreement. Later in May it sought to terminate the Service Agreement under its terms by reason of alleged breaches by the plaintiff, but it is disputed whether any such termination was validly effected. By a letter of 31 May 2004 the plaintiff sought to accept an alleged repudiation of that agreement by the actions of the defendant. Whether the actions of the defendant in not performing maintenance work after about early May 2004 were a wrongful repudiation by it of the Service Agreement appears to be a complex and difficult issue. As it may be the subject of litigation on evidence more extensive than that before me, it is better that I say nothing about it other than that the plaintiff has shown at least an arguable case for an offsetting claim for breach of contract by the defendant.
The defendant’s counsel submitted that even if there was an arguable offsetting claim, the plaintiff had not discharged the onus upon it to show that the quantum of damage which it had suffered from any such breach of contract exceeded $71,385 (being the balance of the demand less the statutory minimum). The only evidence put forward by the plaintiff on this topic was a spreadsheet prepared by Edwin Reynolds, who is a consultant of the plaintiff. It was not stated that he had any expert qualifications. However, having examined the spreadsheet I am satisfied that it is only an exercise in arithmetic, albeit a fairly complicated one. It is not inadmissible as opinion evidence which could only be given by a suitably qualified expert.
The defendant’s counsel also submitted that the spreadsheet should be rejected because Mr Reynolds had not put forward the facts on which it was based. It would have been better if he had done so, but having examined it in detail I am satisfied that it is generally based upon information which is available in the other affidavits. I accept it as admissible evidence.
Broadly speaking the spreadsheet tabulates 6,542 warranties given by the plaintiff to its customers in each month in and after September 2003 and appropriates the amounts which became notionally payable to the defendant at the inception of the warranties over equal monthly periods for the 12 months of their operation. From this it collates the amounts allegedly attributable to the service work which was to be performed from May 2004 until May 2005. It shows this to be a total of $195,968.
I accept that if the plaintiff can establish that the defendant wrongfully repudiated the Service Agreement, one possible measure of its damage would be recovery of, or credit for, the unearned portion of the fees payable in advance for the periods in which the defendant did not perform its obligations. In about May 2004 the plaintiff engaged another contractor to carry out its warranty obligations, but no evidence was adduced as to what it had to pay to that contractor for such work which would otherwise have been performed by the defendant. While that amount may be a possible measure of the plaintiff’s damage, I consider that it is reasonably arguable that the plaintiff could recover, or seek to be credited for, the portions of the lump sum fees paid in advance for warranty work which are attributable to the periods in which the work was not performed. As the amount of $195,968 far exceeds the balance of $73,385.99 on the demand there is considerable leeway for errors in the calculations or other adverse factors to be brought into account in the assessment of the damages.
These findings are sufficient to establish that the plaintiff has at least an arguable case for a genuine dispute or an offsetting claim as a full answer to the defendant’s demand. Accordingly, it is not necessary to go into the other contentions put forward by the plaintiff. The demand will be set aside.