HIS HONOUR: This is an application, by Originating Process dated 11 May 2022, to set aside a statutory demand dated 19 April 2022 under which the defendant claims from the plaintiff $234,678.06 for services rendered by the defendant to the plaintiff under a written Service and Platform Agreement (the agreement) entered into on 26 November 2020 and which commenced on 1 January 2021.
The defendant provides access to the Google marketing platform as an authorised reseller. The platform displays advertisements when a user searches a particular keyword, and the defendant charges fees based on clicks by the user into the advertisement displayed. The platform provides analytical data to the customer on the amounts spent on advertising and information pertinent to the campaign.
Clause 15 of the agreement provides for the payment of various types of fees listed in a schedule, including a management fee and a monthly minimum platform cost.
Clause 16(b) of the agreement (which was varied by correspondence in late January 2022), to which reference is made later, provides that the plaintiff must pay all fees within 45 days after the date of invoice.
Clause 16(e) of the agreement provides that Services may be immediately suspended if any payment is overdue.
Clause 16(g) of the agreement provides that all sums due under the agreement must be paid without any setoff, counter claim, or other deductions or withholding of monies.
Clause 27 of the agreement deals with termination. Clause 27(c) provides that, in the event of termination, the monthly minimum platform costs set out at item 13 of Schedule 1 are to be paid. These total $750 per month. By email dated 14 March 2022, which is also referred to again below, the defendant notified the plaintiff that it was terminating the agreement "as a result of the constant breach of the payment terms".
Clause 30 of the agreement provides as follows:
Dispute resolution
(a) If a dispute arises before any proceeding in commenced, the party claiming that a dispute has arisen must give fourteen days' written notice to the other party setting out the dispute and seeking discussion and compromise to resolve the dispute;
(b) If after fourteen days the dispute is not resolved, then it must be referred to mediation on the same terms as those ordered by the Supreme Court of New South Wales available at (there is then reference to a website) and the cost of the mediation shall be borne by the parties equally;
(c) Notwithstanding the preceding provisisions of this clause, the service provider may, at its absolute discretion, elect to continue to provide the services and perform its obligations under this agreement pending resolution of the dispute;
(d) Nothing in this clause will prevent either party from seeking urgent interlocutory relief.
The amount claimed in the statutory demand pertains to 26 invoices spanning the period 30 November 2021 to 28 February 2022 totalling $227,935.81, interest of $742.28, and early termination fees of $6,000 claimed to be payable under cl 27(c) of the agreement.
The plaintiff says that over the life of the agreement the defendant has rendered invoices totalling $988,877.86, and the plaintiff has paid invoices totalling $707,905.73, leaving a balance on this basis of $240,972.13.
A number of unsustainable propositions were initially put by the plaintiff but abandoned during argument. These included that the discrepancy between $240,972.13 and the amount claimed by the defendant (about $5,000 less than that) rendered the statutory demand ineffective or liable to be set aside, and also a contention that the plaintiff had overpaid the defendant.
The plaintiff made two submissions. First, it argued that the demand should be set aside because it constituted the commencement of a "proceeding" within the meaning of cl 30(a) and, a dispute having arisen, the defendant was precluded by cl 30 in issuing it prior to the mediation, having been completed, which cl 30(b) requires.
Second, the plaintiff argued that there is a genuine dispute between it and the defendant about the existence or amount of the debt to which the demand relates. The thrust of this argument was that:
1. the defendant "locked" it out of access to the platform during periods in December 2021, January 2022, February 2022 and March 2022, and the invoices the subject of the demand cover periods during which it was locked out,
2. its lack of access put (and puts) it in a position where it cannot verify the amounts claimed by the defendant, and
3. before the service of the demand there had been communications between the parties concerning the convening of a mediation, which was a factor supporting the conclusion that there was a genuine dispute.
I have significant doubt that the service of a statutory demand is properly to be construed as commencement of a proceeding within the meaning of cl 30, but it is not necessary to consider whether the point is reasonably arguable or not because in its primary material in support of the originating process the plaintiff did not raise it in a manner identifiable with one or more of the grounds available under ss 459H or J of the Corporations Act 2001 (Cth) (the Act).
Much judicial energy has been spent on what is, and what is required to establish, a genuine dispute within the meaning of s 459H(1)(a) of the Act. It suffices for present purposes simply to say that it must be bona fide and truly exist in fact, and that it is sufficient if the Court is satisfied that what the plaintiff raises may have some substance or constitute a plausible contention which requires investigation: see Solarite Airconditioning Pty Ltd v York International Australia Pty Ltd [2002] NSWSC 411; Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452.
Despite the low bar, the plaintiff has failed to hurdle it.
Although the plaintiff's affidavit material is short on detail on precisely when it was locked out, it may be accepted for present purposes that for various periods it was denied access to the platform.
The difficulty for the plaintiff is that it has not persuaded the Court that there is any substance in the contention (which it made more by implication in its founding affidavit rather than by express articulation) that the defendant acted unlawfully in denying it access. Of course, it can have no valid complaint if, when the defendant denied it access, the defendant was acting in accordance with either cll 16(e) or 27(e), that is, that the defendant suspended services because the plaintiff had not paid.
