In the matter of Carrington Equipment Pty Ltd - Carrington Equipment Pty Ltd v Hyundai Construction Equipment Australia Pty Ltd

CATCHWORDS : CORPORATIONS - application to set aside a statutory demand on the basis of a genuine dispute or genuine offsetting claim in relation to an entitlement to certain rebates or discounts based upon alternative claims in contract, estoppel or misleading and deceptive conduct - HELD - statutory demand set aside

Corporations Act 2001 (Cth) LEGISLATION CITED : Fair Trading Act 1987 (NSW) Trade Practices Act 1974 (Cth)

Carlill v Carbolic Smoke Ball Co [1892] 2 QB 484 Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporises Pty Ltd (1994) 13 ACSR 37 Chippendale Printing Co Pty Ltd v Deputy Commissioner of Taxation (1995) 15 ACSR 682 Edge Technology Pty Ltd v Lite-on Technology Corporation (2000) 34 ACSR 301 Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785; (1994) 12 ACLC 669 CASES CITED : Goldspar Australia Pty Ltd v KWA Design Group Pty Ltd (1999) 17 ACLC 456 Jesseron Holdings Pty Ltd v Middle East Trading Consultants Pty Ltd (No 2) (1994) 122 ALR 717; (1994) 13 ACSR 787; (1994) 12 ACLC 490 Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743 Panel Tech Industries (Australia) Pty Ltd v Australian Skyreach Equipment Pty Ltd (No 2) [2003] NSWSC 896 Re Morris Catering (Aust) Pty Ltd (1993) 11 ACSR 601; Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452

PARTIES : Carrington Equipment Pty Ltd (Plaintiff) Hyundai Construction Equipment Australia Pty Ltd (Defendant)

COUNSEL : S Golledge (Plaintiff) E C Muston with J E Maconaghie (Defendant)

SOLICITORS : Mullane & Lindsay (Plaintiff) ClarkeKann Lawyers (Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

10/252943 CARRINGTON EQUIPMENT PTY LTD V HYUNDAI CONSTRUCTION EQUIPMENT AUSTRALIA PTY LTD JUDGMENT 1 HER HONOUR: This is an application brought by Carrington Equipment under s 459G of the Corporations Act 2001 (Cth) to set aside a statutory demand dated 9 July 2010 served on it by Hyundai Construction Equipment Australia Pty Ltd. That statutory demand claimed payment in the sum of $96,419.22. Carrington contends that this debt (the incurring of which is admitted) is liable to be reduced to nil by reason of certain offsetting claims. Background facts 2 Broadly speaking, the dispute arises out of a dealership arrangement between the two entities pursuant to which Hyundai supplied products (both machinery and parts) to Carrington for on-sale to customers of Carrington. The invoices in question relate to machinery sold and delivered to Carrington over the period from 1 July 2009 to 15 February 2010. Hyundai terminated the dealership arrangement, with 90 days' notice, on 17 February 2010. 3 Carrington asserts that an account was maintained between the two companies in which debits for purchases, as well as credits for payments, warranty claims, and any rebate and discount entitlements (to which Carrington as dealer was entitled) were offset. 4 In relation to machinery acquired from Hyundai, Carrington had in place what was in effect a financing arrangement with GE Commercial Capital, under a Bailment Agreement pursuant to which the entity that in fact acquired the goods from Hyundai was GE and those goods were then bailed to Carrington until such time as it repaid GE. (The interposition of GE in the distribution chain is relied upon by Hyundai in defending the present application, as having the effect that Carrington has no claim in contract to any rebate/discount.) 5 There are two matters which are said by Carrington to give rise to an offsetting claim and together to reduce or be likely to reduce the total amount claimed under the statutory demand to nil:

(a) its alleged entitlement to a 5% rebate or discount in respect of purchases made between September and December 2009 (quantified by Carrington at somewhere in the order of $92,386.41); and

