Morrow Marketing Pty Limited v Home Unit Investments Pty Limited

[1999] NSWSC 548

CITATION:	Morrow Marketing Pty Limited v Home Unit Investments Pty Limited [1999] NSWSC 548
CURRENT JURISDICTION:	Equity Division
FILE NUMBER(S):	1351/99
HEARING DATE(S):	7 June 1999
JUDGMENT DATE:	7 June 1999
PARTIES :	Morrow Marketing Pty Limited (P) Home Unit Investments Pty Limited (D)
JUDGMENT OF:	Master McLaughlin

COUNSEL :	Mr. P. Durack (P) Mr. I. R. Pike (D)
SOLICITORS:	Norton Smith & Co (P) Parry Carroll Kanjian (D)
CATCHWORDS:
ACTS CITED:	Corporations Law
CASES CITED:	Thomas v The ANZ Banking Group Limited (1986) 64 ALR 347 Spencer Constructions Pty Limited v G & M Aldridge Pty Limited (1997) 76 FCR 452 Waltons Stores Interstate Limited v Maher (1988) 164 CLR 387 Portrait Express Sales Pty Limited v Kodak Australia Pty Limited (1996) 20 ACSR 746
DECISION:

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SUPREME COURT OF
NEW SOUTH WALES
EQUITY DIVISION

MASTER McLAUGHLIN

Monday, 7 June 1999

1351/99 MORROW MARKETING PTY LIMITED -v- HOME UNIT INVESTMENTS PTY LIMITED

JUDGMENT

1    MASTER: By summons filed on 12 February 1999 the plaintiff, Morrow Marketing Pty Limited, seeks an order that the statutory demand dated 8 January 1999 served upon it by the defendant, Home Unit Investments Pty Limited, be set aside. 2    That statutory demand seeks payment by the plaintiff to the defendant of the amount of $300,000 which is described in the schedule to the demand as follows:

Amount payable on 31 December 1998 pursuant to cl.1.1(a) of Deed dated 20 August 1996 between Morrow Marketing Pty Limited, Graham Vincent Morrow, Carol Anne Morrow, the creditor, Capers Pty Limited and James Rutherford Palmer - $300,000.

3 The plaintiff brings the present application pursuant to the provisions of Division 3 of Part 5.4 of the Corporations Law. The grounds upon which the plaintiff submits that the statutory demand should be set aside are, firstly, that there is a genuine dispute as to whether the debt is due and payable; and, secondly that the affidavit in support of the demand does not comply with the statutory requirements, because it does not state the source of the deponent's knowledge of the matters set forth in the affidavit. 4 I have had the benefit of receiving from Counsel for each party a written outline of the submissions on behalf of that party. I shall retain those written outlines with the papers. 5 The ground upon which the plaintiff submits that there is a genuine dispute as to whether the debt is due and payable is that the demand grounded upon the provisions of the deed referred to in the schedule to the demand is contrary to what is described on behalf of the plaintiff as an oral assurance given to the plaintiff shortly before the deed was executed. That oral assurance was, so it was asserted, to the effect that if the plaintiff did not have the money to pay on 31 December 1998, the defendant would wait until the plaintiff did have the money to pay. 6 That oral assurance is alleged to have been given in the course of a conversation in either mid-July or late-July 1996 between Mr James Rutherford Palmer (on behalf of the defendant, who is asserted to have given such oral assurance), and Mr Graham Vincent Morrow, on behalf of the plaintiff. It will be appreciated that each of those gentlemen is, in his personal capacity, a party to the deed of 20 August 1996. 7 The express provision of the deed upon which the defendant relies in asserting that there is an amount of $300,000 presently due and payable by the plaintiff is clause 1.1(a) which provides as follows (the abbreviations "GVM", and "MMPL" and “HUI” referring, respectively, to Graham Vincent Morrow and Morrow Marketing Pty Limited and Home Unit Investments Pty Limited):

GVM and MMPL jointly and unconditionally undertake to pay to HUI without any deduction or counter-claim -

(a) the sum of $300,000 on 31 December 1998 provided, however, that if GVM, CAM and MMPL observe and perform their obligations under Part 5 of this deed, then a discount will be allowed on that sum of $300,000 in the event of any early and effective payment of part of that sum. The discount will equal the lower of $3,000 or one per cent of the early payment made in each complete calendar month between the date of the early payment and 31 December 1998.

