Financial v Lucsan

PARTIES : Financial & Energy Exchange Ltd v Lucsan Capital Pty Ltd

COUNSEL : Mr RA Dick for plaintiff Mr A Vincent for defendant

SOLICITORS : Blake Dawson for plaintiff Dibbs Barker for defendant

• 1- IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

1779/09 FINANCIAL & ENERGY EXCHANGE LIMITED v LUCSAN CAPITAL PTY LIMITED

1 HIS HONOUR: This is an application under section 459G of the Corporations Act to set aside a statutory demand dated 12 February 2009 served by the defendant on the plaintiff. The plaintiff raises genuine dispute and offsetting claims. 2 The plaintiff was providing financial derivatives exchange services in the energy and environment markets. The defendant entered into an agreement with the plaintiff to provide the relevant the IT services to enable the start up of the plaintiff's business. 3 Under the agreement made on 21 March 2007 the defendant was to provide various services which would be agreed upon from time to time in a "schedule 1 - variable conditions". These were signed during the course of the contract. The relevant one for the period of the outstanding invoices is as follows: "Schedule 1 - Variable conditions

1. Scope of Services Project Management of FEX Derivatives, Exchange implementation. Complete implementation of all FEX Technology streams in relation to trading and clearing systems. Staff relationships with 3rd party companies in the establishment of the FEX Exchange, ie CCorp, OMX, HMSP, ISVs etc. 2. Fees $130,000.000 + GST Lucsan Employees monthly retainer fee and Project Manager fee. Lucsan Capital Contractors monthly fee $1,200 per actual working day or as their part of, per contractor, based on timesheets. 3. Commencement Date 1th April 2008 4. End Date 31st January 2009." 4 That the amount claimed in the demand is the sum of $1,244,049.73 described as follows: "Schedule Description of the debt Amount of the debt

Debt owed by the company to the creditor pursuant to the following invoices Invoice LC-009-04 Dated 31/07/2008 $107,443.93 Invoice LC-009-05 Dated 31/07/2008 $143,000.00 Invoice LC-009-15 Dated 31/08/2008 $96,607.50 Invoice LC-009-16 Dated 31/08/2008 $143,000.00 Invoice LC-009-23 Dated 30/09/2008 $92,733.30 Invoice LC-009-24 Dated 30/09/2008 $143,000.00 Invoice LC-009-36 Dated 31/10/2008 $56,265.00 Invoice LC-009-37 Dated 31/10/2008 $143,000.00 Invoice LC-009-46 Dated 30/11/2008 $143,000.00 Invoice LC-009-53 Dated 31/12/2008 $121,000.00 Invoice LC-009-54 Dated 31/12/2008 $55,000.00 Total $1,244,049.73" 5 Apart from the last item, which is a special service fee, the amount in the demand reflects the fixed fee for the defendant's employees on a monthly basis plus contractors' fees.

Genuine Dispute 6 I have had the benefit of having a number of submissions in respect of the principles to be applied. I think the most useful summation of what is a genuine dispute is that given by McLelland CJ in Equity in Eyota Pty Limited v Hanave Pty Limited (1994) 12 ACLC 669. At page 671 his Honour made the following comments in respect of the expression "Genuine dispute": "It is, however, necessary to consider the meaning of the expression 'genuine dispute' where it occurs in s 459H. In my opinion that expression connotes a plausible contention requiring investigation, and raises much the same sort of considerations as the 'serious question to be tried' criterion which arises on an application for an interlocutory injunction or for the extension or removal of a caveat. 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' (cf Eng Mee Yong v Letchumanan (1980) AC 331 at 341), or 'a patently feeble legal argument, or an assertion of facts unsupported by evidence' (cf South Australia v Wall (1980) 24 SASR 189 at 194). But it does mean that, except in such an extreme case, a Court required to determine whether there is a genuine dispute should not embark upon an inquiry as to the credit of a witness or a deponent whose evidence is relied on as giving rise to the dispute. There is a clear difference between, on the one hand, determining whether there is a genuine dispute and, on the other hand, determining the merits of, or resolving, such a dispute. In Mibor Investments (at ACLC 1066; ACSR 366-7) Hayne J said, after referring to the state of the law prior to the enactment of Division 3 of Part 5.4 of the Corporations Law, and to the terms of Division 3: 'These matters, taken in combination, suggest that at least in most cases, it is not expected that the Court will embark upon any extended inquiry in order to determine whether there is a genuine dispute between the parties and certainly will not attempt to weigh the merits of that dispute. All that the legislation requires is that the Court conclude that there is a dispute and that it is a genuine dispute.' 7 In Re Morris Catering (Australia) Pty Limited (1993) 11 ACLC 919 at 922; (1993) 11 ACSR 601 at 605 Thomas J said: There is little doubt that Division 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 simply - 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).'

