Tennant Limited v Flomin Inc

Supreme Court of NSW|2009-11-30|Before: Forster J, Santow J

CITATION : Tennant Limited v Flomin Inc [2009] NSWSC 1246

DECISION : See paragraphs 69 to 72 of judgment.

CATCHWORDS : Application to set aside statutory demand - genuine dispute - to what extent does it have to be "revealed" by the supporting affidavit - whether "due and payable" as at the time of service of demand - offsetting claims. - Held: demand varied pursuant to section 459H.

PARTIES : Plaintiff- Tennant Limited Defendant- FloMin Inc

COUNSEL : Plaintiff- M. Condon, S. Fraser Defendant- L. Livingston

SOLICITORS : Plaintiff- Terri Bell, Christopher Stephen Frawley, Macpherson & Kelley Lawyers Defendant- Justin McDonnell, Mallesons Stephen Jaques

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

(3843/09) TENNANT LIMITED v FLOMIN INC. JUDGMENT 1 HIS HONOUR: By originating process filed on 27 July 2009, the plaintiff, Tennant Limited ("Tennant") seeks an order pursuant to section 459G (1) of the Corporations Act 2001, setting aside a statutory demand served on it by the defendant, FloMin Inc. ("FloMin"). It is conceded by FloMin that the application was made in accordance with the requirements of section 459G. 2 The statutory demand requires the payment of US$ 412,000, which amount is made up of the following six separate amounts: Amount 1 Commercial Invoice No. CON-2453 dated 22 September 2007 US$ 16,445 Amount 2 Commercial Invoice No. CON-2454 dated 15 October 2007 US$ 29,120 Amount 3 Purchase Contract No. CON-2639 dated 11 February 2008 US$ 29,240 Amount 4 Purchase Contract No. CON-2662 dated 3 March 2008 (first shipment) US$ 121,805 Amount 5 Purchase Contract No. CON-2662 dated 3 March 2008 (second shipment) US$ 121,805 Amount 6 Purchase Contract No. CON-2694 dated 10 April 2008 US$ 93,585 Total amount US$ 412,000

3 Tennant seeks to set aside the statutory demand on the following grounds:

(a) in relation to all of the Amounts -- that the mediation clause in the contract between the parties has not been complied with;

(b) in relation to all of the Amounts -- that the supporting affidavit was sworn by a person who did not have the necessary personal knowledge which entitled him to swear that affidavit;

(d) in relation to all Amounts -- that the amounts in question were not due and payable; and

(e) in relation to all Amounts - that Tennant has an offsetting claim. 4 The foregoing are, of course, only a summary of the submissions made by Mr Condon of Counsel, who appeared with Mr Fraser for Tennant, and I will deal with each of those submissions separately. In the context of dealing with those submissions, I propose to consider the responses made by Mr L. Livingston of Counsel who appeared for FloMin. However, before doing so, I hasten to note that it has been pressed upon me, and I accept, that the role of the Court in applications such as the present is not to resolve contested issues between the parties, but simply to ascertain whether or not there is a genuine dispute about the existence or amount of a debt to which the demand relates, and whether or not Tennant has an offsetting claim. The authorities speak with one voice on this issue and I need say no more than to reproduce what was said by Barrett J in Panel Tech Industries (Aust.) Pty Ltd v Australian Skyreach Equipment Pty Ltd (No 2) [2003] NSWSC 896 at [17] and [18], namely: "[17] The test to be applied in cases of this kind has been established in several well known cases, of which those most often quoted are Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290, Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452 and Re Morris Catering (Aust) Pty Ltd (1993) 11 ACSR 601. Those cases refer to tests of "plausible contention requiring investigation", "real and not spurious, hypothetical, illusory or misconceived" and "perception of genuineness (or lack of it)." [18] These tests, applied in the context of a summary procedure where it is not expected that the court will embark on any extended inquiry, mean that the task faced by a company challenging a statutory demand on the "genuine dispute" ground is by no means at all a difficult or demanding one. The company will fail in that task only if it is found upon the hearing of its s. 459G application that the contentions upon which it seeks to rely in mounting its challenge are so devoid of substance that no further investigation is warranted. Once the company shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow. The court does not engage in any form of balancing exercise between the strengths of competing contentions. If it sees any factor that, on rational grounds, indicates an arguable case on the part of the company, it must find that a genuine dispute exists, even where any case apparently available to be advanced against the company seems stronger." 5 I turn then to the submissions made on behalf of Tennant. Ground (a): Failure to mediate 6 Mr Condon submitted that the contracts between the parties were governed by Tennant's standard terms and conditions of purchase, a copy of which were annexed to the affidavit of Stephen Becher Wolfe, sworn 27 July 2009. That affidavit ("the principal affidavit") was the affidavit supporting the application and was the only affidavit served within the 21 day period. Mr Condon drew my attention in particular to the various purchase contracts which were also annexed to the principal affidavit and noted that each of those purchase contracts expressly provided that Tennant's "Standard Terms and Conditions of Purchase 2004 form part of this contract". So far as is relevant, those standard terms and conditions of purchase provided as follows: "9. DISPUTE RESOLUTION

9.1 In the event of dispute both parties will attempt to resolve the dispute by negotiation between them.

9.2 In the event negotiation under 9.1 is not successful the parties may attempt to resolve the dispute through mediation by a mutually agreed mediator.

9.3 In the event negotiation under 9.1 is not successful the parties may attempt to resolve the dispute through arbitration in New South Wales, Australia." 7 Mr Condon then drew my attention to the decision of Gzell J in National Telecoms Group Limited v Bulldogs Rugby League Club Limited [2003] NSWSC 654, and in particular to [13] to [16] of his Honour's judgment, where his Honour found that in the case before him, there was a serious issue for determination, namely whether the failure to comply with what his Honour referred to as "the requirement for mediation" was a bar to the commencement of proceedings. 8 The report of that decision does not go on to record the precise form of the mediation agreement which was before his Honour. However, I note that his Honour referred to "the requirement for mediation", from which I infer that the parties in that case were required to mediate before commencing proceedings. 9 It seems to me that that decision is distinguishable from the case before me. Clause 9.1 of the standard terms and conditions of purchase require the parties to attempt to resolve the dispute by negotiation. This is made clear by the verb "will" in that sub-clause. By clear contrast, however, clause 9.2 is not expressed in such mandatory terms, using instead the word "may", thus imposing no such requirement or obligation. 10 It was submitted by Mr Condon that there is an argument available that this is a case where the word "may" in clause 9.2 will be construed as meaning "will". There is no doubt that skilful Counsel can put forward an argument on just about any unarguable point. That does not mean that such an argument necessarily raises the existence of a genuine dispute even in the context of section 459H of the Corporations Act. In my view, that is the case with this particular argument. I do not consider that it reaches even the low threshold which it must reach in order to be accepted for the purposes of this application. By saying so, I mean no disrespect to Mr Condon, who put his client's case fairly and forcefully, as indeed he is required to do. I should also say at this point that the same comments apply equally to Mr Livingston. 11 That conclusion disposes of ground (a) as a ground for setting aside the statutory demand. However, I also propose to deal in this context with a further submission, put forward by Mr Livingston, which applies not only to this ground but to other grounds as well. 12 Mr Livingston submitted that this ground was not identified, expressly or by inference, in the principal affidavit and that, in those circumstances, Tennant is not permitted to rely on it. 13 In support of that submission, Mr Livingston has referred me to a number of decisions, including the decision of the Full Court of the Supreme Court of Western Australia in Energy Equity Corp. Limited v Sinedie Pty Limited (2001) 166 FLR 179 at [129] and to the decision of White J in Infact Consulting Pty Limited v Kyle House Pty Limited [2007] NSWSC 56, particularly at [23]-[24] and [32]. He submitted that the principle, sometimes known as the Graywinter Principle (after the decision of Sundberg J in Graywinter Properties Pty Limited v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452) is that the grounds to be relied upon to set aside a statutory demand must be raised in the supporting affidavit. 14 In Graywinter, Sundberg J said: "'It was said that the affidavit must, as a minimum, contain a statement of the material facts on which the applicant intends to rely to show a genuine dispute - it might read more like a pleading than a story. That accords with what I consider to be the minimum requirement.'" 15 Mr Condon responded by saying that, based upon the relevant authorities, if a document upon which the submission is founded appears in the principal affidavit, that is sufficient, and he noted that a copy of the standard terms and conditions of purchase were annexed to the principal affidavit. 16 The authorities to which Mr Condon referred me were the decisions of Barrett J in Saferack Pty Ltd v Marketing Heads Australia Pty Limited (2007) 214 FLR 393 and the recent decision of Brereton J in Canon Australia Pty Limited v Yong Bros. Pty Limited [2009] NSWSC 842. 17 In the former case, Barrett J reviewed carefully the authorities on this issue at [23] to [25]. After a close analysis of those decisions, including the decision of White J in Hansmar Investments Pty Limited v Perpetual Trustee Co. Limited [2007] 61 ACSR 321 and the decision of Santow J (as his Honour then was) in Callite Pty Limited v Adams [2001] NSWSC 52, Barrett J concluded that the supporting affidavit is, "required to reveal [emphasis in Barrett J's judgment] a genuine dispute". His Honour concluded that a particular ground is raised: "If the ground is evident from the supporting affidavit, even if only because it can be discerned from some annexed document the content of which 'reveals' it." [Emphasis in the original] 18 The more recent decision of Brereton J, which his Honour delivered ex tempore on 11 June 2009 also dealt with this issue and cited with approval inter alia the decisions in Hansmar and Saferack. In that case Brereton J concluded that even if something less may suffice, a supporting affidavit plainly supports an application under section 459G: "…if it contains (or annexes) the evidence necessary to make good the application. Where the grounds depend on arguments based on the face of a document, it must be sufficient that the affidavit annexes the relevant document or documents." 19 I am not convinced that the two decisions to which I have referred necessarily pose the same test. However, in the present case, it is unnecessary for me to determine which is to be preferred, having regard to the fact that this particular ground (a), satisfies neither test. In my opinion, taking first what fell from Barrett J, the ground is not evident from the principal affidavit notwithstanding that the standard terms and conditions of purchase have been annexed. Nothing is said in the affidavit or in any of the annexures to suggest expressly or by implication that this point will be taken, and in my opinion in those circumstances, it is not sufficient merely to annex that document. Alternatively, if one takes the approach apparently preferred by Brereton J, it cannot be said that the evidence necessary to make good the application has been included in the principal affidavit. There is nothing said about the absence of mediation, and it cannot be said that, in the present case, the grounds depend on arguments based on the face of the document itself. 20 Even if one goes back to what was said by Sundberg J, merely annexing a copy of Tennant's standard terms and conditions of purchase without more does not satisfy the "minimum requirement" referred to in Graywinter. There must be something further provided to identify the point to be taken. Otherwise, the mere annexation of all possibly relevant contractual documentation would be sufficient to permit an applicant for relief to raise any contractual argument, no matter how obscure, on the hearing of the application. 21 For those reasons also, I do not consider that ground (a) constitutes a basis for setting aside the statutory demand.

Ground (b): Defective supporting affidavit 22 Mr Condon drew my attention to the fact that the affidavit supporting the statutory demand was sworn by Alan Jay Aron, who swore that he was the person who, on behalf of FloMin, "had the dealings with [Tennant] that gave rise to the debt". He also noted that Mr Aron swore that he believed "that there is no genuine dispute about the existence or amount of any of the debts". He submitted that contrary to what was contained in the principal affidavit, Mr Aron did not have the dealings with Tennant that gave rise to the debts in question. He based that submission on the absence in the affidavit of any explanation as to "how and when [the six contracts] were formed, or the negotiation of their terms". He submitted that as a consequence, the statutory demand is liable to be set aside pursuant to section 459J(1)(b) of the Corporations Act. 23 Again, I do not accept that this ground (b) is available to set aside the statutory demand. In his affidavit, Mr Aron dealt at some length with the underlying agreement between Tennant and FloMin, indicating that he had a substantial involvement both in setting up that relationship and in relation to the various contracts which are the subject of this application. Mr Condon referred me to the decision of McLelland CJ in Eq. in B & M Quality Constructions Pty Limited v Buyrite Steel Supplies Pty Limited (1994) 15 ACSR 433 where his Honour noted that, having regard to the fact that the person making the affidavit is required to depose to his or her belief that there is no genuine dispute, it is necessary that the person swearing the affidavit be likely to have personal knowledge of the existence of any such dispute. 24 Mr Aron is the general manager of FloMin. He has sworn that the matters and facts set out in his affidavit are within his own knowledge, save where he states to the contrary. In the latter case, he swears that the matters and facts set out in the affidavit have been obtained from his review of the books and business records of FloMin. There is no evidence before me suggesting the contrary. 25 The fact that Mr Aron has conceded that he cannot locate copies of certain documents (which, incidentally Tennant is likewise apparently unable to locate) does not disqualify him as a person who is able to swear the affidavit verifying the statutory demand. 26 I also reject this ground (b) as a basis for setting aside the statutory demand. Ground (c): Tennant did not contract with FloMin 27 In relation to Amounts 1 and 2, Mr Condon submitted that there is a genuine dispute whether Tennant contracted with FloMin, or with Qingdao Aotong Chemical Co. Limited ("Qingdao Chemical") in relation to Amount 1 and with Tieling Flotation Reagents Factory ("Tieling") in relation to Amount 2. In support of that submission he notes that (unlike in relation to Amounts 3 - 6), FloMin does not appear to have any purchase contracts with Tennant and relies solely on commercial invoices issued by it. 28 In relation to Amount 1, Mr Condon relied on a bill of lading showing Qingdao Chemical as shipper and Tennant as consignee. There is no evidence before me either way as to whether or not the goods the subject of that bill of lading have been paid for, and Mr Condon informed me from the bar table that in the time available to him to answer my enquiry on that matter, he was unable to obtain instructions. 29 So far as Amount 2 is concerned, Mr Condon pointed to a purchase contract which showed Tieling as the seller and Tennant as the buyer of a volume of product of the kind it habitually purchased from FloMin and there is before me evidence that an amount of US$ 33,150 has been paid by Tennant to Tieling in October 2007. That was roughly contemporaneous with the purchase in respect of which Amount 2 is claimed. 30 My attention has also been drawn to fairly extensive correspondence between the parties dealing with these two Amounts. There is clearly some confusion concerning these two Amounts, notwithstanding the fact that at one point of time Tennant appears to have informed FloMin that its two invoices in question would be paid. In fact they have not been paid, but that may be the result of the continuation of the confusion that appears to exist between the parties as to the precise status of these invoices. It may be that on a final hearing, the point will be resolved in favour of FloMin (on which point I express no view), but I accept that for the moment at least, there is a genuine dispute in relation to Amounts 1 and 2 in the sense that the term "genuine dispute" is used in the authorities to which I have earlier referred. 31 For that reason, I am of the view that the statutory demand should be set aside in respect of Amounts 1 and 2. 32 In this context, I should also rule on an issue which I reserved when it arose before me in the course of the hearing. One of the affidavits upon which FloMin sought to rely on the hearing before me was one sworn by Kevin Andrew Botha on 13 November 2009. Mr Condon objected to Mr Livingston reading that affidavit other than paragraphs 1 to 6, 32, 33 and 43. Mr Condon submitted that as a result of the lateness of that affidavit, which was served on the last business day before the hearing, Tennant's legal advisors had had no opportunity to consider and investigate whether there was any material contained in the affidavit which required a response. 33 I recognise that in applications of this kind, which must of necessity be heard as a matter of urgency, affidavits are often produced out of time and that the Court tends to overlook their late production so long as it does not unduly prejudice the other party. 34 In the present case, however, I am not prepared to grant leave to Mr Livingston to read the paragraphs objected to. There is a great deal of material in those paragraphs and in the documents which they annex which require detailed investigation and I do not consider it appropriate to impose that obligation on Tennant or its legal advisors to meet that material without having an opportunity to do so. 35 Accordingly, in the affidavit of Kevin Andrew Botha, I read only paragraphs 1 to 6, 32, 33 and 43. 36 Notwithstanding that paragraphs 32 and 33 of Mr Botha's said affidavit are now before me, they do not change my conclusion that there is a genuine dispute in relation to Tennant's obligation to pay Amounts 1 and 2. Ground (d): Amounts not due and payable 37 This next ground (d) argued by Mr Condon is founded on the requirement of section 459E(1) of the Corporations Act, namely that the debt upon which the statutory demand is based must be, at the time the statutory demand is served, "due and payable". 38 The evidence before me satisfies me that in or around February 2008 the price of sulphur, which is the base raw material for the production of the chemical that Tennant was purchasing from FloMin, increased significantly and that on 25 February 2008 FloMin announced that it would impose a sulphur surcharge on future orders. It is not in dispute that Amount 6, which includes such sulphur surcharge, relates to a purchase contract which was entered into after Tennant became aware of the surcharge, and that Tennant has accepted that the sulphur surcharge has been validly included in the amount in question. However, in relation to Amounts 3, 4 and 5, there is a dispute between the parties as whether or not Tennant is obliged to pay the sulphur surcharge in respect of the purchases underlying those three Amounts. Those surcharges aggregate to US$ 57, 885 for those three purchases. 39 I should hasten to add that Amounts 3, 4 and 5, as set out in the statutory demand, do not include the sulphur surcharges that FloMin claims Tennant is obliged to pay. 40 Details of the invoices that had been issued by FloMin are set out in a schedule attached to a letter dated 14 April 2009 sent to Tennant by the solicitors acting for FloMin. The text of that letter is as follows: "We act on behalf of Flo Min Inc ("FloMin").

We are instructed that Tennant Limited has failed to pay a total amount of USD$506,825.00 to FloMin pursuant to various invoices issued by them. The details of these invoices are listed in the attached schedule.

Payment of these invoices is now several months overdue, even though Tennant has on-sold Flo-Min's product. Our client is no longer prepared to allow delay in payment.

Our client demands payment of these invoices by 5pm on 28 April 2009, failing which we will seek our client's instructions as to formal recovery of the monies, which may include commencing legal proceedings.

In the circumstances, our client looks forward to receipt of payment." 41 An abbreviated version of the schedule referred to in the said letter is set out hereunder: 1 2 3 4 5 6 7 8 9 PO No PO Date Date of Invoice Amount Surcharge Shipping Total Paid Overdue USD$ USD$ USD$ USD$ USD$ USD$ CON- 9/22/07 26820 0 2600 29420 10375 19045 2453 CON-2454 10/15/07 26820 0 2600 29120 0 29120 CON-2639 2/11/08 3/9/08 29240 3400 0 32640 0 32640 CON-2694 4/10/08 5/3/08 83385 10200 0 93585 0 93585 CON-2662 3/3/08 5/27/08 121805 23375 0 145180 0 145180 CON-2662 3/3/08 6/28/08 121805 31110 0 152915 0 152915 CON-2662 3/3/08 12/23/08 17170 0 0 17170 0 17170 CON-2662 3/3/08 12/23/08 17170 0 0 17170 0 17170 Totals 444215 68085 4900 517200 506825

(a) the reference in column 1 to "PO No" is a reference to the number of Tennant's purchase order;

(b) the reference in column 2 to "PO Date" is a reference to the date of Tennant's purchase order; and

(c) the reference in column 3 to "Date of Inv" is a reference to the date of FloMin's invoice. 43 The amount appearing as the total of column 9, namely US$ 506,825, is the amount appearing in the letter of 14 April 2009. 44 It is common ground between the parties that no amount was paid by Tennant pursuant to the demand made upon it by the letter of 14 April 2009. It is also common ground that no further or amended invoices were served on Tennant prior to the service upon it of the statutory demand. 45 Mr Condon's submissions in relation to this ground (d) fall under two headings. I will deal with them separately. 46 Under the first heading, he relies on two conversations which are set out in affidavits filed on Tennant's behalf. The first of those conversations is referred to in paragraph 16 of the principal affidavit and is in the following terms: "16. Some time during the period between August 2008 to November 2008, I had a number of conversations with Mr Goydych to the following effect: 'I talked to Alan Aron at FloMin about the sulphur surcharge. He advised me that t (sic) 'everyone has accepted the surcharge and you have to as well'. I told him that we would not accept the surcharge. His advice to us was that we should not pay any accounts until FloMin were able to correctly invoice and the requirement for a surcharge was deleted.'" 47 Having regard to the nature of the application, I admitted this hearsay evidence over Mr Livingston's objection. There was evidence before me that the solicitors for Tennant have made substantial attempts to locate Mr Goydych (who was at the time, but no longer is, an employee of Tennant), but that those attempts have so far been unsuccessful. 48 The second conversation relied upon by Mr Condon appears in the affidavit of Graeme Stewart Farmer, Tennant's Chief Financial Officer, sworn 30 October 2009 at paragraphs 6 to 8, which are in the following terms: "6. Around that time, I had a number of conversations with various people employed at Tennant regarding the FloMin invoices including Adrian Beer, then Tennant's General Manager, Sales and Marketing. That conversation included words to the following effect:

Farmer: 'What is the status with the FloMin invoices?' Beer: 'I've spoken with FloMin's local representative who advised me not to pay the invoices until they have been sorted out and invoiced correctly. Our contact at FloMin in Australia told us that he is just as frustrated with this issue and said that he would get on to it.'

My understanding of this conversation was that the (sic) FloMin had acknowledged that the issue regarding pricing was as a result of FloMin having invoiced Tennant for incorrect amounts and, in that context, I was content for the invoices to remain unpaid until correct invoices had been issued. At the time of the conversation I did not know the name of the contact but I since became aware that Adrian Beer was referring to Kevin Botha, a FloMin employee in Australia." 49 Despite the hearsay nature of these paragraphs, I admitted them, again over the objection of Mr Livingston. 50 In his affidavit of 4 September 2009, Mr Aron denied saying anything to the effect referred to in paragraph 16 of the principal affidavit. As I did not admit Mr Botha's affidavit of 13 November 2009, there is no evidence before me denying any conversation with Mr Beer of the kind referred to in Mr Farmer's affidavit. However, I am not prepared to make a Jones v Dunkel inference in that respect. All I am left with is the hearsay evidence given by Mr Farmer as to what Mr Beer had informed him as to what Mr Botha had said to Mr Beer. I should add that I was told from the bar table that some steps had also been taken to locate Mr Beer, who was likewise no longer employed by Tennant, but that at least so far, those attempts have been unsuccessful. 51 It seems clear to me that there is a genuine dispute between Tennant and FloMin as to whether or not FloMin is entitled to impose the sulphur surcharge in respect of Amounts 3, 4 and 5. Tennant's standard terms and conditions of purchase include an "entire agreement" provision as well as a provision to the effect that no variation is to be effective unless it is in writing and signed for and on behalf of each party. Mr Livingston has not suggested that there is any provision in Tennant's standard terms and conditions that would permit FloMin unilaterally to alter those terms. Instead, Mr Livingston relies on the fact that the evidence adduced by Tennant is of a hearsay nature and is unclear in many respects including when it occurred, to which invoices it related and how those conversations should be construed. He points to the unequivocal denial by Mr Aron of the conversation attributed to him. He also relies on the fact that the evidence relating to the alleged conversation between Mr Botha and Mr Beer was not referred to in the principal affidavit and that, for that reason, Tennant is not entitled to rely on that conversation in its application to set aside the statutory demand. 52 It is probably unnecessary for me to determine whether the absence of any reference to the alleged conversation between Mr Beer and Mr Botha in the principal affidavit prevents Tennant from relying on it in this application. Mr Condon had submitted that the evidence contained in the principal affidavit in relation to the alleged conversation between Mr Aron and Mr Goydych was sufficient to raise the point, and thereby permitted Tennant to rely on similar conversations between other employees. 53 While I am by no means persuaded that Mr Condon's submission is the correct one, it is probably sufficient for me to rely on the evidence contained in the principal affidavit relating to the alleged conversation between Mr Goydych and Mr Aron as raising, as a matter of genuine dispute, the issue of whether or not there was some concession given by employees of FloMin for Tennant not to pay at least those invoices as included the sulphur surcharge until the situation had been finally resolved between the parties. 54 I am comforted in this conclusion by correspondence passing between the parties, including Mr Goydych's correspondence to Mr Aron on 27 July 2008 and Mr Aron's email response of 7 August 2008. Accordingly, in my opinion, there is a genuine dispute between the parties as to whether or not FloMin agreed to Tennant not paying Amounts 3 - 5 until the issue of the sulphur surcharge had been resolved. That had not occurred prior to the service of the statutory demand. 55 That conclusion is sufficient to set aside the statutory demand in so far as it claims Amounts 3 - 5. 56 However, that conclusion does not extend to Amount 6. It is agreed between the parties that the purchase order was placed after Tennant had become aware of the sulphur surcharge. There is no dispute that FloMin is entitled to include in its invoice an amount representing the sulphur surcharge. In that respect, the invoice relating to Amount 6 stands in quite a different position to the invoices relating to Amounts 3 - 5. 57 Even if on a final hearing a court were to accept as accurate Tennant's evidence of what Mr Aron and what Mr Botha had said, I do not consider it arguable that those comments extended to Amount 6. It is not as if there was any possibility that FloMin would ultimately be found to be indebted to Tennant, and that for that reason, it was desirable for Tennant to retain Amount 6 until the dispute was resolved. It is clear that there will be a substantial amount payable to FloMin no matter how the issue of the sulphur surcharge is resolved. Insofar as Amount 6 is concerned, it seems to me that any suggestion that it, too, was the subject of what Mr Aron and Mr Botha had said, fails to constitute a genuine dispute. 58 Under the second heading, Mr Condon put his submission on the basis that the amounts claimed in the statutory demand were not "due and payable" at the time the statutory demand was served for the reason that no invoice for the correct amount had been served prior to that time. 59 A perusal of the abbreviated version of the schedule of FloMin's unpaid invoices set out above at [41] reveals that this submission cannot apply to Amounts 1 or 2, which included no sulphur surcharge and in respect of which the amounts claimed (as distinct from the identity of the creditor) are not in dispute. Likewise, this submission cannot apply to Amount 6, which includes the sulphur surcharge but whose correctness is not in dispute. 60 The submission does, however, apply to Amounts 3 - 5 because although the amounts included in the statutory demand are net of the sulphur surcharge, no previous invoices have been issued in the amounts now claimed in the statutory demand. 61 Mr Condon submitted that the amounts claimed are not due and payable until 30 days after receipt of an accurate invoice. Presumably he was relying on the evidence of Mr Farmer to the effect that it is Tennant's practice not to pay invoices until Tennant has been provided with invoices in accordance with the formal arrangements with the relevant organisation. As Mr Livingston pointed out, there is no evidence to suggest that this practice formed part of the legal relationship between the parties. As Mr Livingston also has pointed out, there is no evidence of any term of any agreement between the parties which makes Tennant's liability to pay dependent upon receipt of an invoice, let alone a "corrected" or "amended" invoice. There is certainly nothing that I have found in Tennant's standard terms and conditions of purchase which so provides. 62 On the contrary, clause 4 of those standard terms and conditions provide as follows: "4. PAYMENT

4.1 The Buyer must make each payment to the Seller under this Contract as specified.

4.2 The Buyer must pay interest on any amount that is not paid when due from the day after it falls due to the day on which it is paid in full.

4.3 Interest accrues daily at a compound interest rate of 8.5% per annum." 63 So far as Amounts 3 - 5 are concerned, copies of Tennant's purchase contracts are in evidence at pages 20 and 21 of the principal affidavit. The documents set out what they describe as its "material terms and conditions" and in relation to payment, they provide, in the case of Amount 3, "TT 60 days after Bill of Lading" and in the case of Amounts 4 and 5, "TT 60 DAYS DATE BL". 64 Both of those provisions appear to me to mean that payment is due by telegraphic transfer 60 days after the Bill of Lading. Whether that means 60 days after the date on the Bill of Lading or 60 days after the Bill of Lading is presented, it probably does not matter. Clearly more than 60 days have passed since either formulation, and that being so, it seems to me that the amounts there provided were payable in accordance with those material terms and conditions. 65 I might add that in the case of Amount 3, the Purchase Contract called for the delivery of 17 metric tonnes of product at US$ 1,720 per metric tonne, a total of US$ 29,240. Likewise, in the case of Amounts 4 and 5, the Purchase Contract called for the delivery 170 metric tonnes at US$ 1,433 per metric tonne, a total of US$ 243,610, or two equal shipments of US$ 121,805 each. In other words, the amounts contained in the Purchase Contracts relating to Amounts 3 - 5 were the same amounts which were claimed in the statutory demand. 66 It follows that Mr Condon's submission under this second heading for this ground (d) does not, in my opinion, constitute a genuine dispute which would be sufficient to set aside the statutory demand in relation to Amounts 3 - 5. However, having regard to the conclusion that I have reached in [55] above, ground (d) does succeed in relation to those Amounts. Ground (e): Offsetting claims 67 The final ground relied upon by Tennant was that it had offsetting claims in the nature of foreign exchange losses, a claim for damages for an alleged failure by FloMin to supply technical services, a claim for damages for exposure to potential market losses if Tennant were to cease receiving product from FloMin and finally a potential for proceedings that may be brought by a third party against Tennant for unspecified damages. However, as Mr Livingston pointed out, and as Mr Condon properly conceded, there is no evidence that any of the losses relied upon by Tennant have yet been sustained by Tennant or that they definitely, or even probably, will be sustained. Thus Mr Livingston pointed out that none of the alleged offsetting claims have accrued or presently exist and that each is merely a possible future claim. As such, none of such claims qualify as an "offsetting claim" within the meaning of section 459H(1)(b) of the Corporations Act. In this respect, he referred to the decisions in Advance Ship Design Pty Limited v DJ Ryan t/as Davies Collison Cave (1995) 16 ACSR 129 and Collier Nominees Pty Limited v Consolidated Constructions Pty Limited (Supreme Court of New South Wales, Santow J, 3 July 1998, unreported). 68 Mr Condon did not seek to contradict Mr Livingston's submissions. In my opinion the allegedly offsetting claims do not constitute grounds for setting aside the statutory demand. Conclusion and orders 69 For the reasons set out above, I am of the opinion that the statutory demand should be set aside in respect of Amounts 1 - 5. However, I am satisfied that Amount 6 in the sum of US$ 93,585 is not the subject of any genuine dispute between Tennant and FloMin. Accordingly, for the purposes of section 459H(2) of the Corporations Act, I calculate the substantiated amount of the statutory demand to be US$ 93,585. Therefore, I propose to make an order pursuant to section 459H(4) varying the statutory demand so that it relates only to Amount 6 in the sum of US$ 93,585 and also an order declaring the demand to have had effect, as so varied, as from when the demand was served on Tennant. 70 I also propose to deal with the issue of costs. Having regard to the fact that neither party was totally successful or unsuccessful, my present inclination is to make no order for costs to the intent that each party bear its own costs. 71 The only order that I presently make is to direct the parties to provide, within 7 days from the date of this order, draft orders giving effect to my reasons. If the parties are unable to agree on the orders within the 7 day period, they are to provide within a further 7 days their respective draft orders, together with their written submissions in support. 72 Should I consider it appropriate to do so, I will make arrangements for the matter to be listed before me for further oral argument. Otherwise, I propose to deal with the final orders on the papers.

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At a glance

Court

Decision date

Before

Source

Judgment (32 paragraphs)

Parties

Cases Cited (9)

Cited By (4)