8    (I would, for completeness, record that paragraph (b) of that clause makes provision for the payment by GVM to MMPL of a further sum of $200,000 on 30 June 2000.) 9    The defendant also relies upon clause 1.2 of the deed which provides:

Time is of the essence for the making of each of the payments referred to in cl.1.1.

10 The plaintiff submits that the effect of the alleged oral assurance that if the plaintiff did not, on 31 December 1998, have the money to pay, then the defendant would wait for payment is such as to constitute a genuine dispute between the plaintiff and the defendant which, consonant with the provisions of section 459H(1) of the Corporations Law, would require that the statutory demand be set aside. 11 I have been taken to various authorities relating to the concept of a genuine dispute in the context of the provisions of section 459H of the Corporations Law. The Full Court of the Federal Court of Australia had occasion to consider this concept within the context of winding up under the Corporations Law in Spencer Constructions Pty Limited v G & M Aldridge Pty Limited (1997) 76 FCR 452. At 462ff their Honours helpfully summarised various earlier decisions dealing with whether or not there existed a genuine dispute. At 464 their Honours concluded:

In our view a 'genuine' dispute requires that:

· the dispute be bona fide and truly exist in fact;
· the grounds for alleging the existence of a dispute are real and not spurious, hypothetical, illusory or misconceived.

We consider that the various formulations referred to above can be helpful in determining whether there is a genuine dispute in a particular case, so long as the formulation used does not become a substitute for the words of the statute.

