Re Dinjac Pty Ltd
[2020] VSC 603
•18 September 2020
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2020 01741
IN THE MATTER of DINJAC PTY LTD (ACN 120 350 147)
| DINJAC PTY LTD (ACN 120 350 147) | Plaintiff |
| v | |
| PANASIA ALUMINIUM PTY LTD (ACN 164 977 557) | Defendant |
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JUDGE: | Gardiner AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 3 September 2020 |
DATE OF JUDGMENT: | 18 September 2020 |
CASE MAY BE CITED AS: | Re Dinjac Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2020] VSC 603 |
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CORPORATIONS – Application to set aside statutory demand by reason of alleged genuine disputes – ss 459G, 459H and 459J Corporations Act 2001 (Cth) 2001 – Malec Holdings Ltd v Scotts Agencies Pty Ltd(in liq) [2015] VSCA 330 – Some alleged disputes found to be genuine others not – Amount claimed in demand reduced.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr B J Parker | Peter Speakman & Co |
| For the Defendant | Mr J Kohn | Hilton Bradley Lawyers |
HIS HONOUR:
By originating process filed 14 April 2020, the plaintiff, Dinjac Pty Ltd (ACN 120 350 147) (‘Dinjac’), applies pursuant to ss 459H and 459J of the Corporations Act 2001 (Cth) (‘the Act’) to set aside a statutory demand dated 26 February 2020 (‘the Demand’) served on it by the defendant, Panasia Aluminium Pty Ltd (ACN 164 977 557) (‘Panasia’), on 20 March 2020. The Demand was accompanied by an affidavit of Xing Qin Lu, Accounting Manager for Panasia, sworn 26 February 2020, in compliance with s 459E of the Act.
The debt the subject of the Demand is described in the Schedule as:
Monies due and owing by the Company for goods and services as described in the attachment Statement marked ‘A’.
$118,141.87
Legal costs incurred by the Creditor, recoverable pursuant to Clause 10.2 of the Credit Application Form
$2,663.11
Total
$120,804.98
The Demand was served on the sole director of Dinjac, Francis Reinhard Gregg, on 20 March 2020 and the usual 21 day period during which Dinjac had to make the application would, but for the intervention of the Easter public holidays, have expired on 10 April 2020, being Good Friday. The application was made on Tuesday, 14 April 2020, being the first day after the Easter public holidays, and by operation of s 36(2) of the Acts Interpretation Act 1901 (Cth), the application has been made within time.[1]
[1]See Elan Copra Trading Pty Ltd v JK International Pty Ltd (2005) 226 ALR 349, [36]; J & K Homes Pty Ltd v Evans Lawyers [2017] QSC 24, [15]; Farid Assaf, Statutory Demands and Winding Up in Insolvency (LexisNexis, 2nd ed, 2012), 4.22.
Evidence
Dinjac relies on two affidavits of its director, Mr Gregg, sworn 14 April 2020 and 26 May 2020.
Panasia relies on the affidavit of Mr Mark Rankine, Victorian State Manager of Panasia, sworn 29 June 2020. Dinjac has not filed any evidence in reply to Mr Rankine’s affidavit.
Dinjac’s evidence
Panasia is a supplier of extruded aluminium and for a period of some 15 years, supplied that material to Dinjac. Dinjac would place orders for aluminium with Panasia and Panasia would then manufacture the aluminium offshore and ship the finished product to its Australian warehouse to be made available for delivery or collection. In his first affidavit, Mr Gregg exhibits a document headed ‘Panasia Aluminium Pty Ltd (Panasia) Account Application Form’[2] with annexed trading terms, which identifies Rapid Aluminium Pty Ltd (‘Rapid Aluminium’) as applicant. The Australian Securities and Investment Commission (‘ASIC’) extract in respect of Dinjac records Rapid Aluminium as being the previous name for Dinjac. The Account Application Form was signed on behalf of Rapid Aluminium on 6 November 2015 by a person who purported to be the CEO of the company. Dinjac sold its assets and inventory together with the name ‘Rapid Aluminium’ to a third party effective 1 July 2019.
[2]Which included a request for $200,000 in credit.
Mr Gregg deposes that in or about September or October 2017, the Australian Government’s Federal Anti-Dumping Commission imposed a 35 per cent duty on aluminium material sold by Panasia, the effect of which was to render its pricing uncompetitive in the Australian market. Mr Gregg states that in or around September or October 2017, before the imposition of the duty came into effect, either Martin Chen, a director of Panasia, or Mr Rankine from Panasia, contacted him. The communication was to the effect that Dinjac should ‘place as many orders as you can and as you need it you can draw it out’. Whichever representative of Panasia spoke to him used words to the effect that ‘we will warehouse it for you at no charge’.
