JAHE Pty Ltd v Aquatic Leisure Technologies Pty Ltd
[2008] WASC 176
•20 AUGUST 2008
JAHE PTY LTD -v- AQUATIC LEISURE TECHNOLOGIES PTY LTD [2008] WASC 176
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2008] WASC 176 | |
| Case No: | COR:42/2008 | 25 JUNE 2008 | |
| Coram: | MASTER SANDERSON | 20/08/08 | |
| 11 | Judgment Part: | 1 of 1 | |
| Result: | Demand varied Application to set aside refused | ||
| B | |||
| PDF Version |
| Parties: | JAHE PTY LTD (ACN 121 202 051) AQUATIC LEISURE TECHNOLOGIES PTY LTD (ACN 008 905 888) |
Catchwords: | Corporations law Application to set aside statutory demand Turns on own facts |
Legislation: | Nil |
Case References: | Chippendale Printing Co Pty Ltd v Deputy Commissioner of Taxation (1995) 15 ASCR 682 Re Softex Industries Pty Ltd (2001) 187 ALR 448 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Applicant
AND
AQUATIC LEISURE TECHNOLOGIES PTY LTD (ACN 008 905 888)
Respondent
Catchwords:
Corporations law - Application to set aside statutory demand - Turns on own facts
Legislation:
Nil
Result:
Demand varied
Application to set aside refused
(Page 2)
Category: B
Representation:
Counsel:
Applicant : Mr D S Romano
Respondent : Mr M F Holler
Solicitors:
Applicant : Wilson & Atkinson
Respondent : Lawton Gillon
Case(s) referred to in judgment(s):
Chippendale Printing Co Pty Ltd v Deputy Commissioner of Taxation (1995) 15 ASCR 682
Re Softex Industries Pty Ltd (2001) 187 ALR 448
(Page 3)
1 MASTER SANDERSON: This is the applicant's application to set aside a statutory demand. The application is supported by an affidavit of Jason Eastough sworn 10 April 2008 and a further affidavit of Mr Eastough sworn 30 May 2008. In opposition, the respondent relies upon an affidavit of Greg Garbellini sworn 13 May 2008.
2 Appearing as annexure JE1 to Mr Eastough's first affidavit is a copy of the statutory demand. In the schedule to the demand under the heading 'Description of Debt', reference is made to 29 invoices rendered by the respondent to the applicant which it is said show that the applicant is indebted to the respondent in an amount of $196,553.34.
3 The applicant appears to have approached this matter on the basis that with respect to each of the invoices there is either a genuine dispute as to whether the amount claimed is owing, there is an offsetting claim which can be put against each invoice or, in the overall, there is some other reason why the demand ought be set aside. Leaving to one side the question of whether there is some other reason why the demand should be set aside, a reading of the affidavit material shows that in fact the applicant alleges a genuine dispute or an offsetting claim only with respect to 14 of the invoices. These 14 invoices total $119,248.45. In reality then (and again, leaving aside the argument that there is some other reason why the demand ought be set aside), the applicant is looking to vary the amount of the demand rather than have it set aside in its entirety. What is required, then, is an analysis of each of the disputed invoices to see whether or not in each case some genuine dispute or offsetting claim has been raised by the applicant.
4 It is convenient to begin with a brief summary of the background facts. The applicant is the trustee of the JA & HD Eastough Family Trust. In November 2006, the company, as trustee, purchased a business which carried on the business of selling spas, saunas and associated products. The business traded under the name of Jadan Spas. It was located in Osborne Park. Mr Eastough says in his first affidavit that at the time the business was purchased, the applicant entered into an oral agreement with the respondent to re-sell products which were manufactured and marketed by the respondent. Mr Eastough says this was an oral agreement. He says that there were four relevant terms of the agreement. First, the respondent would supply the applicant with products and the applicant would have 30 days to pay for those products. Second, the respondent would provide after sales support for the products supplied. Third, the respondent would maintain certain service standards and undertake warranty work on any defective products manufactured or supplied by the respondent. Fourth,
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- from November 2007, the respondent would supply the applicant with products on the basis that the applicant was required to pay for the products by way of cash on delivery or, in the absence of the products being paid by way of cash on delivery, the products would be paid automatically through a floor plan arrangement with GE Finance.
