FEDERAL COURT OF AUSTRALIA

New Era Installations Pty Ltd v Don Mathieson & Staff Glass Pty Ltd

[1999] FCA 475

CORPORATIONS LAW - application to set aside statutory demand - review of Registrar’s decision - whether review involves a hearing de novo - whether “genuine dispute” about the existence or amount of the debt to which the statutory demand relates - meaning of “genuine dispute” - agency - whether agency by estoppel - whether agency by ratification - power of Court to make costs orders on applications to set aside statutory demands, both as to costs before Court and costs before Registrar.

Corporations Law ss 459E(1), 459G(1), 459H(1)(a), 459H(3), 459H(4)(a), 459N, 1335(2)

Federal Court of Australia Act 1976 (Cth) ss 35A(5), 35A(6)

Jageev Pty Limited v Deane (Federal Court of Australia (Davies J); unreported; 15 May 1998), followed

Burdon Pty Limited v Gillford Pty Limited (Federal Court of Australia (Davies, Hill and Whitlam JJ); unreported; 21 December 1995), followed

Lindel Constructions Pty Limited v Bacic Bros Plastering Pty Limited (1996) 19 ACSR 690, cited

Trinity Properties Pty Limited v Gilles (1996) 20 ACSR 22, cited

Petersen v Moloney (1951) 84 CLR 91, applied

NEW ERA INSTALLATIONS PTY LTD v DON MATHIESON & STAFF GLASS PTY LTD

NG 3025 OF 1998

KATZ J

SYDNEY

21 APRIL 1999

THE COURT ORDERS THAT:

1.      The amount of the statutory demand be varied to $79,317.80;

2.      The demand, as so varied, be declared to have had effect as from when the demand was served on the applicant; and

3.      The applicant pay four-fifths of the respondent’s costs of the proceedings before the Court and the Registrar.

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

REASONS FOR JUDGMENT

1                     On 3 July 1998, a Registrar determined an application which had been made to this Court by New Era Installations Pty Limited (to which company it is convenient to refer hereafter as “the debtor”).  The application had been made under subs 459G(1) of the Corporations Law (“the Law”) and was for an order setting aside a statutory demand which had been served on the debtor under subs 459E(1) of the Law by Don Mathieson & Staff Glass Pty Limited (to which company it is convenient to refer hereafter as “the creditor”).  The statutory demand, which had been served on the debtor in January of 1998, had specified a then-payable debt owing to the creditor of $97,678.70.  The Registrar expressed herself as satisfied that, of the sum of $97,678.70 specified in the statutory demand, the sum of $38,854.81 was not the subject of a “genuine dispute” between the debtor and the creditor, although the balance of the sum (incorrectly said by her to be $52,539.20) was (see par 459H(1)(a) of the Law).  The Registrar, exercising the power of the Court under par 459H(4)(a) of the Law, therefore made an order varying the statutory demand to specify the sum of $38,854.81, instead of the sum of $97,678.70.

2                     Subsection 35A(6) of the Federal Court of Australia Act 1976 (Cth) relevantly confers on the Court jurisdiction to review the Registrar’s exercise of power in connection with the debtor’s application for an order setting aside the creditor’s statutory demand.  The debtor has applied, under subs 35A(5) of that Act, for such a review.

3                     In Jageev Pty Limited v Deane (Federal Court of Australia; unreported; 15 May 1998)  Davies J described (in the context of a review by the Court of a Registrar’s decision on an application under subs 459G(1) of the Law) the function of the Court in a review under subs 35A(6) of the Federal Court of Australia Act. His Honour said (at 3-4),

“The function of the Court, on a review of a decision of a … Registrar, is to rehear that case and decide the facts for itself. Harris v Caladine (1991) 172 CLR 84 is authority for the proposition that, to be constitutionally valid, powers and functions exercised by officers of a federal court in the exercise of delegated jurisdiction must be subject to review by a judge of the court.  See also Cheesman v Waters (1997) 148 ALR 21. In D’Antuono v Minister for Health (Federal Court of Australia, Full Court, 5 December 1997, unreported), Burchett J analysed the reasons for judgment in Harris v Caladine (1997) 172 CLR 84 and said, inter alia, at 5:

‘...What emerges from this examination of the constitutional position, as declared by the High Court (and see also Cheesman v Waters (1997) 148 ALR 21 at 27), is that the control and supervision of the Court are required to be so real and effective that the decision, which is within the Court’s jurisdiction, though made by an officer who is not a judge, can still be seen to be a decision of the Court.  That would obviously not be so if a resolution of disputed facts which was its foundation were not examinable by the judge.’

Burchett J went on to say, at 6:

‘In any case, as Dawson J points out (at 125) ... even in the absence of the constitutional imperative which a delegation of power by a federal court must acknowledge, delegations by courts to registrars and masters, subject to review by a judge, have uniformly been held to involve a complete reconsideration of the case.’

To the same effect, Branson J said in Sheahan v Joye (1995) 57 FCR 389 at 391, in relation to a review under s 35A of the Federal Court of Australia Act:

‘In my view this provision provides for the Court to reconsider in the light of evidence before it and the law as at the time of the review, the rights of the parties: (Builders Licensing Board v Sperway Constructions (Syd) Pty Ltd (1976) 135 CLR 616 per Mason J at 619-625; Wigg v Architects Board of South Australia (1984) 36 SASR 111.’