Mr Gregg states that he then arranged for orders, dating from 22 August 2017 to 12 October 2017, to be placed with Panasia. The orders were in respect of various types of extruded aluminium such as frames, shadow lines, mating mullions and other aluminium product used in building construction. The purchase orders state a price for the products. Mr Gregg states that the tax invoices which form the basis of the demand claim prices which are different to the amounts appearing in the purchase orders.
Mr Parker, counsel for Dinjac, tabled an aide memoire at the hearing of the application which compared purchase orders with the tax invoices generated by Panasia in respect of that purchase order. His purpose for preparing that document was to demonstrate the disparity in the prices stated in the purchase orders with the ultimate price charged on the corresponding invoice. These orders, which Mr Gregg describes as ‘bulk orders’, were then followed up with specific purchase orders from Dinjac which would ‘draw down’ from the stock in the bulk orders from time to time as material was required.
The invoices which make up the debt claimed in the statutory demand are all dated 29 November 2019 and refer to the numbers used by Dinjac on the purchase orders. Two of the invoices imposed charges for warehousing costs. Mr Gregg deposes that Dinjac did not agree to pay such warehousing charges, rather it was an express term that there would be no charge for warehousing. Mr Gregg states that Dinjac would not have placed any orders if it had to pay storage costs as it had its own warehouse and would have stored the goods itself to avoid the exaction of these charges.
Mr Gregg deposes that the goods which are the subject of the invoices claimed in the demand remain in Panasia’s warehouse and largely comprise naturally anodised product. Mr Gregg explains that aluminium is either powder coated or treated to become naturally anodised. The naturally anodised product is the finished product and Mr Gregg deposes that the product in anodised form which Panasia purported to supply is an irregular and different colour from all other colours in the market and because of this, Dinjac was unable to sell this product. Dinjac attempted to ascertain whether its customers would be prepared to purchase the product, but it proved unsaleable, even when offered for sale at cost.
Mr Gregg states that in the six months leading up to 1 July 2019, he had multiple discussions with Mr Rankine regarding the problems with the colour of the naturally anodised aluminium but the issue was left unresolved. Other than solicitors’ correspondence subsequent to the issue of the demand, there is no written complaint concerning the colour of the goods in evidence.
The parties’ solicitors exchanged correspondence in March and April 2020. Dinjac’s solicitor stated that Dinjac had no knowledge of the invoices claimed in the Demand, and that Dinjac had not received any goods that corresponded with the dollar amounts for the invoices shown in the statement. The author of the letter explained that the usual procedure between the two parties was that upon delivery to Dinjac it would provide Panasia with signed proof of delivery documents. It was said that no such delivery documents were executed with respect to the goods the subject of the Demand and a request was made to provide Dinjac with copies of the delivery documents executed by it corresponding to the goods the subject of the Demand. Dinjac’s solicitor also indicated his instructions were that his client did not recall executing any credit application form of the type referred to in the Demand and accompanying affidavit and requested that a copy be provided.
After receiving copies of the tax invoices requested from Panasia’s solicitors, Dinjac’s solicitors responded that clause 4.5(c) of the trading terms, which purport to give Panasia the right to unilaterally determine a ‘warehousing fee’, was void and of no effect as it is a ‘term uncertain’. Further, the author asserted that in the alternative this clause was likely to be characterised as ‘an unfair contract term’ and was unenforceable as it entitled Panasia to set an arbitrary price. The letter then states that in any event, Dinjac’s solicitors’ instructions were that Panasia insisted upon warehousing the goods and that it was agreed that such warehousing would be at no cost to Dinjac. The letter then makes observations in respect of what are said to be pricing inconsistencies to which reference has been made, and culminates in an assertion that the goods the subject of the demand are not of merchantable quality. In this regard, it is said that the anodisation by Panasia of the aluminium has not produced a natural colour, rendering the goods unsaleable. The letter then culminates with a statement that if Dinjac was required to make application to set aside the Demand it would seek costs against Panasia on an indemnity basis.
In his affidavit of 26 May 2020, Mr Gregg exhibits a spreadsheet setting out the tax invoices issued by Panasia pursuant to the specific purchase orders of Dinjac following the bulk orders referred to in his first affidavit.