The court book provided by the parties runs to well over 500 pages. It contains all of the invoices and an extensive course of correspondence between the parties concerning the plaintiff's repeated failures to pay. It is not necessary for present purposes to recount all of it. What it clearly establishes, to the extent of demonstrating that the plaintiff's position is spurious, is that the defendant gave the plaintiff repeated indulgences with respect to failures by the plaintiff to pay, and that it suspended the defendant's access to the platform for those reasons and those reasons alone.
On 7 January 2022, the defendant asked the plaintiff for a payment schedule for November Overdue Invoices of $129,015.67.
On 13 January 2022, the defendant, under the caption "November Overdue Invoices", advised the plaintiff to pay by the following day (a Friday), and that if it did not its campaigns would be paused and eventually shut down.
Plainly payment was not made, and on 17 January 2022 the defendant called for payment by 5pm that day, failing which it would remove access to the platform.
On 19 January 2022, the plaintiff wrote to the defendant that it was in a position to make "the following payments to clear the overdue invoices that are owing to is (sic), however funds have not arrived on the due date due to Christmas office closures". The payment schedule provided for a payment of $42,968.98 to be made on each of 20 January, 27 January and 30 February 2022. The plaintiff failed to pay the first instalment (and presumably the later ones too).
On 24 January 2022, the defendant wrote to the plaintiff telling it that they would have to pause all campaigns by Wednesday if payment had not been received. Plainly, payment had not been received.
On 27 January 2022, the defendant confirmed that certain campaigns had been paused, but that in an effort to demonstrate their commitment they would provide an addendum to the agreement extending the payment terms to 45 days, which the defendant trusted would help the plaintiff with its cash flow. Also, notwithstanding the plaintiff's failure to pay, due to its arrangements with Google Australia, the defendant continued to pay for advertising costs incurred by the plaintiff regardless of recovery.
On 27 February 2022, the plaintiff confirmed that it had been advised that a recent dispute had been settled in its favour and it expected funds to be received over the next few weeks. It requested that the defendant accept a weekly repayment plan "whereby the outstanding balance of $145k will be paid in full by 31 March 2022". It made the following statement:
We appreciate that this is not ideal however we would really appreciate your continuing support and understanding and hopefully we can work together to push through a period whereby we have not only been impacted by COVID but by non-paying clients.
It is imperative that we keep any campaigns alive and therefore would be grateful if you could maintain full access, given the promise of payment in full by the end of March.
There is not a single complaint (or even a reference) in the correspondence to the defendant acting outside the agreement in terminating the plaintiff's access.
It is significant to observe that by 27 January 2022, when the defendant said it would provide an addendum to the contract extending the payment terms from 30 days to 45 days, 30 days had already elapsed from the date of the November invoices, and the defendant was accordingly entitled to terminate the plaintiff's access.
The plaintiff relied on two conversations deposed to by its director, Aaron Monks, in a reply affidavit sworn 24 June 2022 as having occurred between him and Germain Tottet (revealed by the correspondence to be a Senior Consultant AUNZ region) on 17 December 2021 and 2 February 2022 respectively in which he says he complained about being locked out of the platforms and their campaigns being suspended even though payments were being made. The conversations reveal that Ms Tottet's position was that the plaintiff was not paying its bills. With respect to the latter conversation, Mr Monk says that he followed it up with an email thread, which is exhibited to his affidavit. The email thread provides no support or corroboration for these conversations having taken place. However, accepting for present purposes as I do that conversations to this effect took place (noting that Mr Monk was not cross-examined), they do not in any plausible way raise any issue of substance or worthy of investigation that the defendant's denial of access to the plaintiff was anything other than because of the plaintiff's default under the agreement.
The plaintiff's evidence does not extend to putting the Court in a position to know precisely when it was first denied access to the platform.
I do not consider that an inability on the part of the plaintiff to verify the amount owed to the defendant because of lack of access to the platform would itself be sufficient to raise a genuine dispute, even if the plaintiff had established that it had been locked out inappropriately. In that event, if the plaintiff had so established, it would not have needed the argument anyway.
The existence of potential arrangements for mediation says nothing of whether the dispute sought to be raised by the plaintiff is genuine.
I heard the parties on costs. The defendant moved for an order for indemnity costs on the basis of what is expressed, in itself, to be a Calderbank letter dated 8 August 2022. The conditions upon which it offered to settle this dispute were that the plaintiff pay it $200,000 within 28 days in full and final settlement, Mr Monks provide a personal guarantee to secure the payment, the plaintiff allow the defendant to lodge a caveat over property belonging to Mr Monks (presumably personally), the plaintiff and the defendant enter into a Deed of Release, and the proceedings be dismissed with no order as to costs.
I do not regard that offer as constituting any real compromise, but as requiring in fact more than a capitulation.
The application by the defendant for indemnity costs is refused.
The plaintiff is to pay the defendant's costs of the proceedings.
The amended originating process is dismissed with costs.
[3]
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: 26 August 2022