On appeal to the Full Court, this approach was not challenged.

It follows that the Court should consider the matter afresh. A hearing de novo involves a complete rehearing of the facts and the law as they exist when the Court reviews the order made by the … Registrar: per McHugh J in Harris at 164.”

4                     Neither of the parties before me disputed the correctness of the above approach to the Court’s function in the present review (nor, in my view, could either of them have done so successfully).  Accordingly, I begin with a statutory demand for $97,678.70, which I may either leave wholly undisturbed (in theory), set aside in whole or (in effect) set aside in part. I have said that I may leave the statutory demand wholly undisturbed “in theory” because the creditor has conceded before me that its statutory demand exceeded what it now claims to be the payable debt by $12,299.88 and should therefore be varied to the sum of $85,378.82. Obviously, I would act upon that concession by the creditor, even if the debtor were to have no success otherwise in having the statutory demand set aside. I have further said that I may “in effect” set aside the statutory demand in part, because the formal mechanism for achieving that result is the variation of the statutory demand, rather than its partial setting aside.

5                     As it did before the Registrar (albeit unsuccessfully), the debtor submits before me that I will (to use the language of par 459H(1)(a) of the Law) be “satisfied … that there is a genuine dispute between” it and the creditor “about the existence … of”the“debt to which the [statutory] demand relates” (my emphasis), in which case I will simply set aside the statutory demand under subs 459H(3) of the Law. Alternatively, as it did before the Registrar (successfully), the debtor submits that I will (again, to use the language of par 459H(1)(a) of the Law) be “satisfied … that there is a genuine dispute between” it and the creditor “about the amount … of”the“debt to which the [statutory] demand relates” (again, my emphasis), in which case I will instead vary the statutory demand under subs 459H(4)(a) of the Law to reflect the amount of the debt which is not the subject of a genuine dispute.

6                     As is apparent from the preceding paragraph, both submissions by the debtor depend upon my being satisfied that there is a “genuine dispute” between it and creditor, whether as to the existence of the debt to which the statutory demand relates or as to its amount. In Burdon Pty Limited v Gillford Pty Limited (Federal Court of Australia (Davies, Hill and Whitlam JJ); unreported; 21 December 1995), Hill J, with whom Whitlam J agreed, discussed the notion of a “genuine dispute” for present purposes. Although that notion has also been discussed in numerous cases since, it appears that Hill J’s discussion has been referred to in only two of those subsequent cases: see Lindel Constructions Pty Limited v Bacic Bros Plastering Pty Limited (1996) 19 ACSR 690 (NSWSC; McLelland CJ in Eq); and Trinity Properties Pty Limited v Gilles (1996) 20 ACSR 22 (FCA; Finn J).  No doubt, the lack of prominence given to Hill J’s discussion has been because the Burdon Case is unreported. Although Hill J’s discussion is lengthy, in my view, it certainly bears repeating.  His Honour said (at 16-22),

“The background to Division 3 of Part 5.4 of the Law concerned with statutory demands is dealt with in the judgment of Gummow J, with whom Brennan CJ, Dawson, Gaudron and McHugh JJ agreed, in David Grant and Co Pty Ltd v Westpac Banking Corporation (1995) 131 ALR 353 [now also reported in (1995) 184 CLR 265].  Suffice it to say here that the present provisions of the Division stem from the recommendation of the Law Reform Commission in the ‘Harmer Report’ (Law Reform Commission Report No. 45, General Insolvency Inquiry).  Relevantly, that Report recommended that where a debt forming the basis of a statutory demand was disputed or some other dispute arose in respect of a statutory demand, that dispute be dealt with at a stage earlier than the winding up proceedings.  Hence, s459G was introduced to permit a company to apply to the Court for an order setting aside a statutory demand served upon it where the application is made within twenty-one days of the demand being served.  It is a ground for setting aside the statutory demand that there is a genuine dispute between the company and the person serving the demand about the existence or amount of the debt to which the demand relates: s459H(1).  If that dispute is as to the whole of the amount demanded, then the demand will be set aside.  If the dispute is only as to part, the Court may vary the demand: s459H(4).

Thus the statutory issue in a case such as the present is whether there is ‘a genuine dispute’ between the parties, either as to the existence or the amount of the debt.  There have now been many cases which have considered the test to be applied by the Court.  They are conveniently summarised by Lindgren J in Chase Manhattan Bank Australia Limited v OSCTY Pty Limited (1995) 17 ACSR 128 at 135.  His Honour says:

