Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd [2019] NSWSC 1102 | Case summary

Supreme Court of NSW|2019-03-11|Before: Rees J, McLelland CJ, As McLelland CJ

These proceedings

On 14 February 2019, these proceedings were commenced. At the first return of these proceedings on 27 February 2019, there was no appearance for Force Draft. The Registrar adjourned the proceedings to the Corporations List on 11 March 2019 for further directions. On 11 March 2019, Mr Pocock appeared in person. In considering the distance he had come, his Honour Justice Black referred the application to me for final hearing that day. I gave leave for Mr Pocock to represent the company and, after the hearing, made directions for further evidence to be served before reserving judgment. Three further affidavits were served by Force Draft and three affidavits were served by Daikin.
Because of this unusual procedural history, an issue arose as to an affidavit filed by Mr Pocock outside the terms of the leave I granted. Daikin objects to this affidavit being read. I apprehend that the mistake on Mr Pocock's part was innocent: perhaps understandably for a self-represented litigant. I do not propose to take note of the affidavit to the extent that it contains evidence although I do not consider that the findings I have made would have differed materially. To the extent that that affidavit contains submissions, it falls within the leave granted and I have considered the submissions. Mr Pocock took objection to the affidavit of Mr Narasimhachar which was filed and served in time but was then unsigned. I consider that, despite the formal issue, which has since been cured, Mr Pocock has had an opportunity to respond to its contents. I have read this affidavit.

Consideration

It is apparent to me from reviewing the evidence that there is a dispute between Daikin and Force Draft which includes both legal and factual issues. As to legal issues, there is a dispute as to whether the contract between them included the following terms: 1. whether Force Draft could only submit invoices for repair work done under warranty within specific time frames, failing which, Daikin was entitled to reject the invoice; 2. whether such a term as described in (a) was varied in 2017 to increase the time within which a warranty claim could be made from 14 days to 28 days; 3. whether Force Draft was only entitled to charge for labour up to a maximum number of hours depending on the repair work done; 4. whether such a term as described in (c) was varied to entitle Force Draft to charge for more hours or at a higher hourly rate than provided for in Daikin's written documentation; and 5. whether Daikin was entitled to require Force Draft to provide further information in respect of an invoice, either within a specified time period or at all, failing which Daikin was entitled to reject the invoice.
As to disputes as to factual matters, the following appear to me to arise: 1. whether Force Draft received Daikin's letters and emails requesting revised invoices or further information in support of an invoice; 2. whether the second invoice has been paid, or at least all but $5.21 has been paid, by the application of two credit notes; and 3. whether the labour invoiced in one of the invoices (Invoice 4046952 dated 10 March 2017) was in respect of a repair covered by the Daikin warranty.
Mr Pocock submitted orally: There is no genuine dispute but Daikin's trivial and petty, tiresome ways of actually allowing a contractor to make a claim…
Force Draft submitted that Daikin's constant request for further details on invoices was punitive; its requirement to submit warranty claims within specified time frames was "tyrannical"; and Daikin: have managed to make a fantasy story by spurious claims with smoke and mirrors and using bluster and assertion to believe it themselves … they can make a story out of nothing.
But it seems to me from the correspondence between the parties and the affidavits of Mr Pocock and Daikin's employees that the legal and factual disputes I have listed at [35]-[36] are "genuine" in the sense that they involve a plausible contention requiring investigation and cannot be dismissed as mere assertions unsupported by evidence, or as patently feeble legal arguments. Each dispute has a sufficient objective existence and prima facie plausibility, evidenced by contemporaneous documentation, and cannot be said to be spurious, bluster or assertion.
Two invoices fall into a slightly different category. Although the first invoice remains in dispute, Ms Lazar's letter indicates that Daikin did not cavil with Force Draft charging $335 for its work. There is no genuine dispute as to this amount.
Second, the final invoice was due to be paid on 8 February 2019, a fortnight after Force Draft's statutory demand was issued. Force Draft was not entitled to include the debt in the statutory demand when it was not due and payable: section 459E(1) of the Corporations Act. The inclusion of debts not due is a defect such that the whole of the demand may be set aside under section 459J: Portrait Express (Sales) Pty Ltd v Kodak (Australasia) Pty Ltd (1996) 20 ACSR 746 at 750; [1996] NSWSC 199; In the matter of MK Group Phoenix Pty Ltd [2014] NSWSC 1467 at [40]; In the matter of Longking Pty Ltd (2017) 123 ACSR 456; (2017) NSWSC 1534 at [44]; In the matter of Erma Properties Pty Ltd [2017] NSWSC 1748 at [32].
As such, there is an undisputed amount of $335. This is the "substantiated amount" for the purposes of section 459H. Since this amount is less that the statutory minimum of $2,000, the Court must set aside the demand: section 459H(3).
Finally, I note Mr Pocock's oral submission in respect of the use of statutory demands: In the past I have used this format and it has been a very effective in receiving payment when there is a genuine non-dispute or no genuine dispute … To correct any misapprehension going forward, Part 5.4 of the Corporations Act is not a convenient and easy way of recovering moneys: indeed, it is not really a way of recovering moneys at all. It is a process used to raise a presumption of insolvency in a debtor company.