As to the issue in respect of the difference in the colour of the aluminium supplied by Panasia, Mr Gregg states that he had operated Rapid Aluminium since 1989 before selling the business on 1 July 2019. His affidavit exhibits a photograph of what is said to be a sample of Panasia’s aluminium compared alongside of that of another supplier. He asserts that Panasia’s aluminium appears on the right-hand side of the photograph, and that Panasia’s aluminium is darker in colour and duller than the one sourced from the other supplier. Mr Gregg states that, in his experience, the industry standard for the colour of anodised extruded aluminium is the colour of the product provided by the other supplier and customers are not willing to purchase aluminium which deviates from the standard colour because the anodised aluminium is the finished product. That is to say, the extrusion is not usually painted or coated so as to obscure any difference in colour occurring as a result of production.
Mr Gregg stated that if the aluminium supplied by Panasia was used on a project, it would result in colour variations throughout the construction site. At the hearing of the application, the photograph said to demonstrate the difference in colour and patina was made available to the Court in colour and for my part, I could not discern the differences in the items depicted in the photograph. Mr Kohn, counsel for Panasia, observed that there was no evidence that the material in the photograph was an extrusion supplied by Panasia and the subject of this application.
As regards Dinjac’s attempt to sell Panasia’s anodised aluminium, Mr Gregg exhibits a number of emails sent to customers inviting them to purchase the stock at a reduced rate, but he deposes that no response was received to those approaches. Mr Gregg states that he is informed by Mr Paul Stroud, Ms Courtney Blakey and Mr Patrick Young, former sales staff of Rapid Aluminium, and believes, that they presented samples of Panasia’s product to customers and prospective customers but they declined to place orders based upon the samples because the samples did not match material those customers already had in stock or materials they were able to source from other suppliers.
Panasia’s evidence
In his affidavit, Mr Rankine refers to a number of the terms of the credit agreement which was annexed to the account application form (which was also referred on occasion to as the ‘Credit Application Form’ by the parties). Several of the clauses are particularly relevant in the present context. Clause 2.1 provides:
The contractual terms between Panasia and the Customer for the purchase of Goods from Panasia are contained exclusively within this document and any Purchase Order Contract and in no circumstances will Panasia be bound by any purported addition to or a variation of these terms or a Purchase Order Contract unless any such additional variation is signed on behalf of Panasia and the Customer. The terms of a Purchase Order Contract prevail to the extent that they are inconsistent with these terms.
Clause 2.3 provides:
Except as provided in these terms, and to the extent permitted by law, the Customer agrees that it has not relied on any inducement, representation or statement made by or on behalf of Panasia in purchasing or receiving the Goods. Any advice, recommendation or information provided by Panasia in relation to the application of the Goods is given in good faith and is believed by Panasia to be appropriate, but is given without any liability on the part of Panasia.
Clause 4.2 is concerned with pricing of the goods and provides:
The price payable with respect to each Order will be calculated by reference to Panasia’s price list as at the date of that Order, as amended from time to time and notified to the Customer.
Clause 4.5(c) is concerned with warehousing costs and relevantly provides as follows:
…where a Customer requests a deferment of delivery of Goods and such deferment is consented to by Panasia, the date to which delivery is deferred will be deemed to be the date on which delivery is to be made by Panasia. For the period commencing on and from the delivery date agreed in the Purchase Order Contract and up to and including the actual date of delivery, the Customer will pay a warehousing fee determined by Panasia;
Clause 5.1 is concerned with payment terms and provides:
Payment for a Good (sic) must be made by the Customer within 30 days of the issuance of a tax invoice with respect to that Good (sic), unless otherwise agreed between the Customer and Panasia without set off or deduction, to an account nominated by Panasia and notified to the Customer from time to time.
Clause 5.4 provides:
If the Customer does not pay any amount when due to Panasia, interest will accrue on that amount at the Default Rate from the date that the payment was due until that amount is paid.
Clause 6.2 is concerned with defective goods and provides:
Claims regarding damaged or faulty Goods must be notified in writing to Panasia within 7 days of receipt. Subject to clause 6.3, if Panasia determines that any Goods are damaged or faulty it will, at its election, repair or replace such Goods as soon as reasonably practicable.
Clause 6.4 provides:
Panasia reserves the right to deliver Goods in one delivery or by instalments on or prior to the date of delivery contained in any Purchase Order Contract.
Clause 10.2 is the clause by which Panasia claims for legal expenses in its demand and relevantly provides:
The Customer indemnifies Panasia from and against any loss, liability or claim (including legal expenses on a solicitor and client basis) (Loss) to the extent that such Loss results from:
(a) breach of these terms by the Customer;
(b) the manufacturing and/or design of the Goods, toolage or packages or containers relating to those Goods, where those Goods, toolage, packages or containers confirmed to the Customer’s design or specifications;…
Mr Rankine details the nine purchase orders sent by Dinjac to Panasia. These date from 22 August 2017 to 12 October 2017 with delivery dates ranging from 22 October 2017 to 12 December 2017.
