1. The statutory demand dated 15 December 1995 is set aside.

2. The respondent pay the applicant's costs on a solicitor/client

basis.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules

HEEREY J The applicant applies to set aside a statutory demand which was served on 15 December 1995. The demand claimed the amount of $113,999. The case of the respondent, which carries on a public relations business, is that on 9 August 1995 there came into existence an agreement whereby the respondent was to provide public relations services for the applicant for a trial period of three months at a sum, which including an amount for the provision of a survey, was the monthly sum of $35,833. The amount claimed is made up of three month's charges plus $6500 out of pocket expenses.

2. The applicant provides computer services to public bodies and in particular computer-aided call taking and dispatch services for emergency services including the Metropolitan Ambulance Service and the Victoria Police. The applicant is a subsidiary of an American corporation.

3. The respondent was invited to tender for the provision of public relations services to the applicant and did so by a written submission dated 9 August 1995. The submission was presented by Ms Lawrence on behalf of the respondent to the executive director of the applicant, Mr Shane Tyrell, at a meeting held on the same day. The submission outlined the various services that the respondent was able to provide together with the quoted cost of $30,000 per month for three months and a survey which, if the retainer was accepted, would be charged at $17,500.

4. There is a dispute as to what passed between Ms Lawrence and Mr Tyrell at that meeting. In her affidavit Ms Lawrence at one point used the expression "after the agreement with the Applicant was sealed with a handshake". At a later stage of her affidavit she deposed:

At no time did Mr Tyrell mention that the proposal would need to be

presented to the Board and that until approval was received he could

not authorise the Respondent to undertake any tasks other than those

specifically requested by the Applicant. In fact to the contrary,

Mr Tyrell indicated to me that he had the authority to bind the

company and ratification by the Board was only a formality. I asked

Tyrell whether the applicant was autonomous in Australia and Tyrell

said to me that they were "big boys and they could make their own

decisions." I took this to mean that Tyrell as Executive Director of

the applicant had authority to engage the Respondent.

5. Even on Ms Lawrence's version, what she deposes to is not equivocally an acceptance there and then by Mr Tyrell on behalf of the applicant. Whether or not ratification by the respondent's Board was "only a formality", that was, objectively speaking, still an event which had to occur before there was a binding contract. In any case, the applicant replied by a letter dated 11 August from Mr Tyrell to Ms Lawrence which was in these terms:

Thank you for your presentation on Wednesday, 9 August 1995. As

discussed I will present your proposal to our Board of Directors

within the next fortnight and I look forward to a favourable response.

Thank you to your prompt attention to my requests.

6. There was no evidence of a response from Ms Lawrence pointing out that a binding agreement had already been concluded.

7. The respondent then proceeded to carry out some public relations tasks. The applicant accepts that some work was done by way of provision of press kits and other associated services, and states that it is prepared to pay a reasonable amount for those services, subject to provision of proper invoices and details.

8. However, the applicant ultimately decided not to proceed with the retainer as outlined in the respondent's submission. On 2 October 1995 the applicant wrote to the respondent as follows:

We refer to your various letters of correspondence and, in particular,

your letter of August 9th, wherein you provided an estimate of $30,000

per month for three months for the provision of professional services.

We have now had the opportunity to review the professional services

you believe are necessary and the proposed terms and conditions of

your contract. As a result, we have proposed Schedule 1 attached

which lists the details of the 21 individual service offerings that

you have proposed offering this Company.

Unfortunately, it is not necessary for this Company to contract your

organisation to provide all the services that you have listed on the

accompanying Schedule. In fact, we have reviewed the services in

detail together with all your correspondence and discussed this matter

at length with our Executive Management Group (EMG). The conclusion

is that of the 21 areas of service offered, we only require five at

this stage. These are clearly indicated on the accompanying Schedule.

Although it is recognised that all the other elements of service are

critically important to professional media and public relations

management, at this stage it has been decided that the remaining 16

items will be either managed internally by IPS or though the

international PR Media Management Division of Intergraph Corporation

Inc.

Accordingly in the light of our discussions last week we would like

you to undertake the following:

1. Advise us of what work you have done to date and what is the

associated cost to this Company of your services. We respectfully

request as much supporting detail as possible for each of these items

of service provided to date.

2. Prepare and submit a quote on a monthly basis for the provision of

the five areas of service outlined in Schedule 1 and discussed with

Messrs Griffiths and Tyrell.

3. Advise when the press/information kit will be finalised and what,

if any, items or contributions are outstanding from this organisation.

In respect of our meeting of 27 September you were also going to

provide an Agenda and plan for securing a number of feature articles

in numerous business, financial and industry magazines on the IPS

story and the services being provided with the ESO's and Victorian

Government under our $200 million contract.

Could you please advise both the status and timing of the preparation

of this Agenda.

In closing, we acknowledge that we have been tardy and unprofessional

to date in our dealings with you and your organisation.