Orders

For these reasons, Daikin's application must be granted. I make the following orders: 1. Pursuant to section 459H(3) of the Corporations Act 2001 (Cth), set aside the creditor's statutory demand dated 25 January 2019 and served by the defendant upon the plaintiff on 30 January 2019. 2. The defendant to pay the plaintiff's costs.

Amendments 02 September 2019 - Decision on coversheet and [44] should read "the defendant upon the plaintiff". DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 02 September 2019

Genuine Dispute

In Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd (2013) 85 NSWLR 601; [2013] NSWCA 344 at [31], the Court of Appeal approved McLelland CJ in Eq's consideration of a "genuine dispute" in Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 787 as involving a plausible contention requiring investigation, raising much the same sort of considerations as the "serious question to be tried" criterion that applies in the case of an interlocutory injunction. As McLelland CJ in Eq stated at 787: This does not mean that the court must accept uncritically as giving rise to a genuine dispute, every statement in an affidavit "however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be" not having "sufficient prima facie plausibility to merit further investigation as to [its] truth", or "a patently feeble legal argument or an assertion of facts unsupported by evidence".
The Court, at [48], also approved the following statement of Thomas J in Re Morris Catering (Australia) Pty Ltd (1993) 11 ACSR 601 at 605: There is little doubt that Div 3 … prescribes a formula that requires the court to assess the position between the parties, and preserve demands where it can be seen that there is no genuine dispute and no sufficient genuine offsetting claim. That is not to say that the court will examine the merits or settle the dispute. The specified limits of the court's examination are the ascertainment of whether there is a 'genuine dispute' and whether there is a 'genuine claim'. It is often possible to discern the spurious, and to identify mere bluster or assertion. But beyond a perception of genuineness (or the lack of it) the court has no function. It is not helpful to perceive that one party is more likely than the other to succeed, or that the eventual state of the account between the parties is more likely to be one result than another. The essential task is relatively simple - to identify the genuine level of a claim (not the likely result of it) and to identify the genuine level of an offsetting claim (not the likely result of it).
The characteristics of a "genuine dispute" were described in similar terms by the Victorian Court of Appeal in TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd (2008) 66 ACSR 67; [2008] VSCA 70, by Dodds-Streeton JA (with whom Neave and Kellam JJA agreed), at [71]: The dispute … should have a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion, and sufficient factual particularity to exclude the merely fanciful or futile. … Something "between mere assertion and the proof that would be necessary in a court of law" may suffice.
Mr Pocock referred me to two other authorities which consider a genuine dispute. In a much-cited passage of Spencer Constructions Pty ltd v G&M Aldridge Pty Ltd (1997) 24 ACSR 353, the Full Court of the Federal Court (Northrop, Merkel & Goldberg JJ) reviewed the many authorities and concluded at 365: 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. Similarly, in Leisure Kart City Pty Ltd v Professional Auction & Valuation Services Pty Ltd [2013] QCA 298 the test applied at first instance and on appeal was that set out in Spencer Constructions: per Philippides J, with whom McMurdo P and Holmes JA agreed, at [26].

Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd

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