Mr Rankine denies the allegation in Mr Gregg’s affidavit in respect of the conversation which he alleged took place between one or other officers of Panasia in September or October 2017 in respect of the placement and “drawing down” of orders and the warehousing for free of charge, stating that such an arrangement would be uncommercial and that Panasia could not afford to manufacture or store all of the goods ordered.
Mr Rankine details the tax invoices which were generated by Panasia for the goods ordered by Dinjad under the nine purchase orders. These range in date from 12 October 2017 to 29 November 2019. Eleven of those tax invoices are dated 29 November 2019. The balance range in date from October 2017 to September 2019, have all been paid by Dinjac, with the 29 November 2019 invoices those the subject of the Demand. They consist of two invoices for warehousing fees for the goods for 2018 and 2019 respectively. The warehousing invoices are for $12,337.60 for each year. The remainder of the invoices contain a narrative ‘Goods in defendant’s Melbourne warehouse’.
Mr Rankine responds to the allegation in Mr Gregg’s first affidavit in which he states that the tax invoices which are claimed in the Demand state prices which are different to the amounts recorded in Dinjac’s purchase orders. Mr Rankine denies the allegations, stating that Mr Mark Haining, Dinjac’s purchasing manager, advised Panasia that the prices referred to in Dinjac’s purchase orders were based on Dinjac’s last purchase price, not Panasia’s then current prices. He asserts that in any event all tax invoice prices were agreed by Dinjac and Panasia. It will be recalled at this point that clause 4.2 of the terms attached to the Account Application Form provides that the price payable with respect to an order will be calculated by reference to Panasia’s price list as at the date of that order.
Mr Rankine states that the Australian Government has imposed antidumping measures on all aluminium extrusions from China since 2010. He states that the investigations which gave rise to the Antidumping Commission Report referred to by Mr Gregg were initiated on 12 July 2018, after receipt of all of the purchase orders made by Dinjac and that none of the purchase orders or tax invoices were affected by investigations.
Mr Rankine states that on numerous occasions Panasia requested that Dinjac take delivery of the goods referred to in the tax invoices. He exhibits a bundle of email correspondence passing between the parties regarding the removal, collection and delivery of the goods ordered by Dinjac and it was because of the result of Dinjac’s refusal to take any steps to collect or take delivery of the goods that Panasia was forced to warehouse them. The emails from Mr Rankine to Dinjac commenced on 4 September 2017 and press Dinjac for removal of the stock by reason of warehousing space considerations. On 1 October 2018, Mr Rankine noted that despite many requests over the last couple of months, the stock level had barely moved and that stock had been in the warehouse since October/November of 2017.
On 18 October 2018, Mr Stroud of Dinjac wrote to Mr Rankine saying,
Unfortunately I’ve spoken with [Mr Gregg] and he’s unwilling just now to take any more as we are storing material outside as well …
On 18 October 2018, Mr Rankine stated:
We are in an extremely difficult position here as we simply cannot store this for much longer. As you know, Mark placed these orders on Panasia in late 2017 in an effort to beat any new duties that were being applied and stock was to be taken in early 2018 …
On 22 July 2019, Mr Rankine wrote to Mr Stroud again. He stated:
… In the meantime, can you please review the attached spreadsheet of stock that we are currently still holding on our floor for [Rapid Aluminium]. As you can see the majority of the stock is Anodised 10um. I find it difficult to understand that since these items are from your fastest moving suites you have not been able to move this stock. … We need to move this stock Paul, despite many requests over the past 18 months very little has been done to move from our floor.
The situation remain unresolved.
On 6 February 2020, Mr Rankine wrote to Mr Gregg, attaching the statement of the outstanding account. This was followed shortly afterwards, on 18 February 2020, with a letter of demand signed by Sam Loo, the accounting manager of Panasia, and subsequent to that, service of the Demand. The statement attached to the 6 February 2020 email lists the invoices outstanding and now claimed in the Demand. The underlying complaint was the inability of Panasia to continue to hold onto the stock and complaints by Mr Rankine about how long the matter was dragging on.
