In the matter of Lisala P/L Cenicourt P/L v Lisala P/L

[1993] FCA 191

JUDGMENT No. ....,I. 9! ...... /!99.3

IN THE FEDERAL COURT OF AUSTRALIA	)
)
NEW SOUTH WALES DISTRICT REGISTRY )	NO. NG 3281 of 1992

)

GENERAL DIVISION 1

IN THE MATTER of LISALA PTY LTD

BETWEEN: CENICOURT PTY. LIMITED

Applicant

AND: LISALA PTY. LIMITED

Respondent

CORAM:	Beaumont J.
W:	12 March 1993  - 6 APR 1993

EX TEMPORE REASONS FOR JUDGMENT

This is an application to wind up the company. The application is opposed by the respondent. In order to understand the grounds for the opposition to the application it is necessary to give an account of the h~story of the

matter as follows.

1993. It is common ground that the orders, as placed, gave rise to an enforceable contract.

On 4 and 28 August the respondent ordered certain cooler equipment from the applicant. The details of these purchases are described in para. 8 of the affidavit of Mr. Vince Perna sworn in these proceedings on 10 March 1993 and need not be restated, save to say, that further details of the last order are also described in para. 2 of the affidavit of Mr. Craig Courtney also sworn in these proceedings on 10 March

The orders were placed agalnst the background of an existlng course of deallng between the parties and in accordance with the usual trade usage. It appears that the respondent was allowed, along with other customers of the applicant, time to pay. The evidence suggests, that at the time in question, the trade creditors of the applicant were allowed 45 days in which to settle their account with the applicant. This matter is referred to in a letter written by the applicant to its customers, including the respondent, dated 2 1 September 1 9 9 2 . In that letter the applicant said that it wlshed its customers to pay promptly and pointed out that the account in question apparently exceeded 45 days. As a result the applicant had decided to place the "credit facilities" extended by the applicant to the respondent "on hold". The letter went on to say that an early remittance from the respondent, as the applicant's customer, would enable the applicant "to reinstate your credit amount". The writer

of the letter, who was the financial controller of the	applicant, proceeded to say that lt was essential that the
customer contact him upon recelpt of the letter.
In reply, a note written by the managing director of the respondent, Mr T.J. Courtney, dated 2 5 September 1992, was sent by the respondent to the applicant by facsimile transmission in the following terms:

" A s you have a l r e a d y r e c e i v e d and banked the cheque - we

accep t your above o f f e r and your p r e v i o u s ve rba l o f f e r t o

r e i n s t a t e t h e account . "

It appears that although some outstanding accounts
of the respondent with the applicant appeared then to have

been overdue, those accounts were discharged on or about 25

September 1992. This is confirmed by the evidence of Mr Perna

in para. 1 3 of his affidavrt, sworn 1 0 March 1993. Reference is made to both the payment of $10,000 on 1 9 August 1992 in respect of the June account, and the payment of the balance of

$5296.25 of the account for that month which, according to Mr

Perna's evidence, was malled to the applicant on 1 0 September

1. I would lnfer that the cheque for the sum of $5296.25

which was mailed on 1 0 September 1992 was not the cheque referred to in the note of Mr: Courtney sent by facsimile transmission on 25 September 1992 .

However, a difficulty arose shortly before the para. 14 of the affidavit of Mr Perna, on 1 7 September 1992 Mr receipt of the letter of 2 1 September 1992 . According to	Perna spoke to a Mr Reid, apparently an employee of the
applicant, and asked when the respondent was to receive the coolers whlch had been ordered in August. According to Mr Perna, and none of thls evidence is disputed, Mr Reid then said:

" Y e s ,	we've	got	your	cheque	b u t	I	c a n ' t	a u t h o r i s e
d i s p a t c h	o f	t h e	goods,	y o u ' l l	have	t o speak	w i t h	Ian

Haberecht who i s o u r f i n a n c i a l c o n t r o l l e r . "

According to the evidence, 1Yr Perna then spoke to Mr

Haberecht on the telephone and was informed by him as follows:

" I c a n ' t a u t h o r i s e d e l i v e r y u n t i l I receive payment f o r

the J u l y 1992 a c c o u n t . "

Mr Perna s a ~ d that he would seek further instructions and call back. In h ~ s affidavit, at para. 16, Mr Perna says that on

21 September he again spoke to Mr Haberecht, informed him that

the cheque for the July account was ready, and suggested that the cheque be given to the driver when he delivered the goods which the respondent was then waltlng for. Mr Haberecht then said:

"You c a n ' t d o t h a t b e c a u s e the d e l i v e r i e s a r e made by a

h i r e d t a x i t r u c k . Can you m a i l the cheque to Braemar."