Unfortunately, this has been symptomatic of three things:

1. the September 5th deadline in terms of commissioning of the system

at the VPC;

2. the current workload of all IPS staff;

3. the conclusion of our contractual arrangements with International

Public Relations Pty Ltd (IPR) that occurred on the 19th September.

However, we have now dedicated the time necessary to media management

issues and in line with the US Head Office budget constraints and

internal management of the majority of PR media issues, we find that

we can only proceed with the contractual arrangements with your

Company in respect of the five services outlined in the accompanying

Schedule. We are now looking forward to receiving the information

requested previously so that we can negotiate final contract terms and

conditions and progress this matter to its logical conclusion.

If you have any queries in relation to this letter or any other matter

concerning our relationship please do not hesitate to contact us.

9. The schedule to the letter sets out 21 defined tasks of which the following five were marked as being required by the applicant: They were:

2. Define and agree media strategies.

8. The preparation, compilation, editing, design and publishing of a

multi purpose information kit on Intergraph.

10. The preparation and distribution of regular press releases-both by

electronic transmission and other distribution.

14. Organising media interviews.

19. To prepare a bank of future stories and in depth articles for

media distribution, including the educational services and tertiary

institutions.

10. The respondent protested at that letter although, as counsel for the applicant pointed out, in terms which were by no means necessarily consistent with a view that there was a concluded agreement already in existence. For example, in a letter sent on 4 October the respondent said, amongst other things,

I seek an immediate meeting to clarify and finally resolve this matter

without rancour before we proceed further, and to finalise our

contract to continue working with and for Intergraph and to ensure

that neither Intergraph Public Safety Pty Ltd nor TLMS Pty Ltd damages

an otherwise productive and most happy relationship -and that both

parties emerge from such meeting with a clear and formal mandate to

continue working together in loyalty and common endeavour, as has

always been our enthusiastic intent.

Intergraph has had our written submission since early August. There

has never been any suggestion either from yourself or Shane, that our

submission would not be accepted. I was repeatedly told that

Intergraph was anxious to move ahead on our submission, indeed on the

basis of its contents and fee structure, I was instructed to move on

the program enclosed. I was constantly told 'to bear with you' - that

the matter just had to be cleared by the American Board and that

though the money issue was a sensitive one, it was understood that

Intergraph in Australia had particular needs and problems with which

to contend, and that the Australian leadership would press these needs

- and that America would approve the go-ahead.

As Intergraph is aware, we prepared extensively for this strategy. I

remained (and remain) constantly on standby and although we maintained

daily contact with Intergraph, return communications proved difficult.

We still had not received written approval of our submission but were

again assured that the matter was to go 'before the Board' and assured

it would be looked upon favourably.

Though this is brief and doesn't track all the issues you raised in

yesterday's fax, I think it is important we do resolve any

misunderstanding immediately and agree on a contract.

13. I am of course not trying as an ultimate issue whether there was or was not a concluded contract reached between the parties on 9 August 1995. As was said in Mibor Investments Pty Ltd v Commonwealth Bank of Australia (1994) 2 VR 290 at 295 per Hayne J:

... 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.

14. I have no doubt on the material here that there is a genuine dispute as to the existence of the contract alleged by the respondent. There is a direct conflict of evidence on oath as to what was said at the meeting of 9 August. Mr Tyrell's version is to the effect that the approval of his Board was required. It is obviously not for this Court on this occasion to resolve that dispute. Moreover, the contemporary documents to which I have referred are, if anything, more consistent with the applicant's view, namely, that there was never to be a concluded contract until the proposal was approved by the applicant's American Board and that until that happened any work done by the respondent would attract a fair and reasonable charge.

15. Moreover, I note that there is no evidence whatsoever suggesting insolvency of the applicant or any other ground for winding up. If the respondent considered that it had such a strong case there is no reason why it could not have proceeded in the County Court of Victoria and sought summary judgment. The answer put on behalf of the respondent to my inquiry as to why this was not done was simply that the winding-up proceeding provided a "faster track".

16. This is precisely what the law does not permit. Winding-up proceedings are to be used for the winding up of companies, that is, paying off creditors and distributing whatever surplus remains amongst the shareholders. There is not the slightest indication in my mind that that was the true purpose for which this statutory demand was issued. Rather, I infer that it was issued for the improper purpose of exerting pressure on the applicant for the payment of what clearly was, and was known to be, a disputed debt. So the application is allowed. The statutory demand will be set aside.

17. As to costs, there are sufficiently special circumstances in this case to warrant an order of costs on a solicitor/client basis. Shortly after being served with the statutory demand, the applicant's solicitors wrote to the respondent's solicitors pointing out that liability was disputed and that there had been previous correspondence about the matter. The letter invited the respondent to forthwith unconditionally withdraw the demand and stated that if that were not done within two days that the applicant would have to make an application and, if so, would seek solicitor/client costs.

18. The respondents were given fair warning and could have withdrawn the statutory demand at one time without incurring any costs whatsoever. Nevertheless, the respondent did not withdraw and, of necessity, that provoked the present application which has been successful. So there will be costs on a solicitor/client basis.