8 During the course of the hearing a substantial part of the plaintiffs material was rejected on the basis that the reasons, namely breach of contract, were not referred to in the affidavit filed within time. 9 There were still a number of disputes raised. These included: 1. Debt not due. 2. Discrepancy in invoices. 3. Overcharging. Debt not due 10 It was alleged that there were pre-contractual discussions to the effect that invoices may be paid late due to the intermittent nature of the plaintiff's capital raising. It was described in the affidavit evidence as "lumpy." 11 In the latter agreement signed by the parties there is an entire contractual clause and there plainly was no consideration for this promise. However, the dispute is put on the basis that there will be a claim under the Trade Practices Act in proceedings which have now been commenced by the plaintiff against the defendant. This dispute is only in respect of $319,000 of the amount claimed. 12 Although correspondence prior to the issue of the demand did not raise this matter, it seems to me that given of the commencement of those proceedings the dispute could be classified as genuine. Discrepancy in Invoices 13 This relates to an amount of $1,231 43 and the defendant concedes that the demand should be reduced by this amount. Overcharging 14 As I have mentioned, the material as to breach of contract has been rejected. This lead to submissions that the issue of the statement of claim is sufficient evidence of these claims. However, the statement of claim, which is of course not in evidence before me, is nothing more that what it purports to be, namely, a claim, not proof of facts in support of the claim. 15 It was also suggested that there was sufficient material submitted to support a finding that there were some breaches. This is a reference to paragraph 53 (a) which was admitted. This admission occurred before the main debate on Mr Thomas Price's affidavit. The vagueness of that evidence, however, in my view is insufficient to establish the suggested dispute. There is no quantification of the expenditure or the true nature of the dispute. 16 It was also suggested in submissions in paragraph 32 as follows: "Both as a matter of construction of the Project Services Agreement, and on the application of legal principles, the obligation on FEX to pay the fees specified in each version of ' Schedule 1 - Variable Conditions' and the corresponding right of Lucsan to receive payment of those fees only arose if the performance of the services referred to in each Schedule, to which the fees related, had in fact been given: McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at 475-476; Sunbird Plaza Pty Ltd v Maloney (1988) CLR 245 at 253, 267-268." 17 Those, however, are cases concerning the sale of land. It was in part suggested that the amount may be no more than a quantum meruit claim. However, the schedule 1 fixes the amount by reference to the months "and actual working days". Thus the amount will be a liquidated sum and this is sufficient to support a statutory demand. See the discussion at paragraphs 12 to 22 of Vimblue Pty Ltd v Toweel trading as Carpenters Core Building [2009] NSWSC 494. 18 In my view there is no genuine dispute as to overcharging. Offsetting claim 19 It was suggested that there was an offsetting claim for the overcharging. This claim, even if it were available, has not been quantified. In those circumstances I am not satisfied there is a genuine offsetting claim. 20 The plaintiff has established that there is a genuine dispute in respect of the sum of $320,331 43.

I vary the demand dated 12 February 2009 served on the plaintiff by the defendant by reducing the amount of the demand to $923,818 30.

I order that the plaintiff pay the defendant's costs of the proceedings.

I order that the exhibits be returned. **********

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