Metro Interactive Australasia P/L v. Vixen Wholesale Ltd

[2007] QSC 285

SUPREME COURT OF QUEENSLAND

CITATION:

Metro Interactive Australasia P/L v Vixen Wholesale Ltd [2007] QSC 285

PARTIES:

METRO INTERACTIVE AUSTRALASIA PTY LIMITED
ACN 085 393 611
(applicant)
v
VIXEN WHOLESALE LIMITED
New Zealand Company No. 514464
(respondent)

FILE NO/S:

BS 8015 of 2007

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

10 October 2007

DELIVERED AT:

Brisbane

HEARING DATE:

2 October 2007

JUDGE:

Martin J

ORDER:

The statutory demand is set aside

CATCHWORDS:

CORPORATIONS – PRACTICE AND PROCEDURE – STATUTORY DEMAND – where statutory demand based on an affidavit sworn three days before the demand – whether s 459J(1)(b) Corporations Act allows the setting aside of the statutory demand

CORPORATIONS – PRACTICE AND PROCEDURE – STATUTORY DEMAND – GENUINE DISPUTE – where respondent granted the applicant rights to distribute certain DVDs within Australia – where applicant contends respondent did not have property in those rights – where statutory demand included claims for interest and legal costs – whether genuine dispute existed within the meaning of s 459H Corporations Act

Corporations Act 2001 (Cth), s 459E, s 459G, s 459H, s 459J

Chadmar Enterprises Pty Ltd v IGA Distribution Pty Ltd (2005) 53 ACSR 645, followed
Moyall Investment Services Pty Ltd v White (1993) 12 ACSR 320, cited
Re Morris Catering (Aust) Pty Ltd (1993) 11 ACSR 601, considered
Solarite Air Conditioning Pty Ltd v York International Australia Pty Ltd [2002] NSWSC 411, considered

Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452, followed

COUNSEL:

D S Piggott for the applicant

L J Nevison for the respondent

SOLICITORS:

Nyst Lawyers for the applicant

Ferguson Cannon for the respondent

1. The applicant seeks an order under s 459G of the Corporations Act 2001 setting aside a statutory demand served upon it by the respondent.

1. The applicant relies upon three grounds:

(a)        The affidavit purportedly verifying the debt upon which the statutory demand was based was sworn three days before the date of the demand;

(b)        There is a genuine dispute about the debts and there is an offsetting claim;

(c)        The invoices supporting the alleged debt do not, in two instances, refer to the respondent and, in all cases, incorrectly state the name of the applicant.

1. The respondent’s statutory demand, dated 16 August 2007, sought payment by the applicant of the sum of $12,169.73. It was served, together with a supporting affidavit on 16 August 2007. The supporting affidavit was sworn on 13 August 2007.

1. The alleged debt arose out of the sale of the exclusive rights to sell and distribute within Australia two DVD titles – “Fem L’Amour” and “Sensory Overload”.

Premature affirmation?

1. It was submitted for the applicant that, as the affidavit was sworn three days before the demand was dated, the demand was defective.

1. There have been a number of decisions over the last decade which have considered the ramifications of an affirming affidavit preceding a statutory demand but, before I go to them, I should refer to the statutory framework supporting this area of consideration.

1. Section 459E, so far as is relevant, provides:

“Creditor may serve statutory demand on company

(1)   A person may serve on a company a demand relating to:

(a)a single debt that the company owes to the person, that is due and payable and whose amount is at least the statutory minimum; or

(b)2 or more debts that the company owes to the person, that are due and payable and whose amounts total at least the statutory minimum.

(2)    The demand:

(a)if it relates to a single debt - must specify the debt and its amount; and

(b)if it relates to 2 or more debts - must specify the total of the amounts of the debts; and

(c)must require the company to pay the amount of the debt, or the total of the amounts of the debts, or to secure or compound for that amount or total to the creditor's reasonable satisfaction, within 21 days after the demand is served on the company; and 

(d)       must be in writing; and
(e)       must be in the prescribed form (if any); and
(f)        must be signed by or on behalf of the creditor.

(3) Unless the debt, or each of the debts, is a judgment debt, the demand must be accompanied by an affidavit that:

(a)verifies that the debt, or the total of the amounts of the debts, is due and payable by the company; and

(b)complies with the rules.”

1. A failure to comply with a demand properly made affords a ground upon which a creditor may rely in seeking the winding-up of the debtor company.

1. Section 459G allows a company to apply to the Court for the statutory demand to be set aside. Where the Court is satisfied that there is a genuine dispute about the existence of the debt then it must, pursuant to s 459H, set aside the demand.

1. A discretion is afforded the Court, by s 459J, to set aside the demand on other grounds. That section provides:

“(1) On an application under section 459G, the Court may by order set aside the demand if it is satisfied that:

(a)because of a defect in the demand, substantial injustice will be caused unless the demand is set aside; or

(b)there is some other reason why the demand should be set aside.

