Vac-tron v American

[2003] NSWSC 529

CITATION:	Vac-tron v American [2003] NSWSC 529
HEARING DATE(S):	12/06/03
JUDGMENT DATE:	12 June 2003
JURISDICTION:	Equity Division
JUDGMENT OF:	Master Macready at 1
DECISION:	Proceedings dismissed with costs.
CATCHWORDS:	Corporations Law. Application to set aside statutory demand under section 459G of the Corporations Act. Proceedings dismissed. No matter of principle.
PARTIES :	Vac-Tron Australia Pty Ltd v American Manufacturing & Machine Co Inc
FILE NUMBER(S):	SC 1229/03
COUNSEL:	M. Pesman for plaintiff P. Russell for defendant
SOLICITORS:	Adams Leyland Solicitors for plaintiff Luscombe Wright Lawyer for defendant

- 1 -

THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

MASTER MACREADY

THURSDAY 12 JUNE 2003

1229/03 – VAC-TRON AUSTRALIA PTY LIMITED v AMERICAN MANUFACTURING & MACHINE CO INC T/AS VAC-TRON EQUIPMENT

JUDGMENT

1 MASTER: This is an application to set aside a statutory demand. The statutory demand is one which is dated 2 January 2003 and claims a total of $US41,502.50. It gives reference by details of invoices and it is apparent from those invoices that there is a sale claimed in the invoices of three machines, together with associated equipment between the defendant and the plaintiff.

2 The machines are equipment used for the purpose of vacuum extraction in connection with pipe laying and other similar matters. The actual invoices, as I say, refer to the supply of those three machines. In respect of two of those machines they have been on-sold by the plaintiff and in respect of one it is apparent they still retain that unit.

3 The schedule to the demand lists the payments that have been made on account, of which there are four, and they have been deducted to give a figure which is the amount claimed in the demand.

4 Some of the history of the matter is probably worth noting. There was initial interest in this project by Mr Sperber who visited the defendant’s office in Florida in early 2000 and he apparently took some machines. The plaintiff company and the main principal of it, who is a Mr Collier, became involved in 2000, and the negotiations continued between Mr Collier and the American representative, particularly Mr Showley, representing the defendant.

5 There was contact at a marketing show in Western Australia in October 2000 and, ultimately, on 23 October, a dealership agreement was entered into between the plaintiff and the defendant. The plaintiff had only been incorporated on 5 May 2000.

6 That agreement was executed by Mr Collier on behalf of the plaintiff and it was not executed on behalf of the defendant until 28 October 2000. The terms of that deed of agreement are fairly straightforward. They provide for the period of the agreement which might be two years. There is a requirement to purchase and maintain two units as an inventory and a requirement for the plaintiff to purchase two units in each quarter of each fiscal year.

7 There are paragraphs in relation to pricing and, in particular, the terms dealt with in that agreement require payment ten days after delivery and acceptance of product.

8 On 25 October 2000 in Brisbane, a series of purchase orders were signed on the plaintiff’s behalf relating, in particular, to the three machines that were purchased. I will come back to the terms of the conversations that occurred then, but it is apparent that in due course invoices were sent, although the original was addressed to Mr Sperber. Later they were re-issued to what was obviously the correct purchaser in the terms of the dealership agreement, which was the plaintiff.

9 The goods were shipped in November 2000 and arrived in Australia in December 2000. The invoices were then re-issued. Thereafter there follows a whole series of correspondence and e-mails dealing with the course of the project, when payment could be expected, including the payment of the amounts to which I have referred. Eventually relationships broke down towards the end of 2001, and in due course the statutory demand was given and the proceedings were commenced within time.

10 The principal matters that have been raised by the plaintiff in relation to the claim to set aside the demand relate to representations which were said to be made on 25 October 2000. This was after the plaintiff had signed the dealership agreement, and at the time of signing the orders for the equipment pursuant to it. There are also conversations that happened in Perth, which, I would infer, given the timing and where people would have been on about 23 October 2000, relating to whether the agreement would be enforced.

11 The discussions in Perth, which are referred to in paragraph 9 of Mr Collier’s affidavit of 23 February 2003 were in these terms:

“Kirkley: The dealer agreement is the one used back in the US and it would not be enforced in Australia. The agreement is only to prove that you are serious about promoting Vac-Tron in Australia. It is also necessary to show that we have a worldwide network.’

Collier: It would take time to promote the concept of vacuum excavation in Australia. It is a totally new concept here.

Kirkley: It may be a new concept in Australia, but it is well developed in the US. I want to get in on the ground floor in Australia and make sure I get a piece of the action. I have called Brian Showley and my business associates about the potential in Australia. The dealership would be handled Brian and me.”