(b) its alleged entitlement to a further 5% rebate or discount (in the amount of $6,242.50) being what is referred to as a "wheel loader discount" in respect of one particular piece of machinery purchased by it. 6 (Initially an offsetting claim based on outstanding warranty claims was also raised but by the time the matter came before me that part of the application was no longer pressed.) 7 The total of the respective offsetting claims ($98,628.91) exceeds the amount claimed in Hyundai's statutory demand. Carrington therefore contends that the statutory demand should be set aside pursuant to s 459H of the Act. 8 Hyundai accepts that, during the relevant period, it offered its dealers (including Carrington) both a 5% "EDOS discount" (to which dealers were to be entitled if they utilized a then newly introduced EDOS online ordering system) (that being the discount the subject of the claim in (a) above) and a 5% wheel loader discount offered between November 2009 and 30 April 2010 (in cases where a dealer registered a warranty online before a certain date for wheel loaders acquired from Hyundai) (that being the discount claimed in (b) above). By affidavit sworn 9 September 2010, Mr Nicholas Barnsdall (the Chief Executive Officer of Hyundai) explained the basis on which eligibility for those discounts arose. According to Mr Barnsdall, if an order was eligible for both discounts, then each discount would be provided and in those cases the total discount would amount to 10%. 9 Carrington's managing director, Mr Michael Hector, has sworn a number of affidavits setting out the basis on which Carrington applies to set aside the statutory demand. 10 Mr Hector explained that the system that Carrington had historically used in order to place machine orders with Hyundai was to send an e-mail to Hyundai with details of the stock order; Hyundai would produce a pro-forma invoice and send it to Carrington; Carrington would review the invoice to ensure all details were correct and then provide the pro-forma form invoice to GE (with whom it had pre-arranged finance for machinery acquisitions) to obtain a "pre-release number". (In Mr Hector's affidavit, he says that Carrington and GE had an agreement whereby GE guaranteed the payment of the machine stock ordered from Hyundai. However, the Bailment Agreement in fact seems to have operated so that GE acquired the equipment directly from Hyundai.) 11 Mr Hector says that GE then either sent the pre-release number directly to Hyundai or to Carrington (and, if the latter, Carrington on-forwarded the pre-release number to Hyundai); the order was finalised by Hyundai and ordered from an overseas manufacturer; and the stock was then paid for using the GE "pre-release". 12 Mr Hector says that he had a meeting with Mr Stuart (the General Manager of Hyundai) on 4 August [2009] in which Mr Stuart advised him to hold off ordering machines because Hyundai had a discount program commencing the next month and in which he says Mr Stuart said words to the effect "If you wait you can get a 5% discount." And that "You will require pre-releases on all orders to get the 5% discount" but said nothing about the EDOS system (or the discount being conditional on use of the EDOS system). (paragraph 8 of Mr Hector's affidavit of 18 October 2010). 13 Mr Hector earlier deposed to a conversation (somewhat inconsistently with the timing he says was suggested by Mr Stuart in the above meeting) in or around August 2009 Carrington was informed by Hyundai that it had a new ordering system called the EDOS system. Mr Hector's recollection is that this system commenced operation in or around August 2009. Mr Hector says that Carrington was not provided with information as to how to operate the system or to place machine orders through the system (though I interpose to note that Carrington's marketing officer, Mr Shane White, did attend at least one presentation in relation to the system) and accordingly Mr Hector says he continued to place orders manually in accordance with the system outlined in paragraph 22 of Mr Hector's 28 July 2010 affidavit. (paragraph 23 of that affidavit) 14 Mr Hector deposes to a conversation on or around 11/12 September 2009 with Mr Stuart in which he says he was told "We want dealers to put the orders through the EDOS system but we are just finalising a few things in relation to the system now. The discount will be for all stock order machines with prerelease numbers. We will manage the discount by reviewing the orders submitted by EDOS and the pre-release records" and that, in response to a question by Mr Hector as to whether the discount could be allocated to the parts account, Mr Stuart had said "Yes, Mike, we will work with you to get you the discount". (paragraph 13 of Mr Hector's 18 October affidavit). 15 Mr Hector deposed (and I read this as only going to his understanding) that he understood (on the basis of the above) that a 5% discount would apply to all stock order machines in which there was a pre-GE pre-release for payment and/or stock orders was placed through the EDOS system. (No evidence was adduced by Mr Stuart to the contrary.) Relevantly, it should be noted that on Mr Hector's recollection of the conversation the discount was to be applied to Carrington's "parts account" (an account which seems to be different from the account for purchase of machinery and, as I understand it, separate from the GE financing arrangements). 16 Exhibited to Mr Hector's affidavit sworn 28 July 2010, is a copy of a Hyundai sales/marketing bulletin dated 23 September 2009 in which Hyundai advised dealers of the EDOS stock order discount program (that presumably being the discount Mr Stuart had foreshadowed the month before). That bulletin, relevantly, stated: We are pleased to offer a stock order discount program for a limited time based on the following conditions: Stock order program: 1. 5% discount off current dealer list price - (dated September 23 rd 2009) for dealer stock forward orders only. 2. This discount applies to all monthly machine stock orders receipted via the EDOS system only from 9 th September through to Tuesday, December 22 th [sic] 2009. ... (emphasis in original) 17 Mr Hector says that, when the sales/marketing bulletin dated 23 September 2009 was received, he had a conversation with one of Hyundai's employees (Mr Robertson) in which Mr Hector says he asked for information as to how to use the EDOS system and to get the logon details and Mr Robertson (with whom he usually placed orders at Hyundai) said words to the effect "I don't have time to show you at the moment. Just send me an e-mail with orders like you always do and I will put it in system for you". (paragraph 15 of Mr Hector's 18 October affidavit). (I interpose to note that although it was suggested for Hyundai that this was simply a conversation in which Mr Robertson agreed to "assist" in putting orders into the system; in the context of the conversation as a whole it seems to me certainly arguable that Mr Robertson would have been understood as offering to put the orders into the system in such a fashion as to enable Mr Hector to obtain the 5% discount - in circumstances where Mr Hector had specifically asked for information as to how the system worked and to get the logon details.) 18 There seems to be no dispute that Carrington continued to place orders with Hyundai for machines in accordance with the manual system (i.e. not through the EDOS). 19 Mr Hector says that in or around September or October 2009, he had another conversation with Mr Robertson, who told him that there had been some problems with the EDOS system and who said "I have spoken to Dave [Stuart] and we have been paying the discount for the manual orders". Mr Hector says that he had said to Mr Robertson "let me know when it is worked out and you can show me to use it and I will just keep on placing our orders through you" and Mr Robertson replied "No worries, Mike I will sort it out for you". (paragraph 17 of Mr Hector's 18 October affidavit). (Carrington relies on this conversation as another representation by which Hyundai, in effect, acknowledged the discount arrangement.) 20 Mr Hector has deposed that, on the basis of Mr Robertson's statements prior to (or up to and including) 23 September 2009, he placed orders with Hyundai on the basis that Mr Robertson would insert Carrington's details into the EDOS system and the discount would apply. (Hyundai's evidence, through Mr Barnsdall, is that no Carrington order was ever placed through the EDOS system.) 21 Mr Hector also deposes to a conversation in or around 25 November 2009 in which he says he again asked Mr Robertson how the EDOS system worked and Mr Robertson again said that he did not have time to through it and that he would just submit orders through EDOS as he had previously done; and had said "your orders will still be showing on the system, I will send you your login and you can have it later". (paragraph 23 of Mr Hector's 18 October affidavit). 22 Mr Hector says he relied upon the statements made by Mr Robertson and continued to place orders for machines between September 2009 and December 2009 by e-mailing Mr Robertson "on the understanding that the 5% discount would be applied" by Hyundai to those orders. (paragraph 25 of Mr Hector's 18 October affidavit). 23 In evidence were copies of e-mail communications in relation to monthly orders placed by Carrington over the period. In particular, Mr Hector refers to an e-mail sent by him on 28 January 2010 to Mr Stuart asking that there be a reconciliation so as to credit Carrington's parts account with the 5% credit on machine purchases in accordance with the stock discount program. (I note that there was in evidence also an earlier email from Mr Stuart to Mr Hector in which he advised that Hyundai was in the process of releasing a discount programme for the stock order machines "and would be prepared to work with yourselves by reallocating this amount to the outstanding parts account on receipt of payment for corresponding shipment", in response to a proposal by Mr Hector that an additional amount could be added to machine purchases in order to pay off the parts account (presumably as a way of financing the repayment of the outstanding parts account) (Exhibit MRH29 to Mr Hector's 18 October affidavit). 24 Insofar as the communications suggest that by this stage there was some concern as to the level of moneys due on Carrington's parts account, it seems that the request for application to that account of the 5% rebate/discount on machine orders was something proposed by Carrington to reduce that account (if not indeed an attempt to bring that account back into credit) and, if not encouraged, then certainly not discouraged by Hyundai (which had expressed a preparedness to entertain such an arrangement). The effect of what was apparently proposed would seem to be that, although GE would finance the acquisition of equipment at the pre-discount price, the 5% discount would be applied for Carrington's benefit to reduce its liability for parts. As between Carrington and GE, therefore, there might well have been contention in relation to that proposal (having regard to the terms of the Bailment Agreement, to which I refer later in these reasons). However, as between Carrington and Hyundai there seems to have been no objection to any stock discount being applied to off-set the parts account. 25 The 28 January 2010 email is consistent with an understanding on the part of Mr Hector that Carrington was at that stage entitled to, and was in fact doing what was necessary to obtain, a 5% discount on its machinery purchases - since there would be no point asking for "the" 5% credit to be applied to the parts account if Mr Hector did not believe there was such a discount to be so applied. Mr Stuart's response on the same day, (said by Carrington's Counsel, Mr Golledge, to be the critical piece of evidence) was as follows: Re 5% discount