5 Mr Eastough alleges that as a result of the failure of the respondent to comply with the terms of the oral agreement, on 29 February 2008 the applicant gave notice that it wished to terminate the agreement. He says that on 8 March 2008 the agreement was terminated. The invoices the subject of the statutory demand bear various dates commencing on 10 October 2007 and concluding on 14 March 2008.
6 Mr Garbellini, on behalf of the respondent, disputes the applicant's version of the contractual arrangement between the parties. Mr Garbellini says that in or around November 2006, he had a number of discussions with Mr Eastough which culminated in the applicant becoming a distributor of the respondent's product. During the course of one of those discussions, Mr Garbellini provided Mr Eastough with a draft distribution agreement which the respondent wanted the applicant to sign. For one reason or another that document was never signed. It seems clear then that the contractual arrangement between the applicant and the respondent rested on some form of oral agreement which arose out of the discussions in November 2006.
7 Mr Garbellini maintains that it was never agreed between the applicant and the respondent that the applicant would have a 30-day trading account. He says that he advised Mr Eastough that the respondent's terms of trade were at all times 'cash on dispatch' or payment by way of a finance arrangement known as a floor plan between the applicant and GE Commercial Corporation (Australia) Pty Ltd. Mr Garbellini also says that it was not agreed that the respondent would provide after sales support for the products. He does accept that it was the respondent's responsibility to undertake warranty work on any proven defective products supplied by the respondent. There is also a dispute between the parties as to the circumstances in which the agreement came to be terminated. That dispute is not relevant for present purposes.
8 Given the way that the applicant has approached this matter, save in one respect, the contractual relationship between the parties is of no real concern. The relevant factual dispute is as to the responsibility of the respondent for defects in the products that it supplied to the applicant and the applicant on-sold to customers. Even on this point the dispute is very
(Page 5)
- narrow. Both parties agree that the respondent would undertake warranty work on any defective products manufactured or supplied by the respondent. The real dispute is as to whether the respondent would provide after sales support for the products. Quite what that is supposed to mean is not apparent from Mr Eastough's affidavit. It is hard to see how 'after sales support' could be anything more than a requirement that the respondent undertake warranty work on any defective products it had supplied to the applicant. But insofar as there is a dispute on this aspect of the contractual arrangement, for the purposes of this application, the applicant's position should be accepted.
9 It is appropriate then to look at the invoices which are disputed by the applicant. Conveniently, a table of these invoices was provided in par 11 of the submissions filed on behalf of the applicant. (The evidence in relation to these invoices is largely found in Mr Eastough's first affidavit. Unless otherwise stated, reference to paragraphs in Mr Eastough's affidavit is a reference to this first affidavit.)
10 The first invoice is 086182 in an amount of $1,430. In par 11 of his affidavit, Mr Eastough says that the applicant has no record of receiving the goods the subject of the invoice. In par 21 of his affidavit, Mr Garbellini refers to annexure GG3. That annexure is a copy of the original order from the applicant, a copy of the dispatch advice signed by the applicant's agent acknowledging receipt of the goods and a tax invoice raised by the respondent and sent to the applicant. These documents are not dealt with in Mr Eastough's later affidavit. In my view, there is no genuine dispute with respect to invoice 086182.
11 Invoice 086184 dated 10 October 2007 is for an amount of $2,145. Mr Eastough says that the product was defective and subject to warranty claims (par 12). Mr Eastough annexes as JE4 a copy of the warranty claim in relation to the allegedly defective product.
12 Mr Garbellini says that the respondent has no record of a warranty claim being made with respect to the product supplied. Furthermore, he identifies the product supplied as being a one-person sauna, colour hemlock. To support that, he annexes as GG4 a copy of the applicant's order form which does indeed refer to a one-person sauna, colour hemlock. Both the tax invoice and the dispatch advice which form part of the annexure confirm those details. Annexure JE4 to Mr Eastough's affidavit refers to a two-person sauna and cannot relate to the invoice in question. Accordingly, there is no genuine dispute disclosed on the evidence in relation to this invoice.
