Scanhill Pty Ltd v Century 21 Australasia Pty Ltd [1993] FCA 618;

Scanhill Pty Ltd v Century 21 Australasia Pty Ltd [1993] FCA 618; - FCA 1993 case summary — Zoe

[30]

"459G(1) A company may apply to the Court for an order

setting aside a statutory demand served on the

company.

(2) An application may only be made within 21 days

after the demand is so served.

(3) An application is made in accordance with this

section only if, within those 21 days:

(a) an affidavit supporting the application is

filed with the Court; and

(b) a copy of the application, and a copy of

the supporting affidavit, are served on

the person who served the demand on the

company."

459H(1) This section applies where, on an application

under section 459G, the Court is satisfied of

either or both of the following:

(a) that there is a genuine dispute between

the company and the respondent about the

existence or amount of a debt to which the

demand relates;

(b) that the company has an offsetting claim.

(2) The Court must calculate the substantiated

amount of the demand in accordance with the

formula:

Admitted total - Offsetting total

where:

"Admitted total" means:

(a) the admitted amount of the debt; or

(b) the total of the respective admitted

amounts of the debts;

as the case requires, to which the demand

relates;

"Offsetting total" means:

(a) if the Court is satisfied that the company

has only one offsetting claim - the amount

of that claim; or

(b) if the Court is satisfied that the company

has 2 or more offsetting claims - the

total of the amounts of those claims; or

(c) otherwise - a nil amount.

(3) If the substantiated amount is less than the

statutory minimum, the Court must, by order, set

aside the demand.

(4) If the substantiated amount is at least as great

as the statutory minimum, the Court may make an

order:

(a) varying the demand as specified in the

order; and

(b) declaring the demand to have had effect,

as so varied, as from when the demand was

served on the company.

(5) In this section:

"admitted amount", in relation to a debt, means:

(a) if the Court is satisfied that there is a

genuine dispute between the company and

the respondent about the existence of the

debt - a nil amount; or

(b) if the Court is satisfied that there is a

genuine dispute between the company and

the respondent about the amount of the

debt - so much of that amount as the Court

is satisfied is not the subject of such a

dispute; or

(c) otherwise - the amount of the debt;

"offsetting claim" means a genuine claim that

the company has against the respondent by way of

counterclaim, set-off or cross-demand (even if

it does not arise out of the same transaction or

circumstances as a debt to which the demand

relates);

"respondent" means the person who served the

demand on the company.

(6) This section has effect subject to section

459J."

[40]

"1. I am a Director of the Applicant Company and am

authorised by it to make this Affidavit.

2. The Applicant did on the 9th September, 1991 execute

an Agreement between the Applicant as Franchisee (sic)

and the Respondent as Franchisee ("the Franchise

Agreement").

3. Prior to the execution of the said Franchise Agreement

the Respondent agreed to -

(i) vary the Franchise Agreement

(ii) waive parts of the said Agreement

4. Prior to the execution by the Applicant of the

Franchise Agreement the Respondent represented -

(a) The Respondent was expert in the setting up of

real estate businesses relating to commercial

and retail sales throughout the world

(b) The Respondent would make available to the

Applicant the benefits of its expertise.

(c) By by (sic) reason of items (a) and (b) the

Respondent would provide satellite link-up with

the Franchisor's offices throughout the world

for the purposes of assisting the Applicant to

list and sell commercial and retail property.

(d) By reason of items (a) and (b) the Respondent

would market the name "Century 21" so as to

obtain for the Applicant recognition of the

expertise of the Respondent in the commercial

and retail market of Real Estate.

(e) The Respondent would provide facilities at its

offices to conduct meetings with corporate

clients.

(f) The Respondent would arrange by invitation

quarterly meetings between prospective corporate

clients and the Applicant.

(g) The Respondent would provide brochures for the

purpose of attracting or assisting the

Franchisee to attract corporate clients in the

field of commercial and retail real estate.

(h) The Respondent would announce or cause to be

announced the name of the Applicant in press

releases identifying that the Applicant was part

of the commercial and retail arm of the

Respondent.

(i) That by virtue of items (a) and (b) the

Respondent represented to the Applicant that in

the first year of operation that the Applicant

would earn gross commission of between $250,000

and $300,000 and in the second year $350,000 on

operating expenses of $250,000 in each year.

5. On the faith...of the representations made in (3) and

(4) above the applicant entered into the said

Franchise Agreement, leased premises and commenced

business in North Sydney trading as Century 21 Prime

Real Estate.

6. The Respondent failed to carry out the representations

made in Clause (4) or any of them.

7. The representations were made in the course of trade

and commerce and were misleading and deceptive and the

Applicant suffered damges (sic) in the following

amounts:

(a) The opportunity cost foregone in accordance with

the projected profit referred to in the document

annexed hereto and market "PG A" namely:

1992 $139,131.00

1993 $202,458.00

and

(b) Losses incurred in the financial years to the

30th June, 1992 and to the 30th June, 1993

namely:

1992 Loss $131,811.00

1993 Loss $ 79,403.00

6. The Respondent is in breach (of) Sections 52, 53 and

55A of the Trade Practices Act, 1974.

7. Annexed hereto and marked "PG B" is a copy of a letter

received by the Applicant from Messrs. Kemp Strang and

Chippendall (sic) dated 26th May, 1993.

8. Annexed hereto and marked "PG C" is a copy of a letter

from the Respondent's Solicitors B.Q. Williams and Co.

dated 8th June, 1993 to Kemp Strang and Chippendall

(sic). I am informed and believe that no reply has

been received to that letter.

9. Annexed hereto and marked "PG D" is a letter and

Creditor's Statutory Demand for payment of debt

received by the Applicant on the 3rd August, 1993."

[62]

27. The items listed under "expenses" for the 1992 and 1993 years have the appearance of actual figures. For example, bank charges for 1992 are itemised at $1,021 and for 1993 at $816. Electricity is itemised as $517 and $831 for 1992 and 1993 respectively. Interest for 1992 is $624 and for 1993 is $1,438. The figures for "commissions received" are stated to be $250,000 in 1992 and $300,000 in 1993. These do not appear to be actual figures and probably reflect the gross commissions which the applicant alleges were represented as being the commissions which would be earned. The basis of an opportunity cost foregone calculation would also indicate that this was so. However, the matter is not attended with perfect clarity. The allegation made in paragraph 4(i) of the affidavit is of a representation that the applicant would earn gross commissions in the first year of operation of between $250,000 and $300,000. The figure of $250,000 in the "commissions received" column for the 1992 year reflects the lower of these two figures. If this is the proper interpretation of the 1992 "commissions received" entry, it might have been hoped that the item itself would be internally consistent. This does not seem to be the case, as the allegation in paragraph 4(i) of the affidavit is that there was a representation that the applicant would earn gross commission in the second year of $350,000. Notwithstanding this, the figure specified in the "commissions received" column for 1993 is $300,000. There is nothing which assists in resolving this apparent inconsistency. However, some assistance is to be gained from a Statement of Account (the statement) which was prepared by the respondent and annexed to the affidavit supporting the creditor's statutory demand. That statement, if a true reflection of commissions received, reveals gross commissions significantly lower than the figures contained in the schedule. The statement records that between October 1991 and June 1992 the applicant reported commissions on settled sales in the sum of $27,700. According to the statement, no report was furnished for February 1992. If a twelve month period is taken up to and including September 1992 (the representation alleged relating to the first year of operation, not the financial year), the total commissions on settled sales is recorded in the statement to be in the sum of $46,471. The statement records that there were nil settlements in November 1992 and there were no reports for the months of December 1992 to April 1993 inclusive, April 1993 being the last month included in the statement. Notwithstanding these omissions, it would require commissions in a monthly amount substantially in excess of any reported monthly amount, for the figure of $350,000 to be earned in the second year. I should note in passing that in the schedule, the 1993 figure for commissions received of $300,000 is increased by 10% per year for the years 1994 to 1996 inclusive. The individual items of expenses, except Directors' emoluments, are also increased although not by any consistent percentage. Notwithstanding the detail provided in the document, no claim is made in respect of the years 1994 to 1996. Having regard to the whole of this material, and notwithstanding its shortcomings, it seems to me that the only reasonable inference to be drawn is that the "commissions received" entry in the schedule represents the amount which the applicant alleges was represented in the schedule it would receive in the first and second year of operation.

At a glance

Court

Decision date

Before

Source

Judgment (101 paragraphs)

Scanhill Pty Ltd v Century 21 Australasia Pty Ltd [1993] FCA 618; (1993) 12 ACLC 111 (Extracts), (193) 12 ACSR 341 (1993) 120 ALR 173 (1993) 47 FCR 451 (15 December 1993)

Parties

Legislation Cited (3)

Cases Cited (10)