The current invoices for incoming units are INV 019336 for direct shipment (pre-release obtained with 5% discount applied to invoice - this was prior to agreement to apply to parts a/c's) INV 019403 will apply 5% ($5,575 to parts accounts) INV 019322 Bond stock - discount does not apply INV 019857 still awaiting payment - Redirect, discount does not apply. 26 I interpose to note that the significance of this email depends on whether it is construed as an acknowledgment of the general discount (as Carrington contends) or related solely to a particular transaction (as Hyundai contends). However, that is a determination that would only properly be made on a final hearing in relation to the debt, assuming the statutory demand is set aside. 27 In relation to the first of those invoices (19336), it is said (for Hyundai) that the agreement to give a 5% discount was, in effect, a one off discount related solely to that invoice. Reference is made to a document annexed to the affidavit of Mr Hector, being an e-mail of 13 November 2009 from Mr Stuart referring to "my generous initial offer to apply 5% on the basis of direct payment on 3 November, it is now 13 November and we will need the required processed today or the offer will not apply" (which suggests that Mr Stuart did not consider the discount strictly applicable on that item). That followed an e-mail of 4 November 2009 "please find attached pro forma invoice for requested invoice R55-7 - I have applied the 5% discount based on this being able to be processed directly". Mr Hector's response was "please apply the 5% to our parts account." 28 Thus, for Carrington, it is submitted that this email amounts to recognition of an entitlement to a 5% discount, irrespective of who placed the relevant order; on Hyundai's part it is said to be evidence of no more than a particular arrangement entered into for one acquisition. Insofar as the document might support either construction, it cannot be said that Carrington's position is unarguable on that point. 29 There was a different discount arrangement offered in relation to the purchase of wheel loaders for the period from November 2009. During this period it is accepted that an order was placed by Carrington for one of the wheel loader models covered by the "10% wheel loader campaign" (that being model HL 740-7). There seems no dispute that a 5% discount was applied to the relevant order. What is disputed is whether that was the "wheel loader" discount (as Hyundai says it was and which acknowledges Carrington was entitled to obtain on the wheel loader discount) or the 5% EDOS discount only (to which Hyundai says Carrington was not entitled) thus leaving Carrington in the latter event in the position that it did not obtain the additional 5% wheel loader discount. (An error in the calculation of the 5% discount, of whichever kind it was, was conceded by Hyundai which accepts that a small adjustment to the claim is warranted.) 30 In late 2009/early 2010, disputes seem to have arisen in relation to the business relationship between the parties. In part they seem to have related to a dispute as to whether Hyundai should contact GE directly in relation to the obtaining of pre-release numbers or should, as Carrington contended, deal with Carrington directly on the machinery orders. Carrington seemed to attribute some delay in payment of orders to this issue. There was also reference to Carrington's 'commercial' restrictions, which might have indicated an awareness of financial problems. 31 On 5 February 2010 Mr Hector e-mailed Mr Stuart "Re 5% discount", responding to the 28 January 2010 e-mail by saying "please e-mail me through the sales bulletin that outlines the 5% as my records reflect a different amount to you so I would like to confirm my start dates and the units we believe should have the 5% discount. I would like this to be taken off our parts account ASAP as this is causing us major issues as you are aware." (Up to this point there does not seem to have been any suggestion by Hyundai that some orders, at least, qualifying for the 5% discount had been placed (ie more than the one-off invoice that Hyundai says it agreed to treat as within the discount arrangements). Nor, as I have already noted, does there seem to have been any suggestion that Hyundai would not be prepared to credit any rebate against the parts account.) 32 On 17 February 2010, the dealership agreement was terminated. On 19 February 2010, Mr Stuart e-mailed Mr Hector referring to the 23 September dealer bulletin and stating that this discount "applies to all monthly machine stock orders receipted via the EDOS system only" from 9 September through Tuesday, December 22, 2009 and that, as Carrington had not submitted any orders through this process, Carrington "therefore are technical not eligible for any discounts" (my emphasis). (Use of the word "technical" perhaps suggests a recognition that this was placing reliance on the strict letter of the discount programme and not its intent.) Mr Muston relies on the earlier correspondence in 2010 (in which there had been dissent expressed as to outstanding amounts) as gainsaying any suggestion that the denial of the 5% discount was something first raised after termination of the dealership. 33 Mr Hector's response to the February email was that orders had not been submitted by it through the EDOS system because Hyundai had an employee (presumably Mr Robertson) who was assisting Carrington and who had done this for Carrington "with the view of supporting the dealers". A request was made for Hyundai to reconsider its position. 34 On 15 March 2010 (again, this was after notice terminating the dealership had issued), Mr Stuart advised Mr Hector that he believed that there were no units currently delivered that qualified for forward order discount but suggested that "a simple way to check is through EDOS or review history of prerelease notices from GE as all forward orders need a prerelease". (This would arguably suggest, as asserted by Carrington, that so far as Hyundai considered the discount would be reflected in the pre-release notices, it was not necessarily seen as being limited to orders placed through the EDOS system). 35 Exhibited to Mr Hector's affidavit (MRH26) is a document Mr Hector obtained from GE, being the "prerelease" history. Relevantly, that document includes the invoices to which reference had been made in the "critical" 28 January 2010 email (including invoice number 19336, with date of release noted as 2 November 2009 and date of purchase 22 December 2009; invoice 19403, with date of release 4 January 2010 and date of purchase also 4 January 2010; and invoice 19322, that being noted "Bond Stock" ordered on 22 December 2009). It is difficult to know, from those documents, when precisely orders were placed with Hyundai, although if the placement date is taken to be the pre-release date then that would seem to be identified in this document. 36 I should note that an affidavit was read from Shane White, (a director of Carrington, who was Carrington's sales director and responsible for training and supervising the sales staff dealing with customers directly) deposing as to conversations he had with Mr Robertson in relation to the EDOS discount program. Mr White says that Mr Robertson had told him the 5% discount would not be an issue, "just get Mike to send an email through with the details and we are ready to roll". (Given that Mr White himself says that it was Mr Hector who was responsible for ordering machines with supplies and dealers, it is submitted for Hyundai that the evidence of Mr White can take matters no further as he cannot relevantly have relied on any representation made by Mr Robertson, though it may be that if Mr Robertson understood that the information was being conveyed to Mr Hector reliance might have been placed by Mr Hector on that statement in circumstances where Hyundai might be said in some way to be bound by it.) 37 According to Mr Barnsdall, none of the orders referred to in exhibit MRH-26 to Mr Hector's affidavit was receipted by the EDOS system. In relation to the front wheel loader discount, Mr Barnsdall says he has recalculated it and accepts that it should have been $6,242.50 instead of $6,132.50. He accepts that Carrington is entitled to a further $110 for the discount but not for the $6,242.50 it has claimed (on the basis that the discount given was a front wheel loader discount (as offered) but there was no entitlement a further 5% EDOS discount because the order was not made using the EDOS system). 