Computronics Holdings Ltd v Kiandra IT Pty Ltd

REASONS FOR JUDGMENT 1 The applicant ("Computronics") has sought review of the decision of a Registrar to dismiss its application to set aside a statutory demand served on it by the respondent ("Kiandra"). The review proceeds as a hearing de novo of the application. 2 Kiandra is an IT company which develops software. It has an agreement with GC Access Pty Ltd ("GC Access") to develop software for that company ("the Development Agreement") and Computronics holds a licence from GC Access to use that software. On 29 March 2012, Kiandra, GC Access and Computronics entered into a Deed of Agreement pursuant to which Computronics agreed to pay Kiandra the sum of $770,000 in consideration for Kiandra withdrawing a statutory demand that it had served on GC Access. The sum demanded related to unpaid fees that GC Access owed to Kiandra under the Development Agreement. 3 The Deed of Agreement provided for Computronics to pay the sum of $770,000 to Kiandra in five instalments as follows: $220,000 by 30 March 2012 $137,500 by 30 April 2012 $137,500 by 29 May 2012 $137,500 by 29 June 2012 $137,500 by 30 July 2012 (Paragraph 4(a)) 4 Computronics made the first three payments pursuant to paragraph 4(a) but has not paid the amounts that were due on 29 June 2012 and 30 July 2012. On 13 June 2013 Kiandra served a Creditor's Statutory Demand on Computronics for payment of the sum of $275,000. The debt in the statutory demand was described as: "[relating] to an obligation to pay the creditor pursuant to a Deed of Agreement dated 29 March 2012." 5 On 3 July 2013, Computronics applied under ss 459G and 459J of the Corporations Act 2001 (Cth) ("the Act") for an order setting aside the statutory demand on the grounds that: (1) there is a genuine dispute between Computronics and Kiandra about the existence or amount of the debt to which the demand relates; (2) Computronics has an offsetting claim; and (3) there is some other reason why the demand should be set aside. That last ground was not the subject of submissions or argument. 6 The grounds rested in the uncontroversial fact that Kiandra undertook no further work for GC Access pursuant to the Development Agreement following the execution of the Deed of Agreement. Computronics claimed that Kiandra was subject to a contractual obligation to continue to perform work in accordance with the Development Agreement upon Computronics making the payment of $220,000 due by 30 March 2012. Computronics contended that it has a claim against Kiandra for unjust enrichment or restitution by reason that Kiandra has had, to its own use, three payments from Computronics totalling $495,000 without the provision of any benefit to Computronics. 7 The relevant principles to apply on an application to set aside a statutory demand were not in dispute. It is settled law that s 459H of the Act requires the Court to be satisfied that there is a "serious question to be tried" or "an issue deserving of a hearing" as to whether there is genuine dispute about the debt or whether the company has an offsetting claim against the creditor. An in-depth examination or determination of the merits of the alleged dispute or offsetting claim is neither necessary nor appropriate. All the Court must determine is whether there is a plausible contention of a disputed debt or the offsetting claim: Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd [2013] NSWCA 344. 8 In the present case, the determination of whether there is a plausible contention of a disputed debt or an offsetting claim involves consideration of the terms of the Deed of Agreement. On Computronics' construction, the due payment by Computronics of the instalments provided for in clause 4(a) obliged Kiandra to continue work under the Development Agreement. 9 Clauses 4 and 5 of the Deed of Agreement relevantly provide as follows: 4. Payments (a) [Computronics] must pay Kiandra $770,000 as follows: (i) $220,000 by 30 March 2012; (ii) $137,500 by 30 April 2012; (iii) $137,500 by 29 May 2012; (iv) $137,500 by 29 June 2012; (v) $137,500 by 30 July 2012; all amounts being inclusive of GST; (b) … 5. Obligations (a) In consideration for the payments in accordance with this Deed Kiandra will withdraw the Statutory Demand against GC Access within 2 business days of receiving the payment of $220,000 due on 30 March 2012. (b) Between 30 March 2012 and the making of all payments required by paragraph 4(a), Kiandra will only undertake further work under the Development Agreement: (i) subject to prepayment of its estimated fees for the further work; and (ii) otherwise in accordance with a Deed of Agreement. (c) The parties acknowledge that: (i) the terms of the Development Agreement continue to bind both GC Access and Kiandra; and (ii) subject only to any further work undertaken in accordance with paragraph 5(b), that until the payment in paragraph 4(a)(i) of this Deed has been made, work under the Development Agreement will be suspended as of 5pm, 6 April 2012. 10 Computronics argued that clause 5(c), by its express terms, only suspended work under the Development Agreement until the first payment, due on 30 March 2012, was made. However, Computronics did not advance a plausible argument as to why clause 5(c), as a matter of construction, should not be read subject to the chapeau of clause 5(b)(i). Clause 5(b)(i) stipulates in clear, unambiguous terms that Kiandra "will only undertake further work under the Development Agreement" between 30 March 2012 and the making of all payments required by clause 4(a), "subject to" prepayment of its estimated fees for the further work. Clause 5(b)(i) expressly conditions Kiandra's obligation to continue work under the Development Agreement on Computronics paying outstanding fees for work already completed. 11 Nonetheless, I accept that clause 5(b)(i) is capable of being construed as a condition subsequent, only entitling Kiandra to resile from undertaking any further work under the Development Agreement if it is not paid its estimated fees for that work in advance. I also accept as arguable Computronics' contention that Kiandra could not insist upon payment in advance of a fee estimate that did not have the concurrence of GC Access. But neither of these construction arguments assists Computronics. The difficulty for Computronics is that there is unrefuted evidence before the Court that Kiandra, upon payment of the first instalment from Computronics, did actually submit a schedule of future works on two bases with fee estimates to GC Access and sought a "firm commitment and payment for April" as it was entitled to do under clause 5(b)(i). There is also unrefuted evidence that GC Access did not request any further work to be done because it could not afford to do so. Computronics did not advance a plausible argument as to why Kiandra was not, in those circumstances, entitled to rely on clause 5(b)(i) to excuse it from performing any further work. 12 In the circumstances, I consider Computronics' claim that Kiandra was contractually obliged to continue work by the due payment by Computronics of the amounts provided for in clause 4(a) as "patently feeble". Computronics has not established an offsetting claim nor a genuine dispute about the existence or amount of the debt to which the demand relates. Accordingly, the application for review is dismissed with costs. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Davies.