‘The references in s459H to the Court’s being ‘satisfied’ that there is a ‘genuine’ dispute and ‘satisfied’ that the Company has a ‘genuine’ claim against the person who served the demand on it, have been the subject of judicial consideration: see for example Mibor Investments Pty Ltd v Commonwealth Bank of Australia (1993) 11 ACSR 362; [1994] 2 VR 290 (Vic/Hayne J) at 366-67; Re Morris Catering (Australia) Pty Ltd (1993) 11 ACSR 601 (Qld/Thomas J) at 605-606; Scanhill Pty Ltd v Century 21 Australasia Pty Ltd (1993) 120 ALR 173; 12 ACSR 341 (FCA/Beazley J) (Scanhill) at 356-57; Kalamunda Meat Wholesalers Pty Ltd v Reg Russell and Sons Pty Ltd (1994) 51 FCR 446; 13 ACSR 525 (FCA/Hill J) at 526-27; Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37 (FCA/Lockhart J); Hamilhall Pty Ltd (In Liq) v AT Phillips Pty Ltd (1994) 15 ACSR 247 (FCA/Branson J); Rohalo Pharmaceuticals Pty Ltd v RP Scherer SpA (1994) 15 ACSR (FCA/Lindgren J (Rohalo)).  Their meanings have been illuminated by analogies found in applications for injunctions to restrain the commencement, advertisement or prosecution winding up of [sic] proceedings, pre-dating the enactment of s459G (Scanhill), and in the opposing of a notional application by the person who served the statutory demand for summary judgment against the company for the debt the subject of the demand (Rohalo). Consistently with these cases, I ask whether Oscty has satisfied me that there is a ‘serious question to be tried’ or an ‘issue deserving a hearing’ as to whether it has a claim against Chase.’

One thing is clear. It was not intended by the legislature that the Court would, in an application to set aside a statutory demand, embark upon any extended inquiry into the merits of the case.  All the Court need do is determine where there is a genuine dispute.  In Re Morris Catering (Australia) Pty Ltd (1993) 41 ACLC 919, (1993) 11 ACSR 601 referred to by Beazley J in Scanhill, Thomas J said:

‘There is little doubt that Div 3 is intended to be a complete code which prescribes a formula that requires the court to assess the position between the parties, and preserve demands where it can be seen that there is no genuine dispute and no sufficient genuine offsetting claim.  That is not to say that the court will examine the merits or settle the dispute.  The specified limits of the court’s examination are the ascertainment of whether there is a ‘genuine dispute’ and whether there is a ‘genuine claim’.

It is often possible to discern the spurious, and to identify mere bluster or assertion.  But beyond a perception of genuineness (or the lack of it) the Court has no function.  It is not helpful to perceive that one party is more likely than the other to succeed, or that the eventual state of the account between the parties is more likely to be one result than another.

The essential task is relatively simple - to identify the genuine level of a claim (not the likely the result of it) and to identify the genuine level of an offsetting claim (not the likely result of it).’

The difference in policy underlying the provisions of the Bankruptcy Act 1966 (Cth) relating to a bankruptcy notice and the provisions of the law relating to a statutory demand, can readily be seen.  A creditor is not entitled to have a bankruptcy notice issued unless the creditor has actually obtained a judgment. At least where the claim of the creditor is defended, that judgment will have been obtained only after a hearing.  Ordinarily that judgment will thus be conclusive of liability.  Where a judgment by default is obtained the Court will not, as a matter of course, look behind the judgment.  Although, the fact that the judgment was obtained by default will make it more likely that a court in bankruptcy will look behind the judgment to ascertain whether there was in truth an reality a real debt: Wren v Mahoney (1972) 126 CLR 212.

A statutory demand, on the other hand, may be served notwithstanding that no judgment has been entered.  This clearly can have the consequence that a creditor may issue a statutory demand as a means of collecting a debt and, as an alternative, to obtaining judgment.  For this reason the view was early taken that a court would not, as a matter of discretion, make a winding up order where a bona fide dispute existed as to the debt: cf Mibor Investments at 9 citing McPherson, The Law of Company Liquidation (3rd Ed) at 63. If such a dispute existed then the creditor should take proceedings to obtain judgment against the debtor company and the dispute should be litigated in those proceedings.

The statutory test now enshrined in s459H obviously derives from the Court’s reluctance to have winding up proceedings used for debt collecting and involves a statutory embodiment of this reluctance.

There may, no doubt, be occasions where the Court in reaching a satisfaction that there is no [scil, a] genuine dispute between the parties as to the existence or amount of a debt really reaches a conclusion that there is no debt at all.

An analogy can be drawn from cases where summary judgment is resisted.  The general rule is that a party is not to be denied a trial unless the absence of a cause of action or defence is clearly demonstrated.  The question is often said to be whether a defence is so obviously untenable that it can not possibly succeed: General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125, see at 129, Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91.

If the case is one which can be disposed of by determining a short question of law, or perhaps a question of construction of an instrument, this can be done. Where facts may be in dispute, however, it would ordinarily be inappropriate to proceed to determine the merits.  If the case is one where there is a ‘plausible contention requiring investigation’ the case will ordinarily be one where there is a ‘genuine dispute’: Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 per McLelland CJ in Eq, Delnorth Pty Ltd v State Bank of New South Wales (1995) 17 ACSR 379 at 384.

Lockhart J in Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37 recognised that the standard of satisfaction which the Court requires will not be particularly high.  His Honour said (at 39):

‘Certainly the Court will not examine the merits of the dispute other than to see if there is in fact a genuine dispute.  The notion of a ‘genuine dispute’ in this context suggests to me that the court must be satisfied that there is a dispute that is not plainly vexatious or frivolous. It must be satisfied that there is a claim that may have some substance.  On the other hand the court must be careful, because if all an applicant has to do is to assert both a claim and some basis of it, without more, it would mean in almost every case that the court would set aside statutory demands where application is made to that effect.  Plainly that is not what the legislature intended by introducing this new regime.’”