(Page 6)
13 The next invoice challenged is 088813. Mr Eastough alleges that there is a warranty claim with respect to this invoice. He refers to annexure JE5 to his affidavit. That annexure from the applicant to the respondent complains that the two-person sauna is 'not working'. Mr Garbellini says that the applicant requested a jet for a spa to be supplied by the respondent. The respondent's staff sought details as to the correct jet that was required and it was thereafter supplied to the applicant and invoiced. Mr Garbellini annexes a string of correspondence supporting his position as annexure GG5 to his affidavit. In my view, this correspondence answers the applicant's claim. I am not satisfied that there is a genuine dispute in relation to this claim.
14 Invoice 090750 is for an amount of $300. Mr Eastough alleges that the respondent agreed to supply to a customer 'products' due to the fact that a defective spa was originally supplied to that customer. The value of the 'products' is put at $130. The respondent denies that there was any such agreement. Mr Garbellini says that the invoice relates to an order to supply 'nature 2 sticks' (whatever they may be) for an agreed price of $300. The evidence of Mr Garbellini is consistent with the documentation and I am not satisfied there is any genuine dispute about this invoice.
15 Invoice 090977 dated 8 February is for an amount of $755. It is said that the respondent agreed to supply an umbrella to a customer who was supplied with a defective spa. The value of the umbrella is said to be $130. The respondent claims no further amount is owing.
16 The respondent says that the applicant's order related to the supply of two red stools, an umbrella, a spa bar and a towel rail. Annexure GG7 to Mr Garbellini's affidavit supports that position. Mr Garbellini goes on to say that the issue as to the supply of the umbrella had nothing to do with invoice 090977. Rather, he says that the manufacturer of the spa, Maax Spa Corporation Pty Ltd, offered to supply an umbrella. However, that had nothing to do with the invoice in question. In my view, there is no dispute in relation to this invoice and it should stand.
17 Invoice 088846 is for an amount of $21,948. Mr Eastough says that on 23 December 2007 the applicant delivered and installed a spa to a customer in Albany. The customer paid $27,498 for the spa. The following day, the customer contacted the applicant and advised that the spa was faulty. It was leaking water and the side panels could not be removed in order to fix the fault. Mr Eastough says that he informed the respondent of the faulty product and submitted a warranty claim. Mr Eastough says that the defect was not fixed. The customer is now
(Page 7)
- seeking a refund - he is intending to return the spa as it is a defective product and to get his money back.
18 The respondent says that the manufacturer of the spa was notified of the problem immediately after the warranty claim was made. Mr Garbellini says that the manufacturer has been in constant contact with the customer and every effort is being made to resolve the difficulty. Mr Garbellini points out that the applicant has been paid for the product and any difficulties are being resolved between the customer and the manufacturer. He alleges that there is no reason why the applicant should not pay the respondent for the product supplied. I am satisfied this is the case. There is nothing in the agreement between the parties which allows the applicant to withhold payment for a defective product. Insofar as there may be an offsetting claim - the cost to the applicant of putting right the defective product - there is no quantification of that claim. Indeed, there is every indication that the applicant will not have any liability to the customer given the involvement of the manufacturer. There is no dispute with respect to this invoice.
19 Invoice 085398 is for an amount of $8,930.50. Again, this is said to relate to a defective spa. Mr Eastough says that he was contacted by a customer who said that the spa was leaking water. The applicant made a warranty claim on the respondent. Mr Eastough says that the customer now wants a refund of the amount he paid for the spa and to return the product.
20 The respondent says that a warranty claim was indeed received. The date of that claim was 4 December 2007 and Mr Garbellini says that the remedial work was carried out on 13 December 2007. No other warranty claim has been made. Appearing as annexure GG9 to Mr Garbellini's affidavit is a copy of the service request and details of the service rendered. In my view, there is no genuine dispute in relation to this invoice.
21 Invoice 086080 is for an amount of $6,181. Again, it is said that the spa was defective and again it is said that the customer wishes to return the spa and be refunded the purchase price.