There are several significant features of the documents exhibited to Mr Rankine’s affidavit. The first is that there is no mention of the exacting of storage or warehousing charges in the protracted period commencing September 2017 in which Panasia requested on numerous occasions to take the stock that it had ordered. This is perhaps consistent with the position being put by Dinjac that a special arrangement had been struck outside the normal trading terms to not charge warehousing fees for the stock because of the large orders placed to avoid the antidumping duties. It is only at the end of the timeline that the claim for warehousing charges appears in the statement of February 2020. The invoices for warehousing charges, both dated 29 November 2019, are for exactly the same amount for each year, despite the fact that the level of stock was decreasing over those periods as Dinjac took delivery of some stock.
Another feature of the documentation is despite the fact that Dinjac had been taking delivery of parts of the stock which it had purchased over a period of time, there was no complaint made by it concerning the quality of the stock in terms of its colour and patina. Dinjac, as has been seen, contends that the features of the patina and colour give rise to what amounts to unmarketable stock, but it is not explained by Dinjac why complaints were not made as soon as this would have become apparent as Dinjac collected stock from Panasia or it was delivered to it. Indeed, there was no complaint in writing at all about this issue until after the service of the Demand in this matter when it was referred to in Dinjac’s solicitor’s letter. In addition, as it paid off invoices for parts of the stock it did take delivery of, it made no complaint about the price being charged by Panasia.
Mr Rankine denies Mr Gregg’s evidence in regard to the allegations made by Mr Gregg about the quality of the goods and denies that it had any discussions with Dinjac in regard to that issue, stating that Panasia has been supplying the same product to Dinjac for the past 15 years. Mr Rankine states that during May and June 2019, Panasia attempted to contact Dinjac on numerous occasions regarding monies owed by Dinjac. He states that at the time Mr Gregg was uncontactable or refused to respond to Panasia’s telephone calls and email correspondence. This is at odds with Mr Gregg’s evidence that in the six months leading up to July 2019, he had multiple discussions with Mr Rankine regarding problems with the colour of the naturally anodised aluminium and the issue was left unresolved.
In his evidence, Mr Rankine does not refer to the claim made in the demand for legal expenses. There is no evidence as to how such amount is made up or calculated or what legal services are the subject of that claim.
Dinjac’s submissions
In his written submissions, Mr Parker for Dinjac contended that the demand contained a defect in that it included a misdescription of a debt or other matter and made reference to Austin J in LSI Australia Pty Ltd v LSI Holdings Ltd,[3] where his Honour stated:
A statutory demand is required by Form 509H to ‘describe a debt that is claimed’. If the demand is so vague and/or ambiguous that it fails to identify, to a reasonable person in the shoes of a director of the debtor company, the general nature of the debt to a sufficient degree that the director can assess whether there is a genuine dispute as to the existence or amount of the debt or an offsetting claim, then there is a lack of something necessary for completeness and therefore a defect in the demand.[4]
[3][2007] NSWSC 1406.
[4]Ibid [54].
The Demand claims ‘legal costs incurred by the plaintiff, recoverable pursuant to clause 10.2 of the credit agreement in the sum of $2,663’ but no tax invoice has been attached to the statutory demand and Mr Parker submitted that Dinjac has no way of assessing whether the legal costs for which it is sought to be held liable had been properly incurred or whether the costs claimed are reasonable or not.
Mr Parker then moved on to the subject of the genuine dispute in respect of the colour of the aluminium and its inability to sell it on the market to Dinjac’s customers. He makes reference to Mr Rankine’s denial of those allegations with such denial only being supported by an assertion that ‘Panasia has been supplying the same products to Dinjac for the past 15 years’. He conceded that there is no written complaint from Dinjac concerning the colour of the extrusions despite the fact that Dinjac was taking delivery of a cross-section of the stock over a period of time and such deficiencies would have been apparent when Dinjac took delivery.
Mr Parker contended that the state of the evidence is that Mr Gregg has deposed that he spoke to Mr Rankine about the issue, and the evidence regarding discolouration was not effectively challenged other than denial that conversations had occurred in regard to it.
Mr Parker then moved to the claim for the warehousing charges. He referred to Mr Gregg’s affidavit in which Mr Gregg stated that on the occasion of being told that anti-dumping duties were to be exacted there was an oral agreement struck in respect of the warehousing charges that Dinjac would not be charged for this. Mr Gregg had stated that Dinjac would simply not have placed any orders as it had its own warehouse and if it was going to be charged for storage, it would have stored the goods itself to avoid paying those charges.
Mr Parker also noted that subsequent oral terms to the agreement are susceptible to an estoppel or misleading conduct claim and may be borne out by the email correspondence referred to above.