Mr Perna agreed to do this and arranged for the cheque to be

posted that night. It appears that this was the cheque

referred to by Mr Courtney in his facsimile note wrltten on 25

September.

Mr Perna goes on to say in his affidavit, that on 24

September he sent, by facsimile transmission, a memorandum to

rMr Reid reminding Mr Reid that he was still waiting for a

reply about the delivery of the coolers, informing him that the heater sections were assembled, and that all of these units were due for dispatch before the end of the following week.

Mr Reid responded to Mr Perna by facsimile

transmission on the same day saylng that the second cheque had only been recerved on the previous day but that at this time, the applicant did not hold directors' guarantees on the respondent's account:

" . . . the amount o u t s t a n d i n g i s g r e a t e r t han our normal

t r a d i n g terns i n t h i s s i t u a t i o n . I am n o t prepared t o

r e l e a s e a n y f u r t h e r goods a t t h i s time, a n y f u r t h e r

d i s c u s s i o n r e g a r d i n g d i s p a t c h o f product for you should

be made w i t h M r Graham Mar t in . "

According to Mr Perna's evidence, and there is no dispute about his evidence, the matters of personal guarantees and "normal trading terms", had not been raised or discussed with him prior to receipt of this facsimile transmission.

Regrettably, relations between these parties
deteriorated from thrs point. By letter dated 30 September

1992 to the respondent, the applicant stated that the

respondent's account for August purchases had not been paid and that as the account was "now outside our trading terms of	30 days", payment within seven days was required. It was then
said that £allure to pay within this time would lead to the institution of legal proceedings. The letter was signed by Mr Haberecht as financial controller of the applicant.
Mr Courtney replied to this letter by facsimile transmrssion addressed to Mr Haberecht on 2 October 1992. The
transmission read as follows:

" A s o f y e s t e r d a y we h a v e p l a c e d o r d e r s w i t h other

suppliers for the coolers w h i c h you f a l l e d t o s u p p l y a s

a g r e e d . T h e costs o f r e w o r k i s t o y o u r a c c o u n t and will

be o f f s e t a g a i n s t y o u r a c c o u n t . Our solicitors a r e J a c k ,

Cohen, S e r r y & CO and they a r e a d v i s e d o f y o u r t h r e a t . "

Mr Courtney took the matter further in a letter written to the applicant, dated 5 October 1992, responding in some detail to the applicant's letter dated 28 September. In that letter Mr Courtney sald, inter alla:

" A s t o m y a t t i t u d e t o y o u r company, the only i s s u e w h i c h

h a s c a u s e d me t o c o n s i d e r m y r e l a t i o n s h i p , i s y o u r

f a i l u r e	t o	h o n o u r	y o u r	r e p e a t e d	commi tmen t s	t o	o u r
company re	the	d e l i v e r y o f	19	u n l t s w h l c h	w e r e	on	o r d e r

w i t h you and w h i c h t h r o u g h y o u r a c t l o n s , h a v e cost u s

c o n s i d e r a b l e damage and financial loss, w h i c h w i l l either

be r e d r e s s e d t h r o u g h y o u r a c c e p t a n c e o f the d e d u c t i o n o f

those costs f rom y o u r a c c o u n t or w i l l be r e m e d i e d t h r o u g h

the l e g a l p r o c e s s e s . "

On 14 October 1992 the solicitors for the applicant sent, by post, a Notlce under s.460(2)~ of the Corporations Law (the Notice) addressed to the respondent. In the Notice the applicant demanded payment of the sum of $18,573,

particulars whereof were sald to be as follows:

" ( 1 ) Amount o w i n g for goods s o l d and d e l i v e r e d f rom

03 .06 .92 t o 14 .08 .92 . "

It is common ground that the Notlce was served in accordance with the legislation. Subject to one matter to which I will refer in a moment, and subject also to a foreshadowed counter-clalm, the Notlce lies at the heart of the present dispute. It 1s now common ground that the amount claimed to be owing in the Notice was in fact owing on the account there stated.