7                     In conducting the present review, I intend to act in accordance with the approach of Hill J which I have just set out, finding nothing in any case subsequent to Burdon by which I am also bound which prevents me from doing so.  In doing so, I will naturally deal in the first instance with the debtor’s argument that there is a genuine dispute between it and the creditor as to the existence of the debt to which the statutory demand relates. I will do so because, if I accept that submission, no question will arise of there being a genuine dispute as to the amount of the debt to which the statutory demand relates.

8                     In order to deal with the debtor’s argument to which I have just referred, it is convenient that I first summarise the uncontested circumstances out of which there arose the debt to which the statutory demand relates.  They are as follows: at some date no later than August of 1996 (I am not aware when) Baulderstone Hornibrook Pty Limited (“Baulderstone”), a construction company, had entered into a contract with the Commonwealth government to construct in the Australian Capital Territory certain buildings and associated external works for use by the Australian Geological Survey Organisation. Then, in August of 1996, Baulderstone had subcontracted with a company related to the debtor, New Era Balustrading Pty Ltd (“the related company”), for the supply and installation by the related company of balustrading for the project, such balustrading to be manufactured of metal and glass.  The related company proposed to acquire the balustrading from the debtor and, in order for the debtor to be able to manufacture the balustrading for supply to the related company, the debtor obviously required (relevantly) glass.

9                     There is no issue that glass used to manufacture balustrading installed at the project site by the related company was supplied by the creditor.  There is, however, an issue raised by the debtor as to whether the glass so used had been supplied by the creditor pursuant to a contract between the creditor and the debtor under which the debtor was liable to pay for the glass supplied or whether, instead (as the debtor submits), the glass had been supplied pursuant solely to a contract between the creditor and Baulderstone under which Baulderstone was liable to pay for the glass supplied.  The debtor submits that there is a genuine dispute on that issue.

10                  Although, for the purpose of its application, I was favoured by the debtor with a considerable amount of evidence, both affidavit and documentary, I propose (subject to what I say in par 43 below) to concentrate in these reasons for judgment on that evidence actually relied upon by the debtor in the course of its submissions before me as establishing that there is a genuine dispute.  So far as concerns the debtor’s argument that there is a genuine dispute about the existence of the debt, that evidence consisted of: first, certain (affidavit) evidence given by a director of the debtor; secondly, (a transcript of) certain answers given in cross-examination before the Registrar by an employee of the creditor; and, thirdly, certain documents, some of which were annexures to affidavits and others of which were independent exhibits.

11                  I will deal first with the debtor’s director’s evidence.

12                  Mr Andrew Tornya, who is a director both of the debtor and of the related company, deposed that, on 6 June 1997, he had a telephone conversation with Mr Gerard McCluskey, who is the national marketing and sales manager of the creditor.  (The conversation was, incidentally, one of a series of such conversations, in the first of which Mr Tornya had introduced himself as being “from” the debtor.)  According to Mr Tornya, Mr McCluskey said to him during the course of the conversation,

“Since you don’t have an account [scil, with us] and we haven’t traded with you before, we will require a bank guarantee prior to producing the glass.  My boss said that we are not prepared to give New Era Installations any credit at all, and we cannot accept an order from New Era Installations.  We can accept New Era supplying the sizes but Baulderstones will need to pay us direct for the glass.”

(It is not easy to reconcile Mr Tornya’s account of Mr McCluskey’s referring to the creditor’s requiring a bank guarantee with the rest of Mr Tornya’s evidence about the creditor, but the problem is not one which I need to resolve.) Mr Tornya says that he told Mr McCluskey that he would “find out if this arrangement is acceptable to Baulderstones” and that, later that day, he telephoned Mr Greg Oddo of Baulderstone and said to him,

“Would you have any problem paying DMS [that is, the creditor] direct as we do not have an account with them and they do not want to give us any credit, but we still must use them because our usual supplier does not have the facility for heat-soaking [the required glass].”

(It would appear that, in making the statement which I have just quoted, Mr Tornya was speaking on behalf of the debtor.)  Mr Tornya says that Mr Oddo replied that he didn’t think there would be a problem, but that Baulderstone would only be able to pay for material that is installed as per “your” contract.  (Mr Oddo had obviously understood Mr Tornya to be speaking, not on behalf of the debtor, but on behalf of the related company, with which, rather than with the debtor, Baulderstone had contracted.)  Mr Tornya says that he then said to Mr McCluskey that “DMS should be paid $130.00 per lineal metre.  Could you please confirm that in writing”.

(I note that Mr Tornya says in another part of the affidavit with which I am presently dealing that, in a conversation with Mr McCluskey earlier than 6 June 1997, Mr McCluskey had told him that the creditor’s price was “$122 per square metre, fully inclusive”.  He also says in yet another part of that affidavit that “the charge of $122.00 per square metre is equal to approximately $130.00 per lineal metre at 1.055mm in height”.  It seems obvious that the reference to 1.055 mm was intended to be a reference to 1.055 m, in which case $122 per square metre equals $128.71 per lineal metre.)

Mr Tornya says that he “subsequently” telephoned Mr McCluskey (whether on 6 June 1997 or not is not specified) and said to him,

“Oddo doesn’t have a problem but said he would confirm with his boss and get back to me.  He said he can pay for installed material only, the same as my payments.”