22 Mr Garbellini says that no warranty claim has ever been lodged in respect of the invoice. He goes on to say that the respondent was notified by the client that there were frustrations throughout the installation of the spa shell and equipment. These 'frustrations' were the responsibility of the applicant. Nonetheless, Mr Garbellini says that the respondent took
(Page 8)
- control of coordinating the installation and took the job to completion. Mr Garbellini further says that enquiries made by an officer of the respondent direct with the client indicate that the client is happy with the spa. In my view, there is no genuine dispute with respect to this invoice.
23 Invoice 079042 is for an amount of $9,805. Again, this is said to relate to the supply of a defective spa. The customer claimed that he was experiencing electric shocks when attempting to use the spa. Mr Eastough and an electrician attended to inspect the spa and found that the wiring was faulty. Mr Eastough says that the applicant refunded the customer $10,500, being the full purchase price of the spa. This was done on 24 October 2007. Mr Eastough says that the applicant was also required to pay for the electrician called out by the customer. This was a further $1,379. Appearing as annexures JE11 and JE12 to Mr Eastough's affidavit are copies of the refund details and the accounts for the electrical services.
24 The respondent says that it never received any notification of a warranty claim in relation to the spa. Mr Garbellini says that the applicant dealt direct with the manufacturer of the spa and that the manufacturer made attempts to resolve the difficulties. Further, Mr Garbellini disputes that the account for electrical services was paid by the applicant. He maintains it was paid by the manufacturer of the spa. In fact, par 20 of Mr Eastough's affidavit with respect to the electrical account is ambiguous. At one point he says that the applicant was required to pay for the electrician called out by the customer. Later in the same paragraph, he says that the manufacturer paid the electrician's invoices. But even taking into account that confusion, it seems to me that there is a genuine dispute on this issue. In my view, it is proper to acknowledge that there is a genuine dispute with respect to $11,879 in relation to invoice 079042.
25 Invoice 085214 is for an amount of $6,446. The applicant says that it has no record of receiving the product the subject of that invoice. Mr Garbellini as annexure GG12 produces a copy of the original order, a copy of the dispatch advice signed by the applicant and a copy of the invoice for the goods. There is no genuine dispute as to this invoice.
26 Invoice 092394 is for an amount of $6,578. The applicant says that this invoice appears to be a reversal of a double credit for a spa delivered under invoice 075545. The applicant says that it has no record of receiving a double credit as alleged by the respondent. Mr Garbellini explains that by an administrative error, the respondent did credit the
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- applicant twice in an amount of $6,578. Appearing as annexure GG13 to Mr Garbellini's affidavit is a copy of the applicant's cancelled order form, the cancelled contract, the tax invoice, two adjustment notes and a further tax invoice together with a copy of the applicant's account. This documentary evidence is convincing. I am not satisfied there is any genuine dispute with respect to this invoice.
27 Paragraphs 23 to 25 relate to alleged offsetting claims and are not directed to specific invoices. In par 23, the applicant says that in March 2008 it installed a spa in premises in Donnybrook. Immediately after the installation, the customer contacted the applicant and complained that the spa was leaking. Mr Eastough returned to the customer's home and noticed that two nuts which hold two of the spa jets in place were broken. He alleges that this damage was the result of faulty workmanship during the manufacturing process. He says that he notified the respondent of the faulty product. Mr Eastough says that the customer has informed him that he is not satisfied with the faulty spa. What the consequences of that dissatisfaction might be are not specified. However, Mr Eastough says that the extra time that he had to spend as a consequence of the defective product reduced the profit on the sale by $1,000.
28 Mr Garbellini disputes the applicant's version of events. He says that the problem was rectified quickly once the defect was notified. He says this was undertaken by the respondent at the respondent's cost. Annexure GG14 establishes that in fact the defect was rectified by the respondent. However, it seems to me it is arguable that the applicant, through Mr Eastough, had to spend more time on the installation than would otherwise have been the case. Although detailed quantification of the claim is lacking, I am satisfied the applicant has an arguable offsetting claim in an amount of $1,000.
29 Paragraph 24 deals with what the applicant says are warranty claims for defective products which the applicant has in its possession. There are three warranty claims - in amounts of $2,574, $1,430 and $1,430. Annexed to Mr Eastough's affidavit (as annexures JE15, JE16 and JE17) are copies of the warranty claims.