However, as I have mentioned, in addition to the counter claim foreshadowed, the respondent raised another matter in connection with the demand for the payment of the sum of $18,573. It is sald on behalf of the respondent, that on any view, the amount is overstated by a sum of $775 by reason of a credit note which was issued by the applicant in December 1992. The origln of this credit note is a credit claim dated, coincidentally, the same date as the Notice, namely, 14 October 1992. That credit claim, being number 1086 was addressed by the applicant to "Northern Air, 94 Mrlitary Road, Lismore".

It appears that the credit arose by reason of the
return of some goods pursuant to a claim made under warranty.

The credit claim was addressed to Northern Air but it does

bear, upon its face, a notation that the respondent was in	fact to be credited with the amount in question. This is
confirmed by the note, in respect of remedial action, appearing at the bottom of the credit claim form which states in terms that a credit was to be granted "against" the
respondent.
It appears, however, that the note itself was not issued until much later and, indeed, when it was issued as
credit note 001541 it was said to be not "due" until 31 December 1992. Although the events which gave rrse to the warranty claim, appear to have occurred at a much earlier date, indeed, the evidence would suggest as early as 26 August 1992, there is no evidence before me to suggest that a claim had crystallised in money terms at least before December 1992. As I have noted, the Notice was served on or about 15 October 1992, payment of the amount ln questlon was demanded within 21 days after the date of servlce.
No allowance should be made for the purpose of S. 460 in respect of the credit clam. It was then inchoate in my opinion and did not crystallise until December, well beyond the trme within which compliance with the Notice was required. However, it is perhaps unnecessary for me to express a concluded view on this point because, for reasons which I will shortly give, I am of the view that on
discretionary grounds I should not make a windlng up order in
this matter.
In order to understand the basis of the exercise of my discretron it will be necessary to return to the history of the matter as follows. By letter dated 5 November 1992 the solicitors for the applicant wrote to the respondent noting that the time for compliance with the Notice had expired and that the applicant had instructed its solicltors to commence winding up proceedings unless the sum of $18,573 was pald
within seven days. By letter dated 12 November 1992 the solicitors, then acting for the respondent, replied to the letter of 5 November and indicated that their client disputed the amount claimed in the demand and that wlnding up proceedings would be opposed.
By letter dated 16 November the solicitors for the applicant indicated to the solicitors for the respondent that winding up proceedings would be instituted. As I have noted, on 11 December 1992 the present application was filed. The application was dated 23 November 1992. However, it was not served until 23 December 1992. I have noted that date of service as an as an agreed fact.
Between the date upon which the application was filed and its service, the respondent wrote to the applicant a
letter dated 14 December 1992. In that letter reference was made to an earlier letter dated 24 September 1992 but that letter does not appear in the evidence before me. The letter
dated 14 December 1992 was as follows:

"Further t o our l e t t e r da ted 24 September 1992 we

wish	t o a d v i s e	t h a t	t h e	c o s t s	incurred	i n mod i f y ing
our	equipment	i n	o r d e r	t o	accommodate	Bonaire
c o o l e r s	i n s t e a d	o f	Braemar	c o o l e r s	amount	t o

$3544.25 a s per a t tached l i s t .

W e t h e r e f o r e enc lo se herewi th our cheque f o r

$15028.75	i n	f u l l	s e t t l e m e n t	o f	your	account	a s
f o l l o w s : -

Your invoice No. 6733 dated 03-08-92 $ 5694.00

6 764 04-08-92 S 6195.00

Less our costs as per attached list	$3544.25
Balance as per attached cheque	$15028.75
--------- 8 ,

There was attached to the letter a list of costs. The sum of

$3544.25 specified in the llst of costs is the subject of the

cross-clalm made on behalf of the respondent.

In short, the respondent contends that, as a result of the applicant having repudiated the performance of the contract for the supply of coolers, the respondent was obliged to modlfy the work it had already carried out on its equipment so as to accommodate other equipment which the respondent claims it was compelled to obtain from a source other than the applicant. The result, according to the foreshadowed cross- claim of the respondent, 1s that the respondent is out of

pocket in the sum of $3544.25 by reason of the breach of	contract of the applicant.
The evidence before me shows that the respondent has brought this cross-claim forward bond fide and with at least an arguable prospect of success in its prosecution. I note, in this connection, that no attempt was made to cross-examine
M r Courtney to suggest otherwise.