12 There is nothing in Mr Collier’s affidavit which relates to reliance upon whatever might have been any representation in this conversation. I will come back to this subsequent correspondence, but, suffice it to say, there has never been a suggestion since the arrangements were put in place that the agreement was subject to any condition or that a misrepresentation had been made.

13 The principal representation as to finance is contained in paragraph 2 in Mr Collier’s affidavit in the following form:

“Kirkley: I am very excited about the possibilities of selling Vac-Tron machines in Australia. I would like to become involved in this operation. I think Brian Showley would also like to be involved. I have associates back home who would fund an Australian operation. If forward orders are put in place it would help me to get the best prices on the machines and the highest possible margins to help convince my associates to provide the finance.”

Collier: We do not have the funds to pay for any of the orders. We would be relying on your associates to fund these machines. We don’t want any of the orders processed until the finance has been put in place. We cannot pay for the machines.

Kirkley: That will not be a problem. I will personally arrange funding with my associates and Brian Showley. I have enough to cover the orders personally.

Collier: The orders are worthless because we have not paid for the machines, not paid any deposit, nor obtained any letters of credit. No-one is going to send goods overseas without first securing the payment.

Kirkley: It is not a problem because I will arrange the finance prior too shipping.”

14 In two telephone conversations with Mr Kirkley in the United States the following was said:

“Collier: Has any finance been arranged?

Kirkley: Don’t worry, funds will not be a problem.”

15 In a telephone conversation with Mr Kirkley after the delivery of the machines to Sydney:

“Collier: Has any finance been arranged?
Kirkley: You will need to get financials to me. My associates won’t do anything without those.
Collier: The financials will not be positive because the business is still in its infancy.”

16 In a further conversation with Mr Kirkley the following was said:

“Collier: Has any finance been arranged?
Kirkley: The US economy was in a bad way and my potential investors are not very interested any more in investing off shore.”

17 That affidavit was responded to by Mr Kirkley in paragraph 5 of his affidavit of 27 March 2003. In some senses Mr Kirkley’s affidavit confirms that some representations were made regarding the obtaining of finance. He, of course, puts it subject to having a full set of financials and claims those financials were never provided.

18 Although there is some dispute as to the terms of the conversations in part, the plaintiff’s version is supported. That support for the plaintiff’s version is contained in correspondence. At page 44 of exhibit 1 one sees statements relating to the fact that this occurred after the goods were shipped, and that there were promises of finance by Mr Kirkley. That again repeats itself in e-mails, pages 61 and 62, and also in exhibit 4, which was an e-mail in December 2000, after the goods arrived, and there are a number of references which clearly reflect what Mr Collier was probably told.

19 For the purposes of this proceeding I will assume for the moment that, as the evidence might tend to indicate, Mr Kirkley at least had some authority to deal with the distributorship agreement because he is the one who obtained its execution. I will assume the version that Mr Collier gives.

20 The question is, what does that do so far as to create a genuine dispute or an offsetting claim?

21 There is a difficulty with the financial representations in that they occurred after Mr Collier had signed the agreement. It is perfectly apparent from his own affidavit he said he was convinced to sign the dealership agreement in Perth on the 23rd, to prevent other parties or interested parties obtaining the distributorship rights. But even assuming because the agreement had not been completed, and the representations made on the 25th could be taken into account, there seems to me to be other reasons why this does not give rise to a genuine dispute.

22 A genuine dispute would have to go to liability in respect of the payment for the machines. The liability throughout the course of correspondence, after the goods were shipped, is consistent with an acknowledgment by the plaintiff for liability for payment. Payment on account, various auditor’s letters sent confirming the amounts, and a whole range of comments in the letters from Mr Collier, clearly acknowledge the debt being due.

23 The most the representation can do is provide a basis for some claim for damages that the representations were, say, for instance, fraudulent. Given the state of the agreement, and having regard to the delivery of the equipment, the on-selling of two machines and the use of one of the machines, from a practical point of view, there could be no question of the rescission of the agreement. Therefore, I do not think a genuine dispute goes as far as extending to rescinding the agreement in some way. At most it might give rise to some claim for damages and the problem with that is that would have to be an offsetting claim and no damages relating to such matters are advanced. When one talks of such matters, I am talking of the financial representation.

24 In respect of the other representation about the enforceability, the clear course of correspondence after the delivery of the machinery makes it abundantly plain that Mr Collier never thought or placed any reliance on the representation to which I have referred and, as I have said, he has not actually sworn to reliance in respect of that representation.

25 Accordingly, for those reasons, I do not think there is a genuine dispute or an offsetting claim. Accordingly, I dismiss the proceedings with costs. The exhibits may be returned.

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Last Modified: 06/24/2003