12    It will be appreciated that in the instant case it is not for the Court to arrive at any conclusions concerning the likely ultimate outcome if the Court is satisfied that there is, in fact, a genuine dispute as to the existence of the debt which the defendant relies on. 13    The evidence discloses that there had been a business association between Mr Morrow and Mr Palmer and their respective companies, which are the parties to the present proceedings, since December 1993. Mr Palmer and his company had originally been involved in assisting the plaintiff company to emerge from receivership and then in the words that were used in some of the items of evidence, in assisting the plaintiff and Mr Morrow “to get back on their feet”. 14    The amounts referred to in clause 1.1 of the deed, being the amount of $300,000 (presently the subject of the statutory demand) and a further amount of $200,000 (referred to in paragraph (b) of that clause as being payable on 30 June 2000) relate to past financial advisory services given by the defendant company and Mr Palmer to the plaintiff and Mr Morrow. 15    It is submitted on behalf of the plaintiff that it was only on account of the oral assurance to which I have referred asserted by the plaintiff to have been given in a conversation between Mr Morrow and Mr Palmer in mid- or late-July 1996 that the deed was eventually entered into by, amongst others, the plaintiff and Mr Morrow on 20 August 1996. The assertion that Mr Palmer gave the oral assurance that if the plaintiff did not have the money at the time when it was liable to make the payment, Mr Palmer and the defendant would wait, is denied by Mr Palmer. 16    The plaintiff submits that there are certain legal consequences to the oral assurance on which it relies. Firstly, that the deed should be set aside by reason of what is asserted to be the misleading and deceptive conduct of the defendant in contravention of section 52 of the Trade Practices Act. The plaintiff as to that alleged misleading and deceptive conduct submits that at the time of the deed and subsequently the defendant intended to require payment on 31 December 1998 and to enforce its rights to such payment. The plaintiff says that in such circumstances it was false and misleading on the part of the defendant to assure the plaintiff that if the plaintiff did not have the money the defendant would wait. 17    In that regard the plaintiff relies on the decision of the High Court of Australia in Thomas v The ANZ Banking Group Limited (1986) 64 ALR 347, especially the judgment of Toohey J at 372. 18 Further, in that regard, the plaintiff submits that if the true position of the defendant, that is, that the defendant would rely upon the express provisions of clause 1.1 of the deed had been revealed, the plaintiff would not have entered into the deed. 19 Further, the plaintiff submits that the defendant is estopped from asserting that the debt was due and payable on 31 December 1998 and from seeking to enforce payment. In that regard the plaintiff relies upon the decision of the High Court of Australia in Waltons Stores Interstate Limited v Maher (1988) 164 CLR 387. 20 The plaintiff further submits that the contract between itself and the defendant was not limited to what was set forth in the deed, but included as a term of the contract between the parties the alleged oral assurance which is asserted by the plaintiff. 21 The plaintiff submits that the deed should be varied under the provisions of section 87 of the Trade Practices Act by reason of what is asserted to be the unconscionable conduct of the defendant in giving the oral assurance to induce the plaintiff into executing the deed and then departing from that assurance. Or, alternatively, that the deed should be rectified for a common mistake of both the plaintiff and the defendant; or on account of a unilateral mistake of the plaintiff said to be known to the defendant at the time of execution. 22    A deed is the most solemn and binding manner known to the law by which one party obliges itself contractually to another party. A deed does not merely evidence an agreement. It creates contractual rights between the parties thereto. 23    The plaintiff has made various assertions concerning the existence of an oral assurance. That alleged oral assurance, if given, was given in mid- to late-July 1996. After the conversation in which it is alleged that Mr Palmer, on behalf of the defendant gave that oral assurance, negotiations then took place between the parties through their respective solicitors concerning the preparation and ultimate execution of a deed to give effect to the contractual arrangements between the parties. Those negotiations involved six separate drafts of the deed passing between the legal representatives of the parties and at least two additional sets of emendations passing between the respective solicitors. 24    The correspondence which passed between the solicitors for the parties containing those six separate drafts and the various additional sets of emendations disclosed that those drafts were the subject of discussion between Mr Morrow, on behalf of the plaintiff, and his solicitor. Each and every one of those drafts contained clause 1.1 paragraph (a) and clause 1.2. 25    Indeed, it should be observed that more than a year earlier, in March of 1995, there was a proposal between Mr Morrow and Mr Palmer that there be a deed entered into between those gentlemen and their respective companies. The very provisions which now appear in the deed of 20 August 1996 in clauses 1.1 and 1.2 were included in a proposed deed in March 1995. 26    In considering the genuineness of the alleged dispute between the parties, it seems to me not to be without significance, that although the deed was entered into on 20 August 1996 --- almost two and a half years before the first payment contemplated by clause 1.1 fell due --- the plaintiff and Mr Morrow did not at any stage suggest that there was some other term that varied, that altered, that estopped, that entitled those persons to have set aside, the obligations contained in that clause. 27    Indeed, even after it became clear to the plaintiff and Mr Morrow in correspondence in November 1998 that the defendant and Mr Palmer proposed to rely upon the provisions of clause 1.1 (that intention being known to the plaintiff by at least 9 November 1998), the plaintiff has not even to the present time, in a period now in excess of seven months, sought to set aside the deed for the various grounds now sought to be relied upon and has not sought rectification of the deed for the various grounds now sought to be relied upon. 28    The deed is absolutely and completely clear in its terms. What the plaintiff is seeking to do is to say that, because of a conversation (which is disputed on behalf of the defendant) which allegedly took place, a conversation, not merely before the deed was executed but before even the first draft of the deed was prepared by the respective solicitors for the parties, that the deed which ultimately came to fruition after six separate drafts and two additional sets of emendations passing between the parties and their solicitors, in none of which the plaintiff or Mr Morrow made the faintest complaint about the requirements contained in clause 1.1, there is a genuine dispute between the parties as to the liability of the plaintiff to pay in accordance with the terms of clause 1.1 of the deed. 29    Further, there was admitted into evidence Exhibit 24 which was a letter dated 21 August 1996 from Mr Morrow to his solicitor Miss Beverley Hoskings-Green, of Messrs Atanaskovic Hartnell. That letter was dated the very day after the execution of the deed. In it Mr Morrow on behalf of his wife expressed to their solicitor their thanks for her:

genuine advice and understanding in helping to resolve the Palmer matter. The experience has been a very difficult one for us and it is a relief to have it settled.