(2)Except as provided in subsection (1), the Court must not set aside a statutory demand merely because of a defect.”

1. A statutory demand is defined, in s 9, to mean:

“(a)a document that is, or purports to be, a demand served under section 459E; or

(b)such a document as varied by an order under subsection 459H(4).”

1. It follows from that definition and the provisions of s 459E(3) that an affidavit verifying the debt does not form a part of the “demand” referred to in s 459J(1)(a) or (2).

1. It also follows that a complaint that s 459E(3) has not been satisfied because the affidavit was sworn before the demand was made is not with respect to “a defect in the demand”.

1. This analysis accords with the conclusion reached by the Full Court of the Federal Court in Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452. After examining the relevant provisions of the Act, that Court concluded, at 457-8:

“What is the consequence of a defect? As a matter of construction it appears to us that the section is intended to operate as follows. If the defect is ‘in the demand’ it is only to be set aside if substantial injustice will be caused by the defect unless the demand is set aside: see s 459(1)(a) and (2). If there is any other defect, including a defect in relation to the demand rather than in the demand itself, then the demand may only be set aside if the Court is satisfied that there is some reason why the demand should be set aside: see s 459J(1)(b) and (2).”

1. This reasoning was adopted by Higgins CJ in Chadmar Enterprises Pty Ltd v IGA Distribution Pty Ltd (2005) 53 ACSR 645. I respectfully agree with his Honour’s analysis of the cases which have dealt with this question at paragraphs [30] to [56]. The effect of his Honour’s decision is that the fact that an affidavit predated the demand constituted “some other reason why the demand should be set aside” for the purposes of s 459J(1)(b).

1. In the light of the reasoning referred to above and the facts in this case, the applicant is entitled to succeed in its application on this ground and, therefore, the statutory notice of demand is set aside pursuant to s 459J(1)(b).

Genuine dispute

1. The dispute raised by the applicant under this head is in two parts. First, the applicant says that the agreement was for the sale of the rights to distribute the DVDs in Australia but that the respondent did not have property in those rights. Secondly, the debt contains amounts consisting of interest on the principal debt and the respondent’s legal costs in pursuing the debt. The applicant says it is not entitled to recover any amount under either of those heads.

1. A leading authority on the issue of whether a genuine dispute exists is the decision of Thomas J in Re Morris Catering (Aust) Pty Ltd (1993) 11 ACSR 601 where, at 605, the following appears:

“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).”

1. The matter was expressed more strongly by Barrett J in Solarite Air Conditioning Pty Ltd v York International Australia Pty Ltd [2002] NSWSC 411 at [23] where his Honour noted that a company challenging a statutory demand:

“…will fail in that task only if it is found upon the hearing of its s 459G application that the contentions upon which it seeks to rely in mounting its challenge are so devoid of substance that no further investigation is warranted. Once the company shows that even one issue is of sufficient cogency to be arguable a finding of genuine dispute must follow. The court does not engage in any form of balancing exercise between the strengths of competing conditions. If it sees any factor that on a rational ground indicates an arguable case… it must find that a genuine dispute exists, even where any case apparently available to be advanced against the company seems stronger.”

1. Of course, a mere assertion of a dispute will not be enough, there must be something more: Moyall Investment Services Pty Ltd v White (1993) 12 ACSR 320.

1. In this case the applicant claims, and the respondent does not deny, that the transaction upon which the demand was based was for the rights to distribute and sell within Australia the two DVD titles. The dispute said to exist by the applicant is as to the right of the respondent to sell those rights to those DVD titles.

1. After service of the statutory demand the applicant became aware that another company – Coastline Licensing International Inc – claimed that it had the rights to distribute, not the respondent, and, therefore, the respondent could not transfer any rights to the applicant. The applicant has, since notice was given by Coastline, paid Coastline for the rights to distribute.

1. The matters raised by the applicant under this head clearly constitute an arguable case. If the respondent had no right to transfer these rights then there could be no agreement. As a result, s 459H compels the setting aside of the demand.

1. The second head under this point concerns a claim for interest and for legal costs. Mr Nevison, for the respondent, quite properly did not attempt to support the claim for legal costs. There was no contractual basis for making such a claim. The claim for interest was based on a note on the two invoices (each was sent at the same time) to the effect: “Interest will be charged on overdue accounts at 0.1% compounding per day”. There was nothing to suggest that this was anything more than an attempt by the respondent to impose a term not otherwise agreed to by the applicant. I find that there was a genuine dispute as to this part of the claim.

Wrongly named parties on the invoices

1. Given my findings on the other two grounds, this ground need not be considered.

Orders

1. The statutory demand is set aside.