38 Mr Barnsdall contends that Hyundai is entitled to $96,309.22 as the correct amount due and owing by Carrington. Carrington's claim 39 Carrington maintains that it has a claim in contract for a 5% discount that was to be treated as offsetting amounts payable on the parts account provided that orders were placed for machinery within a particular period and, alternatively, that it has a claim based on estoppel in that it was alleged to believe that certain things were done (i.e. that Mr Robertson would place orders for Carrington in a way that would entitle Carrington to a discount) such that it would be entitled to the discount which would then give rise to a rebate against the parts account for orders placed in the usual way in the relevant three months. On the question of reliance, it is said by Mr Golledge that this is a question of fact not to be determined on a hearing of this kind but that the evidence shows reliance in the form of the continuation of placement of orders in the way Carrington had previously done. Alternatively, it is said that there was a representation made on behalf of Hyundai in relation to the placement of orders giving rise to a claim for relief under s 87 under the Trade Practices Act 1974 (Cth) or the equivalent provision of the Fair Trading Act 1987 (NSW). 40 Mr Muston accepts that there is a low threshold in establishing a genuine dispute or a genuine offsetting claim but says that even if one accepts unreservedly Carrington's evidence, the court could not be satisfied as to the offsetting claims. Contract/Estoppel Claim 41 For Hyundai, it is submitted that to the extent that Carrington relies upon a breach of contract (or an estoppel claim referable to the alleged breach of contract) it cannot succeed even if the evidence of Carrington were to be accepted. This submission is premised, first, on the relevant contract being between GE and Hyundai and, secondly, on the conditions to which that offer was subject not being met. 42 As to the first, it is said that any claim for breach of contract would rest with GE and not with Carrington. 43 Reliance is placed in that regard on the Bailment Agreement, and the seemingly undeniable proposition that the purchases in question were made by GE, not by Carrington. It is said that Carrington cannot point to any contract between itself and Hyundai pursuant to which items of equipment were sold to Carrington. Thus, the threshold problem, according to Hyundai is that Carrington was at most the agent of the ultimate purchaser, (GE) and not entitled to pursue any breach of contract claim against Hyundai. 44 There is no dispute that, at the relevant time, there was a dealership agreement in place between Hyundai and Carrington. Nor is it disputed that Hyundai offered to make a 5% discount available to its dealers (i.e. including Carrington) for purchases ordered through the EDOS or, to be precise, "receipted via" the EDOS system). Whatever the way in which the acquisitions were ultimately effected, there seems to me to be an argument open to Carrington that Hyundai promised it that, as a Hyundai dealer, if an order for machinery was placed by or on behalf of Carrington then a 5% discount off the purchase price would be applicable. That discount, insofar as it represented a monetary amount could conceivably have been applied in a number of ways - as a reduction in the purchase price for that item being made available to a third party financing the acquisition of the equipment pursuant to separate arrangements between Carrington and the financier (i.e. to GE and then passed on presumably to Carrington) or by a reduction in the price of future items, or as an offset for other purchases. 45 If the agreement was to the effect that "if you place an order (through EDOS) then we will sell the machinery to your financier at a lower price" then the fact that the sale contract was ultimately between Hyundai and the financier does not mean that Carrington would not have suffered compensable loss if Hyundai failed to sell to GE at the lower price (since Carrington no doubt would have to meet higher finance payments on that piece of machinery). Similarly, if the agreement was, as Carrington contends, an agreement to apply the "discount" as an offset to its parts account, then non-compliance with the agreement would necessarily have an impact on the quantum of the outstanding parts account (for which Hyundai is now seeking payment). 46 There was a suggestion that the sales/marketing bulletin in which the offer was made could not have had any contractual force. I accept that there may be a question as to whether there was an intention to create a binding contract by reference solely to the sales bulletin. However, that is again not an argument that is so clear on its face as to preclude a finding to the contrary. It seems to me that there is a plausible argument open to Carrington that this was a unilateral contract (separate from its formal dealership arrangements) such that, if an order was duly "receipted" or placed in the relevant period, a discount would be made available to Carrington in some fashion (a unilateral contract of the kind considered in Carlill v Carbolic Smoke Ball Co [1892] 2 QB 48 where performance of the condition to which the offer was subject was the event that brought the contract into existence). 47 Therefore, I do not accept that the fact that the finance arrangements are between GE and Carrington is such as to render the offsetting claim based on the alleged contract as one that is spurious, implausible or doomed to failure. 48 The second basis on which it is said that there is no plausible contention of the kind necessary to warrant setting aside the statutory demand (by reference to the contract claim, or the estoppel claim which itself produces a claim based on the contract Hyundai is said to be estopped from denying) turns on the terms of the offer or promise contained in the September bulletin. 49 It was an express term that the discount applied only to orders made through (or "receipted via") the EDOS system. 50 It is said that there are two reasons why the express term was not satisfied in the present case: first, that none of the orders identified in Exhibit MRH26 was submitted through the EDOS system (whether by Carrington or by the Hyundai staff) and, secondly, that the court cannot be satisfied that all of the orders identified in that Exhibit were placed between 9 September 2009 and 22 December 2009 (and it is said that logic suggests they cannot have been). 51 Mr Barnsdall's evidence is relied upon to show that the contractual precondition was not satisfied at least in relation to the first issue. As to that issue, it seems to me that if Mr Hector's evidence of the relevant conversations with Mr Robertson is ultimately accepted, then it would be open to a court to conclude that Hyundai (through its staff) had promised to place the orders through EDOS and that Hyundai could not rely on its own employees' failure to place the orders through EDOS as the basis for denying Carrington the benefit of the promised discount. 