(When Mr Tornya referred to “my” payments, he was obviously referring to payments to the related company, rather than to the debtor.)  Mr Tornya says that Mr McCluskey replied to that statement by asking Mr Tornya to send him “the sizes”, that is, the sizes of the various pieces of glass required for the balustrading.

13                  I turn now to the answers given in cross-examination before the Registrar by an employee of the creditor, namely, Mr McCluskey.

14                  Mr McCluskey was asked in cross-examination about the “conversation that you had with Mr Tornya on 6 June 1997”, which I take to be a reference to the first of the conversations with Mr McCluskey referred to by Mr Tornya which I have mentioned above.  Mr McCluskey agreed that in that conversation he had told Mr Tornya that the creditor was not prepared to extend credit to either the debtor or “any of the New Era companies” and that he had also told Mr Tornya that the creditor would accept “specification of sizes from New Era, but payment from Baulderstone”.  It was suggested to him that he had said that he wanted to be paid by Baulderstone, to which he replied, “We wanted security of payment”.

15                  Mr McCluskey was also asked about a letter dated 21 October 1997 (quoted in full in par 19 below) which he had written to Baulderstone on behalf of the creditor, in which he had said,

“We agreed to supply the toughened glass for this project [that is, the AGSO Project, ACT] on the basis that New Era Balustrading [that is, the related company] would provide us with the production sizes, we would deliver the glass to site with payment being made by Baulderstone Hornibrook directly to DMS Glass.”

In the light of that statement, Mr McCluskey was asked whether “the deal in effect on 6 June to [scil, with] Mr Tornya” was, “We don’t look to you for payment, we look to Baulderstones for payment”.  Mr McCluskey’s answer was, “Yeah, the security of payment had to come from Baulderstone, yes, payment from Baulderstone”.

16                  Turning now to the documentary evidence, it may be divided into three classes: first, that brought into existence contemporaneously with the conversations both deposed to by Mr Tornya and the subject of Mr McCluskey’s evidence in cross-examination; secondly, that associated with the delivery of glass to the site by the creditor; and, thirdly, correspondence exchanged between the creditor and Baulderstone after difficulties arose regarding payment for the glass supplied by the creditor.

17                  As to the first class of documentary evidence, a number of faxes dated either 10 or 11 June 1997 were exchanged among persons already referred to above.  First, on a fax form bearing the name of the related company and the date of 10 June 1997, Mr Tornya wrote to Mr Oddo, for Baulderstone.  The fax was said to be regarding “AGSO”. In the fax, Mr Tornya said,

“Please find confirmation of our discussion on Friday 6 June 1997, that Baulderstone Hornibrook have no objection to splitting payments for the glass, i.e. a cheque to DMS Glass for about $130 per metre with the balance to New Era.”

Secondly, Mr Oddo replied by fax dated 11 June 1997,

Secondly, Mr Oddo replied by fax dated 11 June 1997,

“Further to your request, we confirm that we are able to make payment direct to DMS Glass under the same [sic] terms of our subcontract.

Please provide their full company name, address, contact name and number and PPS details.”

Thirdly, by fax bearing the name of the debtor and the date 11 June 1997, Mr Tornya sent copies of the preceding two faxes to the creditor. Finally, Mr McCluskey sent to the debtor a fax dated 11 June 1997.  In that fax, Mr McCluskey: first, acknowledged receipt of the debtor’s “purchase order no’s” 50-56; secondly, supplied Baulderstone’s “banking details” “[a]s requested in Baulderstone’s fax of 11/6/97”; and, thirdly, said,

“We will proceed with this order on a ‘Cash Sale - Baulderstone A.G.S.O. Project’ with the goods being delivered to site on an unpriced delivery docket. We expect Baulderstone to sign for the goods on delivery to site, with a payment into our account within thirty (30) days.”

18                  As to the second class of documentary evidence, the debtor took me to at least one document on the debtor’s letterhead, which document was styled a “purchase order”, and which, as I understood it, I was to treat as representative of all documents so styled.  (The debtor’s purpose in doing so was to found a submission which it then made that such documents “were not treated” by the creditor “as Purchase Orders but rather as lists of sizes”.  There was, however, no evidence to support such submission.  Further, I note: first, that when it was suggested to Mr McCluskey in cross-examination that the creditor had not seen such documents as purchase orders at all, but simply as documents which set out the sizes of glass it was to supply to Baulderstone, Mr McCluskey denied the suggestion; and, secondly, that the “purchase order” to which I was taken requested the delivery of the glass to “Baulderstone Hornibrook Pty Ltd[,] Att Brett Thompson C/o New Era […,] AGSO Site”.) The debtor took me also to a number of delivery dockets, drawing my attention to the reference in them under the heading “buyer” to the words “cash sale - Baulderstone AGSO”.

19                  As to the third class of documentary evidence, first, on 21 October 1997, the creditor wrote to Baulderstone, saying,

“We agreed to supply the toughened glass for this project on the basis that New Era Balustrading would provide us with the production sizes, we would deliver the glass to site with payment being made by Baulderstone Hornibrook directly to DMS Glass.