As to the pricing in the purchase orders, Mr Parker submits that Dinjac’s purchase orders have been accepted by Panasia because Dinjac’s numbering of purchase orders are adopted by Panasia in their tax invoices to Dinjac. However, Panasia has not invoiced Dinjac in line with the amounts specified in the original purchase orders. To my mind, he did not sufficiently address the terms of clause 4.2 which provide that the price will be calculated by reference to Panasia’s price list as at the date of that order.
In its written submissions, Dinjac concludes by way of summary that the Demand should be set aside because:
(a) the debt described as ‘legal costs incurred by the plaintiff, recoverable pursuant to Clause 10.2 of the Credit Application Form’ has no tax invoice provided in support of the claim and it was not attached to the Demand and as such there is a substantial injustice as Dinjac has no way of assessing the reasonableness of the claim; and
(b) there is a genuine dispute between the parties as Dinjac contends that the aluminium the subject of the invoices provided by Panasia was defective by reason of its irregular colour, Dinjac did not agree to pay for warehousing costs and by reason of the disparities between the prices in
Panasia’s submissions
In his submissions, Mr Kohn, counsel for Panasia, referred to the general principles applicable to these types of applications. He notes that the expression ‘genuine dispute’ in s 459H of the Act connotes a plausible contention requiring investigation. The demand will be set aside if there is a bona fide dispute concerning an issue of fact or law which is not based on spurious, hypothetical, illusory or misconceived grounds and which is not frivolous or vexatious but which has some substance. He notes that it is not the Court’s role on the hearing of these types of applications to attempt to determine where the merits of the dispute lie, but that this does not mean that the Court must accept uncritically as giving rise to a genuine dispute in statements and affidavits, however equivocal, lacking in precision inconsistent with undisputed contemporary documents or other statements by the same deponent. Further, it does not mean that the Court must accept a patently feeble legal argument or an assertion of facts unsupported by evidence. So much is an uncontroversial and succinct statement of the law in regard to these types of applications.
Mr Kohn contended that Dinjac’s claims are a recent invention and points to the absence of contemporaneous evidence regarding the assertions as to the quality of the goods. He points to the collection by Dinjac of numerous identical goods from Panasia, receiving numerous tax invoices, remittance advices, email correspondence and letters of demand and submits that it would be expected that some written complaint would have been made about the quality of the goods or their saleability. Mr Kohn notes that Dinjac paid a variety of invoices prior to 29 November 2019 that concerned batches of the same stock and that no complaint was made regarding the colour or price of the goods supplied. He submitted that one would expect some contemporaneous record such as an email or letter of complaint, as to the alleged conversations referred to by Mr Greg in his affidavit.
Moreover, Mr Kohn contended pursuant to clause 6.2 of the credit agreement, Dinjac was required to notify Panasia in writing of any damage or fault within seven days of the receipt of goods and pursuant to clause 6.3, Panasia would not be liable for damage or fault unless Dinjac establishes such damage or fault was caused by Panasia. However no such notification was sent. In addition, he says that there is no evidence produced by Dinjac that would establish that Panasia caused the asserted fault in the quality of the goods. Mr Kohn contends that even if there was an issue with the quality of the goods, that pursuant to clause 5.1 of the agreement Dinjac is still required to pay the invoice amount without setoff or deduction.
As regards to warehousing fees and Mr Gregg’s evidence that it was agreed that Panasia would warehouse the goods order ’for no charge’, Mr Kohn submitted that Dinjac has failed to adduce any contemporaneous evidence in support of the oral warehousing agreement and contended that the purported oral warehousing agreement defied commercial sense and was also contrary to the express terms of the credit agreement. In this regard, he referred to clause 4.5(c) to which reference has been made clearly states that where a customer requests a deferment of delivery of goods, for the period of the deferment the customer will pay a warehousing fee determined by Panasia.
Mr Kohn contended that the purported warehousing agreement is ‘unenforceable at common law’. Moreover clause 2.1 of the credit agreement, provides that the contractual terms between the parties are contained exclusively within the credit agreement and in no circumstances will Panasia be bound by any purported addition to or variation of these terms or a purchase order contract unless such addition or variation is signed on behalf of Panasia and the customer. There is no such documentation. As to the discrepancy in the amounts charged in the purchase orders, Mr Kohn submits that Dinjac has failed to identify which tax invoices do not correspond with the amounts in the purchase orders. In any event, he contends that the prices were agreed by the parties and this is supported by the fact that Dinjac has failed to file any contemporaneous evidence in support of its contention that the purchase orders do not correspond with the tax invoices or were agreed to by the parties.