52 As to the second perceived problem in the claim based on contract, it is said that there is no reliable evidence that the orders were placed within the relevant period. The document obtained from GE shows a date of release and a date of purchase for the relevant orders. It is not clear whether the former is the date on which the order is placed. If so, then some of the orders (say, the January invoices) cannot seemingly have been within the period. If on the other hand the January orders are within the period then it is said the 9 September order must be out of the relevant period. However, as Mr Golledge submits, on Mr Hector's evidence, Hyundai itself referred to the GE pre-release records as evidencing the orders to which a 5% discount applied, and Mr Hector's evidence (paras 38/39) is that these were the orders placed in the relevant period. It seems to me that on an application of this kind, there is an arguable case that the offsetting claim can be established of somewhere in the order of the claim contended. Uncertainty as to whether one or more of the invoices might have fallen outside the relevant period is not enough to persuade me that there is no plausible contention by Carrington that most (if not all of them) did. Ultimately, that is a matter that would be for evidence on a debt recovery claim if the statutory demand is set aside. 53 As to the wheel loader discount claim, broadly this turns on whether it can be established that the order was not only entitled to a wheel loader discount but also fell within the 5% EDOS discount - since it seems to be accepted that a 5% discount was given for the relevant purchase. The only question is whether an additional discount applied. That turns on the above issues. Representations 54 In relation to the claim based on the representations allegedly made (to the effect that the discount would be given even if orders were not placed through the system), it is said that, for the purposes of the proceedings, it may be open to a court to accept the evidence given by Mr Hector but that, in their context, the conversations do not convey the representations alleged. 55 It is said by Mr Muston that the conversations in paragraphs 8, 9 and 13 of Mr Hector's 18 October 2010 affidavit (referred to at [12] and [14] above, these pre-date the dealer bulletin and simply foreshadow a discount program to be announced and that the terms on which that discount was offered was subsequently made clear in the bulletin itself. (They do, however, arguably provide the context in which later statements might be said to be understood). 56 It is said that the conversation referred to paragraph 15 of Mr Hector's 18 October 2010 affidavit (at [17] above does not contain any assertion that the EDOS discount would be applicable to orders other than those placed using that system. In that regard it is said that dealers had known about the EDOS system since at least 25 November 2008, when they were delivered a sales marketing bulletin and operational instructions, and that on 7 September 2009 Mr White had attended a course and was provided with instructions on how to operate the system. However, in contrast, the conversation, if Mr Hector's version is accepted, suggests an ongoing representation that he would be entitled to (or given) the discount. 57 It is said that the conversation in paragraph 17 of Mr Hector's 18 October 2010 affidavit (referred to in [19] above), by its express terms, relates only to the way in which Hyundai had approached the problem with the EDOS system and that there is no evidence that the problem affected Carrington in any way. I accept that is the substance of what was said but again, in the context of the earlier discussions it is not unarguable that this amounted to a further representation that Carrington would obtain the discount. 58 Finally, the conversation referred to in paragraph 20 of Mr Hector's 18 October 2010 affidavit, in which Mr Hector says that Mr Stuart said "You will get the 5% discount - we just need to get the pre-release number" (read in the context of the surrounding paragraphs of his affidavit) and the e-mails and Exhibit MRH 13, must be read it is said as referring to a one-off discount unrelated to either the EDOS discount or the wheel loader discount; and that the one-off discount was offered (and given) and thus could not form the basis of an offsetting claim. (Ultimately, that might be the proper construction to be placed on this conversation but it does not seem to me that it permits of no other construction in the context of the discussions between the parties over the relevant period.) 59 As noted earlier, in relation to the representation claim, Mr Muston submits that any representations to Mr White are irrelevant (since it was Mr Hector who was placing the orders not Mr White). 60 It is submitted that at best it might be inferred that there was a representation that Carrington did not have to place the orders through EDOS because Mr Robertson would do so, but that insofar as this discussion was in the context of a discussion in relation to problems with EDOS, which were fixed by 14 October, the representation could not travel beyond 14 October. Mr Muston characterised this as evidence that in the past there has been some problem and that it had been decided to give a 5% discount anyway for one item, but says that there was no representation to the effect that anyone who used the manual system will be entitled to a 5% discount. 61 Accordingly, for Hyundai it is submitted that the alleged representations rely upon conversations that do not support in their terms the representations that are said to found the basis of the claim since none can be construed as a representation that the EDOS system applies contrary to the EDOS bulletin. In reply, as to the relevant conversations, it is submitted by Mr Golledge that (fairly understood) the factual context of those conversations included an entitlement to the relevant discount (and that Hyundai's "attempt to "explain away" significance of the email document on 28 January 2010 does not take into account the assertion was the Mr Stuart had applied "the" 5% discount). That may or may not be the case, but it gives rise at least to an arguable or plausible contention in Carrington's favour. It seems to me that there is sufficient put forward by Mr Hector to give rise to an argument that a representation was made to it to the effect now articulated - whether the evidence is ultimately accepted as going that far is a different matter. 62 Further, it is submitted by Mr Muston that, even if the court were to accept that a representation was conveyed to the effect that the discount or rebate did not depend on stock orders being placed in the EDOS system, to establish an equitable estoppel, Carrington must demonstrate both reliance on the representation and that it has suffered detriment as a result of the situation not being as it had been led to understand (and must then establish loss and damage in reliance on the representation to the extent that it seeks such relief). 63 It is submitted by Mr Muston in this regard that there has been a failure to establish any of those elements even to the threshold level required in applications of the present kind, on the basis that there is no evidence that Carrington would have acted differently (either in not buying the relevant machines or not ordering them manually or increasing the price of the machines when they are on-sold to the customer). It is submitted that the evidence suggests that Carrington would have bought the machines regardless of the discount offered (in that Mr White stated he was going to order the wheel loader before he had heard of the discount; the long history of purchases placed since the first distribution agreement in July 2003; the dependence of the plaintiff's customers on its ability to source machinery on its behalf; and the existence of the 2008 distribution agreement which obliged Carrington as dealer to fulfill a minimum sales volume).

