Marshin Motors Pty Ltd v W & S Xuereb Motorcycles Pty Ltd trading as Hawkesbury Dirt Bikes & Motorcycles

CATCHWORDS : CORPORATIONS - Winding up - Statutory demand - Application for order setting aside under s 459G of the Corporations Act 2001 (Cth) - Where there is a genuine dispute about the existence of debt - Agreement that moneys paid by defendant as advance payment for stock to be chosen by defendant in the future - No express or implied term that moneys paid as a loan or that moneys repayable by plaintiff upon demand or at future date - No debt due and payable - Order that statutory demand be set aside.

Eyota Pty Ltd v and Hanave Pty Ltd (1994) 12 ACSR 785 A R Pilot Pty Ltd v Gouriotis [2007] NSWSC 396 CASES CITED : Re Elgar Heights Pty Limited (No. 1) [1985] VR 657 Remuneration Data Base Pty Ltd v Pauline Goodyear Real Estate Pty Ltd [2007] NSWSC 59 Heydon v Perpetual Executors Trustees and Agency Co (WA) Ltd (1930) 45 CLR 111 Schmierer v Taouk (2004) 207 ALR 301

Marshin Motors Pty Ltd PARTIES : v W & S Xuereb Motorcycles Pty Ltd trading as Hawkesbury Dirt Bikes & Motorcycles

COUNSEL : Plaintiff: S Flanigan Defendant: A Paterson

SOLICITORS : Plaintiff: Mark Turnbull & Co Defendant: Low Doherty & Stratford Solicitors

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

1602/07 Marshin Motors Pty Ltd v W & S Xuereb Motorcycles Pty Ltd trading as Hawkesbury Dirt Bikes & Motorcycles JUDGMENT 1 HIS HONOUR: This is an application under s 495G of the Corporations Act 2001 (Cth) to set aside a statutory demand. By its statutory demand, the defendant demanded payment of $184,083.04 in respect of moneys allegedly advanced and not repaid. The debt was particularised as comprising a $200,000 advance on 26 August 2005 which had not been repaid, less a credit described as a "trading offset" of $15,916.96. 2 The defendant accepts that the plaintiff has an offsetting claim for $118,007.78 representing the value of goods supplied to the defendant, although the defendant does not admit the validity of that offsetting claim. The defendant contends that there is no genuine dispute that the plaintiff owes it $81,992.22 after allowance for an offsetting claim. 3 The plaintiff says that it is wrong to treat the supply of goods to the defendant as giving rise to offsetting claims to the value of goods supplied. The plaintiff contends that it is not, and was not, liable to repay the advance of $200,000. Rather, it says that the advance was a payment on account for goods to be supplied in the future by the plaintiff to the defendant. 4 The plaintiff contends that the consideration for the advance was not a promise of repayment, but a promise to supply goods up to the value of $200,000 at cost, plus ten percent, plus GST. The plaintiff says that it is not in breach of that agreement, and is not alleged to be in breach of its promise to supply goods, but even if it were, it would not owe a presently payable debt to the defendant. 5 The plaintiff is in the business of selling motorcycles and motorcycle parts. It carries on business by the name of Dirt Dog. The defendant carries on a similar business under the name Hawkesbury Dirt Bikes. The plaintiff imported stock from Marshin Motorcyle Co in China. In mid 2005, it was in debt to its supplier. The plaintiff says that in August 2005, its director, Mr Andrews, had a conversation with the directors of the defendant, Mr and Mrs Xuereb, to the following effect: " Andrews: Are you interested in joining with us to bring more bikes from China? Mr & Mrs Xuereb: Yes.

Andrews: We need $200,000 and you can have credit for Dirt Dog for that amount.

Mr & Mrs Xuereb: That's a good idea as we can get stock that we wanted at a good price.