As to the legal costs, Mr Kohn contends there is no obligation to serve a tax invoice for legal costs or annex such a document to the demand. Further, he says the letter of demand of 18 February 2020 served by Panasia states that if the sum of $118,141.87 was not paid, legal steps to recover the unpaid debt together with legal costs would be taken. He asserts that there was no complaint as to the quantum of the legal fees in Mr Greggs 21 day affidavit. Mr Kohn also draws attention to clause 10.2 of the credit agreement whereby Dinjac is obliged to indemnify Panasia for, inter alia, legal expenses to the extent that such loss results from ‘a breach of these terms by the customers...’. Finally, Mr Kohn submitted that if there is a genuine dispute as to the legal fees, that the Demand should be varied, not set aside.
Legal principles
Section 459H
The principles to be applied in applications to set aside statutory demands are now well settled. As the Court of Appeal in Malec Holdings Ltd v Scotts Agencies Pty Ltd (in liq) summarised,[5] to satisfy s 459H of the Act:
[5][2015] VSCA 330, [47]-[51].
(a) the plaintiff is required only to establish a genuine dispute or offsetting claim and present evidence of the assertions relevant to such a claim. This task is not difficult or demanding;
(b) the Court should not engage in an in-depth examination or determination of the merits of the alleged dispute;
(c) a ‘genuine dispute’ must be bona fide and truly exist in fact and not be spurious, hypothetical, illusory or misconceived;
(d) the Court is not required to accept every statement in an affidavit uncritically, however should not embark upon an inquiry as to the credit of a witness or deponent except in extreme cases; and
(e) the plaintiff will fail in the task of establishing a genuine dispute only if the contentions upon which it seeks to rely are so devoid of substance that no further investigation is warranted.
Section 459J
Section 459J(1) of the Act provides that a Court may set aside a statutory demand in an application under s 459G where because of a defect in the demand substantial injustice will be caused, or there is some other reason why the demand should be set aside. Defect is defined in s 9 of the Act to be an irregularity, misstatement of an amount or total, misdescription of a debt or other matter, and a misdescription of a person or entity. Section 459J(2) provides that the demand should not be set aside merely because of a defect other than as provided under s 459J(1).
Consideration
A. Claim for legal costs
I do not accept Mr Parker’s submission that the inclusion of the claim for legal costs in the demand gives rise to ‘some other reason’ as to why the statutory demand should be set aside in these circumstances. I consider, however, that that the issue of the legal costs was raised in Mr Gregg’s first affidavit. In response Panasia provided no particulars or any detail concerning what legal services are the subject of that claim or how such amount was arrived at or calculated. There was no evidence such as a tax invoice provided in support of a contention that such claim is due and payable by Panasia to its solicitors and for which it is entitled to be indemnified under clause 10.2. While I accept Mr Kohn’s submission that there is no obligation to attach the tax invoice to the Demand and while Dinjac bears the onus of establishing the existence of a genuine dispute, I consider that the issue in respect of legal costs has been raised and Panasia, who is in possession of the facts and evidence to substantiate its claim, has not done so.
Mr Kohn contended that such legal costs are recoverable on a solicitor-client basis, but in my view those costs must implicitly still be shown to be reasonable. But again, there is no evidence in that regard. I am not persuaded by Mr Kohn’s submission that the assertion in the letter of demand of 18 February 2020 foreshadowed that legal costs will be sought satisfactorily addresses the position in that regard. Mr Kohn placed reliance on clause 10.2 of the credit agreement which provides for an obligation of Dinjac to indemnify in respect of legal expenses; this provision requires it to be demonstrated that there has been a breach of the terms by Dinjac in order to activate that indemnity and that is yet to be established. I do however accept Mr Kohn’s submission that rather than set the Demand aside, it should be reduced by the amount of the legal fees.
B. The warehousing fees
The evidence in regard to the warehousing fees starts with the position that the terms of trade between the parties provided that Panasia is entitled to charge a warehousing fee in certain circumstances and that the terms of the written agreement provide all of the terms of the agreement between the parties. Against this however, there is evidence of Mr Gregg who deposes to the occasion on which Panasia’s representatives foreshadowed the imminent imposition of anti‑dumping duties. His evidence is that an agreement was struck orally that Dinjac could place orders which could then be drawn down over a period of time and that there would be no warehousing charges imposed. While that conversation is denied and it being submitted that the allegation of such an arrangement was implausible from a commercial point of view, there are some features of the evidence which give some support to Mr Gregg’s position.
Mr Rankine’s email of 18 October 2018 in which reference was made to the orders being placed in late 2017 in an effort to avoid payment of the new anti-dumping duties, in my view, provides some support for the contention by Dinjac that a special arrangement may have been struck in respect of warehousing charges because of the impending imposition of anti‑dumping duty. It seems reasonably clear that the ‘bulk order’ of aluminium placed by Dinjac was out of the ordinary and I do not find Mr Gregg’s evidence implausible in that regard.