Upon receipt of your fax to New Era Balustrade [sic] dated 11^th June 1997, (copy attached) agreeing to make direct payment to DMS Glass, we proceeded to supply the goods to site.

As of 20^th October 1997, the value of glass compared to payments received is reconciled as follows:

12mm Clear Toughened delivered to site =   $197,178.70

Payments received      17/7/97 =                    $ 32,500.00

                                    22/8/97 =                    $ 32,000.00

                                    6/10/97 =                    $ 35,000.00

                                                                        =======

                                    Amount outstanding   $ 97,678.70

We would appreciate your response as to when the amount outstanding will be credited to our account.”

Secondly, on 23 December 1997, the creditor wrote to Baulderstone, referring to the fact that the creditor was in dispute with the debtor and had not been paid $97,678.70 in respect of glass delivered to the site.  The creditor also said,

“When New Era left the site, there was a considerable amount of our glass unfixed on site.  This glass remains our property under our terms of trade until we are paid in full by New Era Installations Pty. Ltd.  The glass has since been installed by you.  This glass was not yours to deal with.  It should have been returned to us.  At the very least, we consider that you should pay us directly for the unfixed glass left on site when New Era Installations [sic] withdrew.”

Finally, on 20 January 1998, Baulderstone replied to the creditor’s letter of 23 December 1997, denying that there had been any glass supplied by the creditor which was unfixed on site when “New Era” left.

20                  (I should, I consider, add at this point that, in the debtor’s submissions, reliance was also placed upon the terms of both an undated fax from the creditor to Baulderstone and a letter from Baulderstone to the creditor dated 18 September 1997, which fax and letter were part of an annexure to the affidavit of Mr Tornya to which I have already referred above. However, as the paragraph of the affidavit referring to that annexure was not read before me (or before the Registrar, for that matter) and the fax and letter were not in evidence otherwise, I have ignored both of them for present purposes.  I may say, however, that even if they had been in evidence before me, I am unable to see how they would have assisted the debtor for present purposes.)

21                  Having now referred to the evidence relied upon by the debtor to found its submission that there is a genuine dispute between the creditor and it about the existence of the debt to which the statutory demand relates, I turn to the detail of that submission.

22                  The debtor’s submission that there is a genuine dispute between the creditor and it about the existence of the debt to which the statutory demand relates was based upon three arguments which I understood it to make in the alternative.  Those arguments were all expressed as if it were necessary for me to decide upon their correctness, rather than merely to decide whether they showed that there was a genuine dispute, but I have treated them as if they were expressed in the latter sense.

23                  The first such argument was that Baulderstone “by words or conduct represented to” the creditor that the debtor “had been authorised as their [sic] agent, and in reliance” the creditor “entered into transactions with” the debtor “within the scope of that ostensible authority”.  Baulderstone, it was said, was therefore “estopped from denying the fact of” the debtor’s agency.  (The words which I have just quoted were taken by the debtor in substance from (and attributed to) 1 Halsbury’s Laws of Australia, “Agency” at par 15-60.)

24                  The argument to which I have just referred was, of course, directed, not to an absence of liability to the creditor in the debtor, but rather to the presence of liability to the creditor in Baulderstone.  However, ignoring the omission from the argument of that crucial further step (an omission which applied to the other two arguments made by the debtor to which I will afterwards refer), the argument is still incapable of acceptance, even for the limited purpose merely of establishing a genuine dispute between the creditor and the debtor about the existence of the debt to which the statutory demand relates.

25                  The debtor did not, in the course of its submissions before me, deign to identify specifically on which evidence of that to which I have referred above it relied as amounting to the relevant representation by Baulderstone.  However, as I understand the argument, the words of Baulderstone relied upon must be those in Mr Oddo’s fax dated 11 June 1997. (They could not be those spoken by Mr Oddo on 6 June 1997, because of the provisional character of those words.)  Of course, Mr Oddo’s fax dated 11 June 1997 was not sent to the creditor, but to Mr Tornya; however, it would be easy to conclude that Baulderstone expected that that fax would be forwarded to the creditor by Mr Tornya, as, indeed, it was. Treating that fax, then, as a representation by Baulderstone to the creditor, there is nevertheless a fatal defect in it so far as the present argument is concerned.  Its subject was not the debtor, but rather the related company, a fact made plain beyond doubt by its being in response to a fax from the related company.  (As I have already mentioned above, not only Baulderstone’s fax, but also the related company’s fax to which the Baulderstone fax was a reply, was forwarded to the creditor.)  Assuming the Baulderstone fax to be capable of being construed as a representation by Baulderstone to the creditor that Baulderstone had authorised someone as its agent to enter into contracts on its behalf (a construction which I have considerable difficulty in giving to the document in any event), that someone was not the debtor, but rather the related company.  Yet all relevant transactions entered into subsequently by the creditor were with the debtor, as appears from the fact that, without exception, the various “purchase order” documents sent to the creditor were sent to it by the debtor, rather than by the related company.

26                  The second argument relied upon by the debtor to establish that there is a genuine dispute between the creditor and it about the existence of the debt to which the statutory demand relates began with the following propositions:

“An act which at the time it was entered into or done by an agent, lacked the authority of the principal, may by subsequent conduct of the principal become ratified and made as effectively the principal’s own as if the principal had previously authorised it.  Where an act is done by a person not assuming to act on his or her own behalf but for another, though without prior authority or knowledge, and is subsequently ratified by that other person, the relation of principal and agent is constituted retrospectively, and the principal is bound by the act whether it is to the principal’s advantage or detriment to the same extent and with all the same consequences as if it had been done by his or her previous authority.”

(The words which I have just quoted were taken by the debtor verbatim from (and attributed to) 1 Halsbury’s Laws of Australia, “Agency” at par 15-130.)

27                  As the debtor has not argued in the present matter that it was actually an agent of Baulderstone, although one with a limited authority which it exceeded, the debtor must in truth have been relying upon the second of the two sentences which I have just quoted, rather than the first.  The proposition contained in that second sentence involves three matters which must be established: first, a person’s “not assuming to act on his or her [or its] own behalf”;secondly, a person’s “assuming to act for another [person], though without prior authority or knowledge [of that other person]”; and, thirdly, subsequent ratification of the first person’s act by that other person.

28                  However, although the debtor, in the course of its submissions before me, identified that evidence upon which it specifically relied in connection with the third of those three matters, it identified no evidence upon which it specifically relied in connection with the first two of those three matters.  As with its argument discussed above about a representation by Baulderstone to the creditor, I am left to guess specifically which evidence it is of that to which I have referred above that is claimed by the debtor to found those aspects of its second argument.

29                  To my mind, only two of the items of evidence to which I have referred above could possibly be relied upon by the debtor as amounting to a representation by the debtor to the creditor that the debtor was not acting on the debtor’s own behalf and was acting on behalf of Baulderstone.  The first is Mr Tornya’s forwarding to the creditor on 11 June 1997 the two faxes earlier exchanged between the related company and Baulderstone.  The second is the various “purchase order” documents. Unless the debtor can make out an argument that those two items of evidence establish (or, at least, give rise to a genuine dispute) that it was not assuming to act on its own behalf in ordering glass from the creditor, but was assuming to act for Baulderstone, though without Baulderstone’s prior authority or knowledge, its second argument must fail even before it gets to the issue of ratification of the debtor’s acts by Baulderstone.

30                  I do not consider the items of evidence to which I have just referred sufficiently persuasive to found an argument that there is a genuine dispute.

31                  As to any representation implicit in Mr Tornya’s forwarding of the two faxes to the creditor, I point out, as I have before, that the two faxes were not concerned with the debtor, but rather with Baulderstone’s relationship with the related company.  What the forwarding of those faxes implied about the existence of any relationship between Baulderstone and the debtor is, to my mind, entirely speculative.

32                  As to the “purchase order” documents, they were all sent on the debtor’s letterhead and the only reference in them to Baulderstone was one which I have already pointed out above.  Under the heading “DELIVER TO”, there appeared the words, “Baulderstone Hornibrook Pty Ltd” followed by the words“Att Brett Thompson C/o New Era […,] AGSO Site”.  Even if the latter words had not implied that the specific individual to whom the goods were to be delivered was connected with either the debtor or the related company, still the fact that the goods were to be delivered to Baulderstone appears to me to say nothing of any weight about a purported acting by the debtor on behalf of Baulderstone in ordering the glass.

33                  What I have said above appears to me to be sufficient to justify my rejection of the debtor’s second argument, but I will, in any event, say something about the debtor’s argument that Baulderstone performed acts of ratification of the transactions purportedly entered into on its behalf by the debtor.

34                  The debtor identified in its submissions two purported acts of ratification by Baulderstone for the purpose of the argument presently being discussed.  Setting them out in the reverse order to that in which they were set out in the debtor’s submissions, the first such act was that Baulderstone “accepted delivery of the glass from” the creditor.  The second such act was that Baulderstone “made … payments direct[ly] to” the creditor totalling $99,500.00.

35                  While ratification can, of course, be implied as well as express, if it is implied, that which is said to constitute it must be unequivocal; “[O]nly unequivocal words or acts will suffice to establish ratification”: Petersen v Moloney (1951) 84 CLR 91 at 101 (Dixon, Fullagar and Kitto JJ).  In my view, it would not be open to conclude that the purported acts of ratification by the creditor relied upon by the debtor had the necessary quality of unequivocality to qualify as acts of ratification.  The performance of those acts would have been justifiable even if they were not acts of ratification.

36                  There is yet a further problem as to the first of those two purported acts of ratification. The only evidence said by the debtor in its submissions to be relied upon as proving that Balderstone did accept delivery of the glass from the creditor was the fax sent by Mr McCluskey to the debtor dated 11 June 1997, already referred to above.  I can only assume that the particular material being relied upon in that fax was Mr McCluskey’s assertion that, “We expect Baulderstone to sign for the goods on delivery to site …”  How the creditor’s expectation that Baulderstone would sign for the goods on delivery to site tended to prove that Baulderstone later accepted delivery of the glass from the creditor was not made the subject of any submissions by the debtor.

37                  There was one further argument relied upon by the debtor to establish that there is a genuine dispute between the creditor and it about the existence of the debt to which the statutory demand relates.  That argument began with the proposition stated in 1 Halsbury’s Laws of Australia, “Agency” at par 15-260 that,

“Where the agent obtains the money or property of a third person by means of any act beyond the actual or apparent scope of the agent’s authority, the principal is not responsible unless the money or property or the proceeds thereof have been received by, or have been applied for the benefit of, the principal, in which case the principal becomes liable to the extent of the benefit received.”