Andrews: Dirt Dog can buy from you at cost plus ten percent and if you want to buy from us we will charge you at cost plus ten percent. " 6 On 23 August 2005, the parties signed an agreement. It provides as follows: "Dirt Dog Motorcycles will supply Hawksbury Dirt Bikes with stock at cost price plus 10% and GST. Hawksbury Dirt Bikes will supply Dirt Dog Motorcycles on the same basis, cost plus 10% and GST. Hawksbury Dirt Bikes will have $200,000 credit, for monies paid to Marshin via Dirt Dog Motorcycles, less stock immediately taken. (for two containers to be brought from Marshin) When stock arrives, Hawksbury Dirt Bikes has preference on stock choice over other dealers, until the credit has been used. Hawksbury Dirt Bikes will be advised of stock coming Hawksbury Dirt Bikes will not sell stock to other dealers Bikes sold from Hawksbury Dirt Bikes stock in the warehouse, will be paid for when utilized for Dirt Dog Motorcycles sales, and Hawksbury Dirt Bikes will be notified. " 7 On 26 August 2005, the defendant paid the plaintiff $200,000 which the plaintiff used to pay its Chinese supplier. Since then, the plaintiff claims to have provided stock to the defendant as follows. First, the plaintiff says that as at 26 August 2005, stock to the value of $19,893 had been supplied, or was then immediately supplied, to the defendant. Secondly, it says that it provided motorcycles with parts missing for spares to the value of $46,800 in January 2006. Thirdly, it says that between 5 September 2005 and 6 January 2006, it provided motorcycles to the value of $62,826.50. Fourthly, it says that the defendant agreed that moneys to be paid by the plaintiff to a business called Future Bikes should be deducted from the credit available to the defendant so that in effect, the payments to Future Bikes would be made by the defendant. It says that $9,062.42 was paid to Future Bikes under that arrangement and the credit was reduced by that amount. The plaintiff says that the defendant has $61,418.08 as credit available to be applied to the purchase of stock at cost, plus ten percent, plus GST. It denies that this is a debt presently due and payable. 8 On the present application, the question is not whether the plaintiff owes any money to the defendant, and if so, in what amount. The question is whether there is a genuine dispute that it does. The expression "genuine dispute" connotes a plausible contention requiring investigation (Eyota Pty Ltd v and Hanave Pty Ltd (1994) 12 ACSR 785 at 787-788). 9 There is no dispute that for a debt to be capable of being relied on in a statutory demand it must be a debt which is due and payable (Corporations Act, s 459E, A R Pilot Pty Ltd v Gouriotis [2007] NSWSC 396). Moreover, a creditor may only serve a statutory demand in relation to a debt which is recoverable by action (Re Elgar Heights Pty Limited (No. 1) [1985] VR 657; Remuneration Data Base Pty Ltd v Pauline Goodyear Real Estate Pty Ltd [2007] NSWSC 59). 10 The defendant's case appears to be that the advance of $200,000 was a loan repayable on demand. It is not necessary to consider whether a loan repayable on demand could be implied from the fact of the making of advance (Heydon v Perpetual Executors Trustees and Agency Co (WA) Ltd (1930) 45 CLR 111; Schmierer v Taouk (2004) 207 ALR 301 at 312-314). 11 In the present case, the agreement pursuant to which the payment of $200,000 was made was in evidence. It does not appear from the terms of that agreement that the parties agreed to treat the advance as a loan. There is no reference to the payment of $200,000 being a loan and no express promise of repayment. 12 To the contrary, the terms of the agreement of 23 August 2005 suggest that the advance was to be, in part, a payment for stock to be taken immediately, and in part a prepayment for stock which the defendant could choose in the future, it having preference in stock choice until all the credit was used. No time limit was stipulated for the use of the credit. There was no express term that the defendant could demand repayment of any unused credit. Unless a term could be implied in the agreement that the defendant could demand repayment of unused credit at any time, or after a certain time, then, prima facie, the plaintiff's characterisation of the agreement is correct. I do not need to decide the question whether or not such a term might be implied. It is seriously arguable that no such term should be implied. It could plausibly be said that such a term is not obvious and would not be necessary to give business efficacy to the agreement. 13 Accordingly, whilst there is no dispute that the defendant is entitled to order and take delivery of further stock at cost, plus ten percent, plus GST up to an amount of $61,418.08, there is a genuine dispute that the plaintiff does not owe that sum, or any other amount, to the defendant. There is a genuine dispute that no debt is presently due and payable. 14 For these reasons, I order that the statutory demand dated 1 February 2007 served by the defendant on the plaintiff be set aside. I order the defendant pay the plaintiff's costs of the proceedings.

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.