64 As to reliance, it is said by Mr Golledge that weight must be placed on Mr Hector's evidence that he continued to place manual orders in the system, the logical inference from which is said to be that, but for the representations, he would have acted in a different way to ensure that the discount would be given. I think there is sufficient evidence to enable such an inference to be drawn (at least for present purposes). 65 Finally, it was submitted by Mr Muston that Carrington's representation to its financiers in the Bailment Agreement (that the full purchase price was payable in respect of the equipment ordered), when arranging for that equipment to be purchased under its bailment facility, is entirely inconsistent with any claim of detrimental reliance on the alleged representation by Hyundai. 66 Pursuant to Clause 8 of the Bailment Agreement the bailee (Carrington) represents and warrants in favour of GE Commercial Finance, as an ongoing warranty, that:

D.t the price paid by GE Commercial Finance for the equipment represents the fair market wholesale value and is not greater than the price at which the bailee purchased, or could have purchased, that equipment itself. 67 It is submitted that the only inference to be drawn from this is that Carrington did not rely to its detriment upon the alleged representation (and would have ordered the machinery regardless of whether a certain discount was in force at a certain time). The Bailment Agreement is relied upon as objective evidence contrary to any inference that Carrington was acting on an erroneous belief that it would be entitled to the discount. 68 It is said that if Carrington genuinely believed the price was 95%, and was acting on that assumption, then that would be reflected in what it was conveying to GE. I queried whether this was an unclean hands argument and Mr Muston disavowed such a suggestion. Nevertheless he submitted that the inference the court is asked to draw is inconsistent with a representation that goods are not worth less than GE was paying for them. (In that regard, I note that the concession by Mr Muston seems to me to have been properly made. The fact that there might be some breach of warranty under the Bailment Agreement does not seem to me to taint Carrington's claim against Hyundai, though as Mr Golledge recognizes this might be a classic credit submission arising from this evidence in due course.) 69 In relation to the suggestion that Carrington's evidence can be rejected by reference to clause 8 of the Bailment Agreement, Mr Golledge says that the court cannot reject Mr Hector's evidence unless it is entirely implausible by reference to clause 8 in Bailment Agreement. I do not consider that the giving of the warranty (sometime earlier than the transactions in question) itself means that Mr Hector's evidence could ultimately not be accepted as to reliance (in circumstances where there might be a number of explanations for the fact that the discount was not reflected in the pre-release numbers), though I accept that the diversion of the discount seems to have rendered Carrington's position under the warranty problematic, to say the least, vis-a-vis its financier. 70 It is also said that, even if the evidence was accepted, Carrington has failed to establish any entitlement to an equitable estoppel or to damages under s 82 of the Trade Practices Act on the basis that (as I understand it) Carrington duly obtained the goods through its financing arrangement and on-sold to its customers. However, that does not seem to take into account the cash flow effect of the parts account not being reduced. (I note that it is also said for Carrington that s 87 of the Trade Practices Act would enable it to obtain a variety of relief.) 71 Finally, as a discretionary matter it was also submitted that Carrington had not asserted or led any evidence to establish that it was solvent (as a sign of its good faith in disputing the debts) even though such evidence would have been relevant and admissible for that purpose, referring to Chippendale Printing Co Pty Ltd v DCT (1995) 15 ACSR 682, at 694-5 per Lindgren J. (I note that there seems to have been a suggestion of financial difficulty on Carrington's part but cannot form any view on the cause thereof and should not, in those circumstances, assume that this application is simply seeking to delay the inevitable or not be maintained in good faith, if that is what is suggested by this submission.) Legal principles 72 The meaning of a genuine dispute in the context of a challenge to a statutory demand was considered by McLelland CJ in Eq in Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785; (1994) 12 ACLC 669 and Panel Tech Industries (Australia) Pty Ltd v Australian Skyreach Equipment Pty Ltd (No 2) [2003] NSWSC 896, per Barrett J. Barrett J noted that the task faced by a company challenging a statutory demand on genuine dispute grounds is by no means a difficult or demanding one - a company will fail in its task only if the contentions upon which seeks to rely in mounting the challenge are so devoid of substance that no further investigation is warranted. The court does not engage in any form of balancing exercise between the strengths of competing contention. If there is any factor that on reasonable grounds indicates an arguable case it must find a genuine dispute exists even where the case available to be argued against the company seems stronger. 73 In Eyota, his Honour said:

It is, however, necessary to consider the meaning of the expression "genuine dispute" where it occurs … in my opinion that expression connotes a plausible contention requiring investigation, and raises much of the same sort of considerations as the "serious question to be tried" criterion which arises on an application for an introductory injunction or for the extension or removal of a caveat. This does not mean that the court must accept uncritically as giving rise to 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 Me Yong v Letchumanan [1980] AC 331 at 341), or "a patently feeble legal argument or an assertion of fact 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 [i.e. where evidence is so lacking in plausibility], a court required to determine whether there is a genuine dispute should not embark upon an enquiry 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 Re Morris Catering Australia it was said the essential task is relatively simple - to identify the genuine level of a claim ... 74 In Edge Technology Pty Ltd v Lite-on Technology Corporation (2000) 34 ACSR 301, the court was considering whether a breach of warranty in supply of goods gave rise to a genuine dispute or offsetting claim and the question of quantification of the offsetting claim. Again, it was said that the court's task was not to resolve competing claims but to determine whether there was a genuine dispute concerning the debt or a genuine offsetting claim against the party serving the statutory demand and if so in what amount. It was not necessary, nor was it appropriate, for the court to consider the merits of the dispute or offsetting claim (citing Goldspar Australia Pty Ltd v KWA Design Group Pty Ltd (1999) 17 ACLC 456; Re Morris Catering (Aust) Pty Ltd (1993) 11 ACSR 601; Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporises Pty Ltd (1994) 13 ACSR 37). 75 In Edge Technology, it was said (at [43]): there are several matters of fact bearing on whether the dispute in