30 The respondent says that with respect to the first of these claims, they relate effectively to a blown globe and the replacement of wiring. Neither of these defects inhibits the normal operation of the sauna. This evidence is unanswered by the applicant and, in my view, there is no genuine dispute in relation to this alleged warranty claim. Further,
(Page 10)
- confusion in the documentary evidence over just what spa is involved casts doubt on the applicant's claims.
31 In relation to par 24.2, the respondent alleges that the defect requires the replacement of a fuse and nothing more. Mr Garbellini refers to annexure GG15 which is a copy of the manufacturer's service request comments between 8 January 2008 and 14 February 2008. Those documents show that as at 14 February, the problems were 'all fixed'. I am not satisfied that there is an offsetting claim in favour of the applicant.
32 In relation to par 24.3, Mr Garbellini says that the warranty claim relates to missing legs for the spa motor, a hole in the blow-up cover, and a defective pump. There also appears to be a problem with the main bladder. Mr Garbellini says that replacement parts have been requested from the manufacturer. He does not deny that there appears to be a difficulty with the spa at present. In my view, it is arguable that there is an offsetting claim in relation to this matter, in an amount of $1,430.
33 Paragraph 25 deals with what the applicant says are outstanding warranty claims made on behalf of customers as a result of defective spas and products being supplied by the respondent. Annexure JE18 contains nine of these warranty claims. It is very difficult from these documents to ascertain just what the complaints might be and how it is said that the respondent is liable for the claims. However, be that as it may, par 26 of Mr Eastough's affidavit effectively disposes of this complaint as relevant to this application. Mr Eastough says that he 'has not yet quantified the costs and damage caused by the respondent's conduct in supplying defective products'. Without quantification, there can be no offsetting amount and no warrant for reducing the amount of the statutory demand.
34 Paragraphs 27 through to 31 of Mr Eastough's affidavit appear under the heading 'Negotiations with Respondent'. It is not entirely clear what is being alleged in these paragraphs. The applicant says that it holds products supplied by the respondent for which it has paid $142,410. As I understand what is being said, the applicant wants to reach a negotiated settlement with the respondent whereby the respondent takes the product back and refunds what has been paid. This is presumably because given the termination of the relationship, the applicant will be unable to satisfactorily market products supplied by the respondent. Clearly there is nothing in the agreement reached between the applicant and the respondent which would allow for what might be called a 'return and refund' arrangement on termination of the supply contract. It is difficult then to see that the applicant has any offsetting claim or any dispute about
(Page 11)
- invoices otherwise outstanding. In my view, there is no reason to adjust the amount of the statutory demand based upon the consequences of termination of the supply agreement.
35 That means, then, that I am satisfied there is a genuine dispute with respect to $11,879 of the amount of the statutory demand, and that there is an arguable offsetting claim in an amount of $2,430. That means, then, that the amount of the statutory demand ought be reduced to $182,244.34.
36 There then remains the question of whether or not there is some other reason why this demand ought be set aside under the provisions of s 459J of the Corporations Act 2001 (Cth). As I understand the applicant's submissions, it is alleged that in making the demand, the respondent's conduct is unconscionable or an abuse of process or gives rise to a substantial injustice. Further, it was alleged that the respondent was acting oppressively and unfairly in order to coerce a debtor company to pay a debt that is genuinely disputed. Reference was made to a number of decisions including Re Softex Industries Pty Ltd (2001) 187 ALR 448 and Chippendale Printing Co Pty Ltd v Deputy Commissioner of Taxation (1995) 15 ASCR 682.
37 In my view, there is nothing in this application which could be said to be in any way oppressive, an abuse of process or otherwise unfair to the applicant. The simple fact is that the applicant is indebted to the respondent. The Corporations Act allows a party in the respondent's position to issue a statutory demand. That is what it has done. The demand may have been overstated slightly, but any defect in the demand has now been put to rights. That is the end of the matter.
38 Accordingly, I would vary the amount of the demand but otherwise the demand should stand. I will hear the parties as to the form of orders and as to costs.
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