Re Kidzstuff Manufacturing P/L - [1999] QSC 20

IN THE SUPREME COURT
OF QUEENSLAND

No. 478 of 1999

Before Justice Wilson
[Re Kidzstuff Manufacturing P/L]
BETWEEN:

IN THE MATTER of the Corporations Law
- and -

IN THE MATTER of KIDZSTUFF
MANUFACTURING PTY LTD
(ACN 063 926 992)

REASONS FOR JUDGMENT - WILSON J.
Delivered the 12th day of February 1999

This is an application by Kidzstuff Manufacturing Pty Ltd to set aside a statutory demand served by Kidzstuff (Qld) Pty Ltd and Kidzstuff (NSW) Pty Ltd. The applicant was formerly called OMC Australia Pty Ltd. It changed its name on 24 January 1997.
There are two grounds on which the application was argued before me - that there was an agreement to withdraw the demand and that there is a genuine dispute about which entity owes the debt in question. As to the first, there was a factual dispute whether there had been an agreement to withdraw the demand. There was cross-examination on this issue. Counsel for the respondents conceded that if such an agreement had been made, that would be sufficient reason to set aside the demand under s 459J(1)(b) of the Corporations Law.
The applicant is the proprietor of a franchise system known as “Kidzstuff Franchise System.” On 11 April 1995 it entered into franchise agreements with the respondents. In early 1996 there was a corporate re-structure of the applicant and associated companies, with the result that Kidzstuff Licensed Products (Australia) Pty Ltd (“KLPA”) was given an exclusive licence to deal in franchises. The franchise agreements between the applicant and the respondents were terminated, and on 8 February 1996 new agreements were entered into between KLPA and the respondents. Pursuant to these, each of the respondents paid a franchising fee of $100,000. In April/May 1996 the respondents wished to sell their franchises, and KLPA agreed to buy them back. On 1 May 1996 a deed was entered into between the respondents and the applicant. The applicant was described as “the agent”. That agreement recited as follows:-
“A.The companies have paid certain monies to Kidz Stuff Licensed Products (Australia) Pty Ltd ACN 069 012 193 (hereinafter called “the franchisor”) for the rights to a system for the installation and commercial operation of machines which incorporate popular children’s characters (hereinafter called “the machines”).
B.The agent is a subsidiary of the franchisor and has been authorised by the franchisor to enter into this Agreement.
C.The agent has been authorised by the franchisor to refund certain monies and grant certain rights as described in this Agreement to the companies.
D.The companies have agreed to the proposals put forward by the agent on the undermentioned terms and conditions.”
The applicant asserts that it executed that deed under a misapprehension as to who was liable under it - the applicant or KLPA.
The amount of the statutory demand, $164,010, is the balance of moneys owing pursuant to that deed.
The statutory demand was served on 30 December 1998. The application to set it aside was filed on 18 January 1999,…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Re Kidzstuff Manufacturing P/L

Details

AGLC: Re Kidzstuff Manufacturing P/L [1999] QSC 20
Case: [1999] QSC 20
Decision Date: 12 February 1999

CaseChat Overview and Summary

The case involves an application by Kidzstuff Manufacturing Pty Ltd, formerly OMC Australia Pty Ltd, to set aside a statutory demand served by Kidzstuff (Qld) Pty Ltd and Kidzstuff (NSW) Pty Ltd. The applicant is the proprietor of the “Kidzstuff Franchise System,” and it had entered into franchise agreements with the respondents. The dispute arose from a corporate restructure in early 1996, which led to the termination of the original franchise agreements and the execution of new ones. The statutory demand, amounting to $164,010, was served on 30 December 1998, and the application to set it aside was filed on 18 January 1999.

The primary legal issues were whether there was an agreement to withdraw the demand and whether there was a genuine dispute regarding which entity owed the debt. The court had to determine the credibility of the evidence presented by both parties, particularly the telephone conversations between Mr Crossley on behalf of the applicant and Mr Forsyth on behalf of the respondents. The court also had to decide if the statutory demand could be set aside under s 459J(1)(b) of the Corporations Law, which allows for the setting aside of a demand if there is an agreement to withdraw it.

The court found that there was an agreement to withdraw the demand, based on the evidence of Mr Crossley, who stated that Mr Forsyth had agreed to withdraw the demand on the condition that Mr Crossley attend a meeting on 10 February 1999. The court considered the inconsistencies in Mr Forsyth's evidence and the lack of plausible explanation for his omission to mention the agreement to postpone enforcement of the demand. The court concluded that the evidence of Mr Crossley was more credible, and thus, the statutory demand could be set aside. The court also noted that it was not necessary to consider whether there was a genuine dispute regarding the debt, as the first ground for setting aside the demand had been made out. The court ordered that the statutory demand be set aside and proposed to order that the respondents pay the applicant's costs of and incidental to the application to be taxed.

Orders