By letter dated 6 January 1993 the solicitors, now acting for the respondents, wrote to the solicitors for the applicant a lengthy letter indicating the basis of the cross- claim which I have described and explaining the basis upon which the respondent had paid the sum of $15,028.75.

Opposition to the present application was foreshadowed, as it was then asserted, and the evidence before me clearly shows, that the respondent was not ~nsolvent but was financially viable.

It may be noted that ~t IS not now disputed that the respondent is in fact solvent. What is put, is that there has been a deemed or notional insolvency whlch arose by reason of the undoubted £allure of the respondent to comply with the Notice within the prescribed 21 day period. There is an abundance of evldence before me, none of which is challenged, to indicate, that in truth, the respondent has a substantial excess of current assets over current liabilities. The

respondent is clearly, on the evldence, a financlally viable

organlsatlon and actively trading.

By letter dated 15 January 1993 the solicitors for the applicant replled to the solicitors for the respondent contending that there was no genuine dispute in relation to the debt then remaining and proposing to seek an order for winding up when the matter was before the Court. The matter was before the Court, in the first instance, on 5 February 1993 and after some preliminary consideration of the matter and some provisional orders being made by consent, the matter was stood over for consideration today when it has been fully argued.

I have come to the conclusion that I should ln the exercise of my discretlon refuse to order the windlng up of the respondent. It seems to me to be as clear as case as could be imagined for the exerclse of that discretion in the circumstances disclosed in the evidence now before me. I accept entirely, as has been put on behalf of the applicant, that as at the expiration of the prescribed 21 day period after the service of the Notlce a notlonal insolvency was

established. However, it is, of course, open to the

respondent to establish as at the hearing date of the

application that in truth it was and is actually solvent. As

I have sald, the evidence plalnly establishes the solvency of the respondent.

A further crucial matter in the exerclse of my discretlon depends upon the circumstances surrounding the creation of the balance of the account now said to be due by the respondent to the applicant. The evidence establishes to my satisfaction that these partles had enjoyed a trading relationship, of course, over a considerable period and that a running account had been established in that connection.

Whilst ~t is true that the original debt of $18,573 arose out of invoices rendered by the applicant to the respondent in August 1992, it was at about that tune that the applicant, according to the respondent's cross-claim, appeared to repudiate the contract between them for the supply of the coolers now in contention. It is, of course, no part of my function in hearlng a w~nding up application to adjudicate in any fmal sense upon the contractual dispute which has arisen in respect of the agreement to supply these coolers.

For present purposes it is enough for me to say, as

I have already noted, that the respondent propounds that

cross-clam in a manner which is bona fide and with at least some prospect of success. Moreover, as I have indicated, this cross-clalm 1s propounded in a context where the parties had already enjoyed a trading relationship in whlch a running account had been maintained between them. It is further significant, I think, that the cross-claim arose at

respect of goods delivered by the applicant to the respondent	approximately the same time as the amount claimed to be due ln	in August became payable, that is in or about the month of
September 1992.

In those circumstances I propose to dismiss the

application.

In the circumstances which I have mentioned, it seems to me appropriate that the applicant should receive its costs but only up to the time of receipt of the sum of $15,028.75. That amount was forwarded with a covering letter

of 14 December 1992 and it appears that it was banked on about 17 December. When the applicant received that letter it should, in my view, have recognised that there was at least a

substantial prospect that the respondent would endeavour to

propound the cross-clalm mentioned in the letter. On the other hand, as I have already put to counsel for the respondent, the respondent elected to approach the matter on a self help basis and there are of course obvious risks in embarking on that course. In those circumstances I am of the view that the applicant should receive its costs but only up to 17 December 1992 and that thereafter there should be no order for costs.

The formal orders of the Court therefore are: (1)

Application dismissed.	(2) Order that the respondents pay the
costs of the applicant up to 27 December 1992 and that

otherwise there be no order for costs.

I hereby certlfy that this and

the preceding thirteen ( 13) pages are a true copy of the Judgment of his Honour Mr. Justice Beaumo

Associate :

Date: