Moores Corporation Australia Pty Limited v Sung

[2000] NSWSC 679

CITATION:	Moores Corporation Australia Pty Limited v Sung [2000] NSWSC 679
CURRENT JURISDICTION:	Equity Division
FILE NUMBER(S):	SC 2156/00
HEARING DATE(S):	22, 27 and 29 June 2000
JUDGMENT DATE:	14 July 2000
PARTIES :	Moores Corporation Australia Pty Limited (P) Chin-Chien Sung (D)
JUDGMENT OF:	Master McLaughlin

COUNSEL :	Mr E. White (P)
SOLICITORS:	D. G. Thomas Solicitors (P) Phillip Bushby International Lawyers (D)
CATCHWORDS:	Corporations Law - Application to set aside statutory demand - Genuine dispute about existence or amount of debt - Offsetting claim, and quantification thereof.
LEGISLATION CITED:	Corporations Law
CASES CITED:	Mibor Investements Pty Ltd v Commonwealth Bank of Australia (1993) 11 ACSR 362
DECISION:	See paragraph 30.

SUPREME COURT OF
NEW SOUTH WALES
EQUITY DIVISION

MASTER McLAUGHLIN

Friday, 14 July 2000

2156 of 2000 MOORES CORPORATION AUSTRALIA PTY LIMITED -v- CHIN-CHIEN SUNG (AKA KING SUNG)

JUDGMENT

1    MASTER: By summons filed on 17 April 2000 the plaintiff, Moores Corporation Australia Pty Limited, seeks substantively an order that the statutory demand served upon it by the defendant, Chin-Chien Sung, be set aside. 2    That statutory demand is dated 24 March 2000, and requires payment by the plaintiff to the defendant of the sum of $411,183.21. That sum is described in the schedule as follows:

Amount paid by the Creditor to the Debtor Company on 30 July 1997 pursuant to written agreement of that date	$350,000.00
Payments due by the Debtor to the Creditor from 30 July 1997 to 31 December 1999 pursuant to such written agreement	$ 84,583.33
$433,583.33
Less payments made by the Debtor Company to the Creditor from 30 September 1997 to 9 April 1999	-$ 23,400.12
TOTAL DUE	$411,183.21

3 The plaintiff brings the present application pursuant to the provisions of Division 3 of Part 5.4 of the Corporations Law, and, in particular, pursuant to the provisions of section 459G of that statute. 4 The plaintiff asserts that there is a genuine dispute about the existence or the amount of the alleged debt; further, that the plaintiff has an offsetting claim; finally, that the defendant is not in a creditor-debtor relationship with the plaintiff, and in this latter regard the plaintiff relies upon the provisions of section 459P(1) of the Corporations Law. 5    The plaintiff concedes that it received from the defendant the sum of $350,000. However, of that amount the plaintiff asserts that an amount of $262,500 is disputed. Of the balance then remaining, $87,500, the amount of $22,348 was (so it is asserted by the plaintiff) paid by the plaintiff to the defendant by way of purported dividends, and the entitlement of the defendant to retain that sum is now disputed by the plaintiff. Of the original amount of $350,000 there would then remain (upon the plaintiff’s contention) a net amount of $65,152, the entitlement of the defendant to which it is not disputed. That net amount was paid by the plaintiff to the defendant on 19 June 2000. 6    It will be appreciated that that payment was made more than three months after the service of the statutory demand (which service was effected on or about 24 March 2000), and was made more than two months after the institution of the present proceedings on 17 April 2000. Indeed, that payment was made one month after the hearing date of 22 June 2000 had been specially fixed on 19 May 2000 and the payment was made only three days before the hearing commenced. (It should, however, be recorded, in this latter regard, that on 19 May 2000 when the hearing date was fixed it was stated by Counsel for the plaintiff, and was noted, that the plaintiff admitted its indebtedness in the sum of $87,500, being part of the amount claimed in the statutory demand. The amount paid on 19 June 2000 reflects that sum less the payments (totalling $23,400) made by the plaintiff from 30 September 1997 to 9 April 1999. 7    Essentially, the submission on behalf of the plaintiff is that the written document executed by the parties on 30 July 1997 does not contain the totality of the terms of the agreement between those parties, and that, in consequence of various breaches by the defendant of those additional, albeit oral, terms, the apparent entitlement of the defendant to be refunded the sum of $350,000, as provided in the written agreement, has not arisen. 8    It should also be appreciated that if there is a genuine dispute as to the indebtedness of the plaintiff to the defendant in respect to the amount of $350,000 originally advanced by the defendant to the plaintiff, then, of course, there would also be a genuine dispute as to the entitlement of the defendant to be paid the various amounts (totalling $84,583.33) claimed for the period from 30 July 1997 to 31 December 1998, also asserted by the defendant to be owed to it pursuant to the same written agreement. 9    That written document, which is engrossed upon the letterhead of the plaintiff, and is headed “Directors’ MINUTES --- Agreement”, and is executed under the seal of the plaintiff, and by the defendant (described as “King Sung”), and by one Joseph Chen is Annexure A to the affidavit of Derek Turner sworn 15 April 2000. 10    A considerable quantity of evidence was presented concerning the circumstances in which the document was prepared and executed. It is unnecessary for the purposes of the present proceedings to set forth in detail those circumstances. Suffice it to say, however, that the document was prepared in support of an application on behalf of the defendant for a visa of an appropriate status to allow the defendant and his family to remain in Australia for business purposes. 11    The subject of the foregoing document is described therein as follows:

To meet and conclude principles to which Mr Sung will acquire a 15% (fifteen percent) Equity in the Moores Bakery Division being a wholly owned division of Moores Corporation Australia Pty Ltd for the sum of $350,000-00 (three hundred and fifty thousand dollars).

12    A number of matters appear under the heading “Resolved”. They include the following,

That Mr Sung will pay $350,000-00 to acquire a 15% Equity in The Moores Bakery Division, being a wholly owned Division of Moore’s Corporation Australia Pty Ltd.
That Moores will undertake to pay Mr Sung a yearly dividend of no less than 10% Return on Investment being a Dividend of $35,000-00 per annum.

13    The penultimate item appearing under the foregoing heading “Resolved” is the following,

Moores undertake to refund in full 100% (One hundred percent) of The Sung Investment in Moores should any one of the following apply:
1) That The Sung Family Immigration Application For Business Migration is rejected.
2) That Moores has been unable to maintain a 10% Per Annum Return on Investment.

14 A very considerable quantity of evidentiary material was placed before the Court concerning the negotiations between the parties. Mr Chen, who appears to have been acting in an advisory role to the defendant, and Mr Sam Issa, who appears to have been acting as a solicitor for the defendant, participated in those negotiations. 15 It should at this point be recorded that the evidence by way of affidavit which was relied upon by the plaintiff in support of the summons to set aside the statutory demand was to a very substantial extent defective in form. I acceded to an application on behalf of the plaintiff to allow oral evidence to be adduced, in particular from Derek Guise Turner, managing director of the plaintiff, in order to place before the Court in admissible form evidence which, on account of its defective form, had been rejected during the reading of the affidavits of Mr Turner. 16 The effect of that oral evidence, and of the consequent cross-examination of Mr Turner, was that the hearing of this matter (which had originally been estimated to occupy half a day, at the time when the hearing date had been fixed) was considerably protracted, and, in the event, extended over three separate days, although it did not occupy the entirety of any one of those days. At the conclusion of the hearing I made directions for the parties to lodge written submissions, and upon the lodgment of those submissions for my judgment herein to stand reserved. 17 Those submissions have now been lodged, and will be retained in the Court file. 18 The plaintiff submits that the alleged debt claimed in the statutory demand arose as a result of a complicated arrangement, whereby the parties agreed to enter into an application for an Australian Business Visa, the plaintiff being the sponsor and the defendant being the applicant. Part of that application required an investment by the defendant in an Australian business, such investment being of up to 10% ownership interest, or of up to an amount of $350,000. It was the submission of the plaintiff that, as part of that arrangement, and at the request of the defendant, the plaintiff drafted the document which was executed on 30 July 1997, for the purpose of providing documentary evidence in support of the defendant’s application to the Department of Immigration. Further, the plaintiff submitted that that document did not represent the entirety of the agreement between the parties. 19 It was the assertion of the plaintiff, relying upon the evidence of Mr Turner, that, in addition to the written document, there were, in consequence of oral agreements between the parties, obligations cast upon the defendant (in relation, for example, to attendance by his family at English language classes, participation by the defendant in business activities of the plaintiff, provision by the defendant of business introductions and business contacts in Taiwan), which obligations were not fulfilled by the defendant. 20 To the extent that there were such further terms in the agreement between the parties, it was the submission of the plaintiff that the apparent entitlement conferred upon the defendant by the written document to be paid dividends and to be refunded the sum of $350,000 was in dispute, and that, in consequence, there was a genuine dispute concerning the indebtedness of the plaintiff to the defendant. 21 Further, the plaintiff submitted that the amount of $350,000 advanced by the defendant to the plaintiff was characterised as an investment, and that thus no creditor-debtor relationship came into being between the defendant and the plaintiff. A concomitant of that submission was that the defendant lacked standing to serve the statutory demand. In this latter regard the plaintiff relied upon the provisions of section 459(1) of the Corporations Law (which relate to the standing required of a person applying for a company to be wound up in insolvency. 22 The defendant on the other hand submitted that the plaintiff had fallen well short of establishing that there was a genuine dispute concerning the amount claimed, or that the plaintiff had an offsetting claim. It was submitted on behalf of the defendant that the allegations of the plaintiff concerning the existence of additional, albeit oral, terms of the agreement between the parties were spurious, or, at best, mere assertions. Further, the defendant submitted that the plaintiff had led no evidence whatsoever about how any alleged breach of the agreement was causally connected to any damage which the plaintiff asserted it had suffered, and that what was offered as quantification of the plaintiff’s asserted offsetting claim was without factual or evidentiary basis. 23 I am inclined to agree with the last submission of the defendant, at least concerning the quantification of any alleged damage flowing from any breaches which might have been committed by the defendant. The asserted quantification of such damage by Mr Turner was, in my view, hardly more than an assertion. 24 Concerning the existence of a genuine dispute in relation to the amount claimed in the statutory demand, it is salutary to quote from the judgment of Hayne J in Mibor Investments Pty Ltd v Commonwealth Bank of Australia (1993) 11 ACSR 362, where his Honour said, at 366 - 367,