30    The terms of that letter are totally inconsistent with the deed and clause 1.1 thereof being in any way qualified by some alleged oral assurance. 31    I am not satisfied that there is a genuine dispute between the parties concerning the liability of the plaintiff to pay what it is required to pay by the deed. 32    That conclusion of itself is sufficient to dispose of the present proceedings. But even if the Court were to accept the evidence that there was somehow an oral assurance of the nature asserted by the plaintiff, that of itself does not result in the conclusion that there exists a genuine dispute, or the requirement that the demand be set aside. 33    There has been a quantity of financial material placed before the Court in relation to the financial circumstances of the plaintiff and of Mr and Mrs Morrow. On the face of it, it would appear that the plaintiff is able to pay the amount of $300,000. But it emerges, and was stated by Counsel for the plaintiff in answer to an enquiry from me, that the attitude adopted by the plaintiff has been that the plaintiff would pay the $300,000 after everyone else, including Mr and Mrs Morrow, had received what they considered they were entitled to receive from the assets of the plaintiff. 34    So even if (contrary to my first conclusion in relation to the genuineness of what is asserted on behalf of the plaintiff concerning the alleged oral assurance given to the plaintiff) I were to be satisfied that there was such an oral assertion which qualified the express terms of the deed, I am not satisfied that there is evidence which would activate the circumstances contemplated by such an oral assurance, which would defer the payment of the amount. So even for that reason I would not be satisfied that there is a genuine dispute as to the existence of the debt. 35    The plaintiff also submits that the demand should be set aside pursuant to the provisions of section 459J(b). That sub-section provides, relevantly:

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

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

36    It is submitted on behalf of the plaintiff that the affidavit in support of the demand does not comply with the requirements of the statute. 37    Section 459E provides in sub.s(3) that the demand, unless the debt is a judgment debt, 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.

38 The relevant rule, the compliance wherewith is required by section 459E(3), is contained in Part 80A, rule 15 of the Supreme Court Rules. Subrule.(1) of that rule provides relevantly:

An affidavit referred to in section 459E(3) must:
(c) state the source of the deponent's knowledge of the matters stated in the affidavit concerning the debt or debts.

39   
40    The affidavit accompanying the demand is that of James Rutherford Palmer sworn 8 January 1999. Paragraph 1 of his affidavit says:

I am a director of the creditor and I have knowledge of the facts surrounding the debt owing by the debtor so far as they are known to the creditor. I am authorised to swear this affidavit on behalf of the creditor.

41    It is submitted on behalf of the plaintiff that that statement does not comply with the requirements of paragraph (c) of Part 80A rule 15(1), in that it does not state the source of the deponent's knowledge of the matters stated in the affidavit. 42    The deponent states in that paragraph that he is a director of the creditor and he has knowledge of the facts. The assurance that he is a director of the creditor may possibly constitute the source of his knowledge. 43    I have been taken to the decision of Bryson J in Portrait Express Sales Pty Limited v Kodak Australia Pty Limited (1996) 20 ACSR 746. His Honour in that case was dealing with an affidavit allegedly verifying a statutory demand where the deponent of the affidavit had no personal knowledge whatsoever of the dispute between the parties and did not set forth the basis of his alleged source of knowledge. 44 It seems to me in the circumstances of the present case, where the deponent of the affidavit is the person who had all the dealings with the defendant and with Mr Morrow and where he asserts knowledge of the facts surrounding the debt, that any omission from the affidavit of a statement such as, "the source of my knowledge is the fact that I am a party to the deed" or, "the source of my knowledge is the fact that I negotiated the deed with the defendant", cannot in my view contravene the principle to which Bryson J referred in Portrait Express --- that the dominant consideration in the exercise of the discretion under paragraph (b) of section 459J(1) is the need to ensure the purity of the manner in which creditors follow statutory procedures which are preliminary to litigation and for which verification is required by law. 45    The affidavit itself, in paragraph (3), refers expressly to the deed dated 20 August 1996 and to the parties to that deed, those parties including Mr Palmer himself. It seems to me that at least it is a legitimate inference to be drawn from paragraph (3) of the affidavit that the source of the knowledge asserted in paragraph (1) is the deed to which the deponent was a party referred to in paragraph (3). 46    I am not satisfied that the affidavit does contravene the requirement of the Rules. But if it does, this is certainly not a case where the Court should exercise its discretion to set aside the statutory demand as a result of any failure on the part of the deponent to state the source of his knowledge. 47    For the foregoing reasons, therefore, the summons will be dismissed. 48    (Mr Pike applied for costs) 49    MASTER: Do you wish to be heard on costs, Mr Durack? 50    DURACK: No, Master. I do wish it to be noted for the record that it is not my recollection that in answer to a question from you I stated that the defendant would only be paid after payment of all other liabilities, or other requests. 51    MASTER: That can be noted. It is not my recollection but it will be noted what you have just said. 52    I make the following orders:

1. I order that the summons be dismissed.
2. I order the plaintiff to pay the costs of the defendant.

53    The two sets of submissions will be retained with the papers. The exhibits may be returned.

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