As has been mentioned, the invoices for warehousing charges, both generated on the same day, 29 November 2019, are for exactly the same amount for each year despite the fact that the level of stock was decreasing over those periods as Dinjac drew down on the stock it had ordered. This may be consistent with the situation that Panasia, which was obviously becoming very frustrated with the warehousing of the stock as revealed in the emails to which reference has been made, reaching a decision to impose a warehousing charge despite the oral arrangement which had been struck by Mr Gregg at the time of the placement of the original order. It was only after the numerous requests of Dinjac to take delivery of the balance of the stock that Panasia notified Dinjac that warehousing charges would be imposed. There is no mention of any warehouse charges in the email chain passing between the parties prior to that time.
I consider that there is a genuine dispute in respect of the exaction of warehousing charges. Despite the terms of the written agreement between the parties, I am satisfied that there is a plausible contention requiring investigation as to whether an agreement of the type described by Mr Gregg was struck on the occasion of the ordering of the stock which took it outside the parties’ usual contractual relationship. I consider that there is enough surrounding evidence to support the existence of a genuine dispute in this regard.
C. The colour of the stock
I do not consider that Dinjac has established that there is a genuine dispute in respect of the amounts claimed for the stock which remains undelivered by reason of it not being of the requisite colour and patina. As Mr Kohn submitted, over a period of time Dinjac took delivery of portions of the stock that it had ordered and at no point was there a complaint made concerning a defect of this nature. I consider that such an issue, if real, would have readily been apparent upon Dinjac taking delivery of that stock but there is no evidence of the issue being formally raised as one might expect. While Mr Gregg stated in his evidence that complaints were voiced orally to Panasia over a period, I find that evidence unconvincing. If there were an issue of the type contended, one would have expected to have seen elaborate formal written exchanges on the subject. Instead Dinjac continued to take delivery over that period of time of various parts of the stock making up the bulk order. It was only after service of the Demand that the issue was raised in Dinjac’s solicitors’ letter to Panasia’s solicitors.
Mr Parker contended that the allegation in respect of the colour of the stock was met only with an assertion by Panasia that it had been supplying exactly the same type of stock for some 15 years. In my view, it was a reasonable response on Panasia’s part given its evidence that there was no complaint over a period in which many deliveries took place; it was the only rebuttal it could make in such circumstances. The height of Dinjac’s evidence in this regard is Mr Gregg’s contention that in the sixth months leading up to July 2019 he had ‘multiple discussions’ with Mr Rankine regarding the problem of the colour of the naturally anodised aluminium, but as I have said, there was no written communication at all concerning the issue as one would expect there to be if the issue was of the significance that Dinjac now contends. I reject Dinjac’s submission that there is a genuine dispute which arises by reason of the colour and patina of the material.
D. Price of the goods
Dinjac contends that the prices which are stated in its orders differ from those prices which are ultimately charged in Panasia’s invoices which are the subject of the demand. Mr Kohn in his submissions made reference to clause 4.2 of the credit agreement, the terms of which are extracted above. There is no evidence that there was a departure from these terms in the special arrangement which was struck for the ‘bulk orders’. As such, it was not for Dinjac to stipulate a price, rather, the written terms provided that the price charged was to be calculated by reference to Panasia’s price list. Indeed Mr Kohn pointed to two occasions where the amount charged on the tax invoice was in fact lower than the amount stipulated in the purchase order. In addition, there was no complaint made about the amount being charged by Panasia as Dinjac took delivery of parts of the stock being warehoused by Panasia. I do not consider that there is a plausible contention requiring investigation in respect of the prices charged in the invoices the subject of the demand.
Conclusion
By reason of the foregoing analysis, I consider that the Demand served on Dinjac by Panasia should be reduced by the amounts claimed in the invoices numbered 05586 and 05587 in respect of warehousing fees which are each for $12,337.60, an amount of $24,675.20. In addition, the amount claimed in the Demand for legal costs of $2,663.11 should be deducted, with the result that the Demand should be reduced by a total of $27,338.31.
I will order pursuant to s 459H(4) of the Act that the Demand be varied to $93,466.67 and declare that the Demand is to have had effect as so varied as and from when the Demand was served on Dinjac.
If the parties wish to make any submission in respect of costs, they should do so by a short written submission not to exceed three pages, with such submission to be filed with my associate by 4.00pm on 25 September 2020. I will make final orders on the application on 28 September 2020 to give effect to these reasons.
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