… at least in most cases, it is not expected that the court will embark upon any extended inquiry in order to determine whether there is a genuine dispute between the parties, and certainly will not attempt to weigh the merits of that dispute. All that the legislation requires is that the court conclude that there is a dispute and that it is a genuine dispute.

25    In the instant case, if it be established that the written document of 30 July 1997 does not contain the entirety of the agreement between the parties concerning the application by the defendant for an Australian Business Visa, and the support which the plaintiff was prepared to give to the defendant in that regard, and if it be established that there were oral terms additional to that written document of the nature asserted by Mr Turner, then it is obvious that there is a genuine dispute as to the entitlement of the defendant to the refund of the $350,000 referred to in the written document. I am satisfied that there is evidence to support the submissions of the plaintiff that the agreement between the parties included such further oral terms. In consequence, I am satisfied that there exists a genuine dispute between the parties about the existence of the debt claimed in the statutory demand. 26    I have already commented upon the evidence supporting the quantification of the asserted offsetting claim. Were I not to be persuaded that there was a genuine dispute concerning the claim of the defendant, I would not, on account of the evidence offered in support of the asserted offsetting claim, be disposed to set aside the statutory demand. 27    In the light of my foregoing conclusion concerning the existence of a genuine dispute about the alleged debt, it is not necessary for me to proceed to a final conclusion concerning the alternative limb of the submissions of the plaintiff, that a debtor-creditor relationship did not exist between the plaintiff and the defendant, since (as it was submitted on behalf of the plaintiff) the defendant invested the amount of $350,000 in the plaintiff company, and did not advance that sum by way of a loan or by way of moneys which might become repayable to the defendant as a creditor. I consider, however, that such a submission is not doomed to failure, and that there is some evidence which would support that submission. 28    It follows, therefore, that, since the plaintiff has already paid to the defendant the amount of $65,152 which the plaintiff admitted that it owed to the defendant, and since I have concluded that there is a genuine dispute as to the liability of the plaintiff concerning the balance of the amount claimed in the statutory demand, it is appropriate that I should make an order setting aside the demand. 29    I have, during the hearing, indicated my provisional view that the failure of the plaintiff until three days before the hearing commenced to pay an amount which was admittedly owing to the defendant, and not even admitting its liability to pay that amount until the date when the hearing was specially fixed, together with the deficiencies in the affidavit evidence which resulted in a considerable protraction in the hearing (which had originally been estimated by the parties at half a day) should result in either no costs being awarded to the plaintiff, or even a costs order being made against the plaintiff and in favour of the defendant. Nevertheless, Counsel for the plaintiff has requested an opportunity to make submissions concerning costs, and that opportunity will be afforded to the plaintiff. 30    Accordingly, I make the following orders:

1. I make an order as in prayer 1 in the summons.
2. I stand the matter over to a date to be fixed, for argument as to costs.
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Last Modified: 01/04/2002