the present case or the asserted offsetting claim is not genuine; that is, "spurious, hypothetical, illusory or misconceived" the question must be answered having regard to the evidence before the court at this time and on the basis that the contract has not been terminated. ... The threshold presented by the test to set aside a statutory demand does not however require of the plaintiff a rigorous and in-depth examination of the evidence relating to the plaintiff's claim, dispute or offsetting claim. That is why cross-examination in contested statutory demand proceedings is limited: Hayne J in Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290. 76 His Honour referred to (at [57]) what was said by Young J as his Honour then was in Jesseron Holdings Pty Ltd v Middle East Trading Consultants Pty Ltd (No 2) (1994) 122 ALR 717; (1994) 13 ACSR 787; (1994) 12 ACLC 490:

It is well known that many claims are ambit claims, and not even the person making them has any real hope of recovering the maximum amount claimed. Often it is appropriate to work out what is the maximum likely amount to be recovered. However, it does not seem to me, although I have tried hard to fit this meaning into the subsection, that one can get this result. The amount of the claim is an expression which has a more or less defined meaning ... [it] means the amount claimed in good faith, so long as that claim is not fictitious or merely tolerable. 77 A genuine dispute is one which is bona fide and truly exists in fact and is not spurious, hypothetical, illusory or misconceived. It exists where there is a plausible contention which places the debt in dispute and which requires further investigation. The debt in dispute must be in existence at the time at which the statutory demand is served on the debtor (Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452; Eyota). 78 In Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743, Palmer J said (at [17]);

In my view, a claim for the purposes of CA s 459H(1) and s 459H(2) means not just a cause of action, so that once a genuine cause of action for unliquidated damages is shown by a plaintiff, the court is compelled to accept at face value the damages claimed by the plaintiff as the amount of the offsetting claim for the purposes of the calculation required by s 459H(2). .... In my opinion, a genuine offsetting claim ... means a claim on a cause of action advanced in good faith, for an amount claimed in good faith. "Good faith" means arguable on the basis of facts asserted with sufficient particularity to enable a court to determine that the claim is not fanciful. In a claim for unliquidated damages for economic loss, the court will not be able to determine whether the amount claimed is claimed in good faith unless the plaintiff adduces some evidence to show the basis upon which the loss is said to arise and how that losses calculated. If such evidence is entirely lacking, the court cannot find that there is a genuine offsetting claim … . 79 His Honour had earlier in that case said (at [16]);

the real difficulty in this case is the amount of the plaintiff's alleged offsetting claim. Where the case involves a claim for a liquidated sum the application of the section is relatively easy, the court simply determines whether the cause of action is a genuine one and if that proves to be the case, the amount of the offsetting claim is the amount of liquidated sum, the subject of that claim. The position is by no means as easy where claim is a claim is for unliquidated damages and the damages are said to be economic loss suffered by the plaintiff. Conclusion 80 Having regard to the nature of the task faced by a company seeking to set aside a statutory demand, and in particular the recognition that the task is not a particularly challenging one, I am not persuaded here that the alleged claims are spurious, hypothetical, illusory or misconceived. They are not so devoid of substance (or so doomed to failure) as to warrant a dismissal of the application. If there was, indeed, an arrangement pursuant to which the parts account was to be off-set by the 5% discount and Hyundai represented that it would be made available to orders placed in the relevant period whether or not they were placed online through the EDOS system, then on the material before me there is a relatively substantial off-setting claim (the precise quantum of which will depend on a determination of the times at which the relevant orders were placed, but which potentially would extinguish most of the claim the subject of the statutory demand). I am satisfied that there is a genuine dispute as to the liability of Carrington to pay the amount claimed in the statutory demand without regard first being made to the off-setting amounts to which it says it is entitled by reference to the discount arrangements it was offered (and which it says Hyundai is estopped from denying). 81 Accordingly, I consider the appropriate relief is to set aside the statutory demand and to order the defendant to pay the costs of the application. I so order. **********

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