It was then submitted that Baulderstone had received the glass supplied by the creditor, since it had been installed in the balustrading in the building project in respect of which Baulderstone was the head contractor.

38                  It is sufficient to dispose of this argument to point out that the legal principle being relied upon by the debtor presupposes that the person who receives the money or property of a third person is the agent of the person sought to be made liable.  As I have already rejected above the only two bases upon which the debtor alleges that it is to be treated as Baulderstone’s agent, namely, estoppel against or ratification by Baulderstone, the legal principle set out above is irrelevant for present purposes.

39                  In light of all of the above, I am not satisfied that there is a “genuine dispute” between the creditor and the debtor about the existence of the debt to which the creditor’s statutory demand relates.

40                  As I mentioned in the opening paragraph of these reasons for judgment, when the Registrar determined the debtor’s present application, she expressed herself as satisfied that, of the sum of $97,678.70 specified in the statutory demand, the sum of $38,854.81 was not the subject of a “genuine dispute” between the debtor and the creditor, although the balance of the sum (incorrectly said by her to be $52,539.20) was.  The $52,539.20 said by the Registrar to be the subject of a “genuine dispute” was said by her to be composed of three sums: first, $12,639.20 said to have been wrongly charged by the creditor as a processing fee; secondly, $5,500.00 said to have been for defects in the glass; and, thirdly, $34,404.00 said to have been for oversupply of glass.  (Coincidentally, when one adds together the three sums just mentioned, they do not total $52,539.20, but rather $52,543.20.)

41                  As I have also mentioned above more than once, the debtor submitted before me, in the alternative to its argument that there is a “genuine dispute” between it and the creditor about the existence of the debt to which the creditor’s statutory demand relates, that there is a “genuine dispute” between it and the creditor about the amount of the debt to which the creditor’s statutory demand relates. I therefore turn now to that alternative submission.

42                  Unlike the debtor’s submissions before me that there is a “genuine dispute” between it and the creditor about the existence of the debt to which the creditor’s statutory demand relates, which submissions were made in some detail both in writing and orally and with reference to the evidence said to support them, the debtor’s submissions before me that there is a “genuine dispute” between it and the creditor about the amount of the debt to which the creditor’s statutory demand relates were made only in writing and consisted of nothing more than the statement that “there is a genuine dispute on the amount of $52,539.20 for the reasons outlined by [the] Registrar … on 3 July 1998”.

43                  In the light of the form which the debtor’s submissions took, the way in which I propose to proceed generally on this aspect of the matter is as follows: first, I will take, as the evidence relied upon by the debtor for the purpose, the evidence referred to by the Registrar in her reasons for decision; secondly, I will take, as the submissions made by the debtor for the purpose, the reasons given by the Registrar in her reasons for decision; and, thirdly, I will ask myself whether there exists a “genuine dispute” as to each of the three sums to which I have referred in par 40 above, namely, the $12,639.20 said to have been wrongly charged by the creditor as a processing fee; secondly, the $5,500.00 said to have been for defects in the glass; and, thirdly, the $34,404.00 said to have been for oversupply of glass.

44                  First, as to the processing fee, the evidence relied upon by the debtor was in Mr Tornya’s affidavit to which I have already referred above. In it, he deposed to the fact that some of the creditor’s invoices contained an unwarranted charge for processing, which he asserted, by reference to those invoices, amounted to $12,639.28 (not $12,639.20, which was the figure used by the Registrar).  The correctness of that evidence was largely accepted by the creditor. In an affidavit by Mr Subhash Chauhan, the Secretary of the creditor, which affidavit was read before me, Mr Chauhan “admitt[ed] that, by error, processing charges were included in some of the invoices rendered by” the creditor. According to him, the total of those charges was $12,521.50.  (It was that sum which formed almost all of the sum by which the creditor conceded before me, as I mentioned in par 4 above, that the sum specified in the statutory demand should be reduced.)  It is not the Court’s function on this review to seek to resolve the dispute between the debtor and creditor as to whether the unwarranted processing charge was $12,639.28 or $12,521.50, an exercise which would require an extended examination of the primary financial records.  I propose to proceed on the basis that there exists a genuine dispute between the debtor and creditor as to the difference between those two sums, namely, $117.78, and will therefore reduce the sum specified in the statutory demand by $12,639.28.

45                  Next, as to the defects in the glass, the evidence relied upon by the debtor was again in Mr Tornya’s affidavit.  In it, he deposed to the fact that thirty-five sheets of glass supplied by the creditor had been defective.  Five had been broken, five had had uneven edging and were therefore unusable and fifteen had not been properly labelled and were of incorrect size and were therefore also unusable.  He also deposed to the fact that each of the thirty-five sheets was approximately 1.3 square metres in area, so that, at a price of $122 per square metre, the defective glass had a cost of $5,500, which the debtor should not be required to pay to the creditor.  In his affidavit referred to above, Mr Chauhan dealt with Mr Tornya’s assertions about the defective glass by “admit[ting] that 15 sheets of glass were replaced and a credit note dated 18 July 1997 for $2607.12 was issued”.  I take Mr Chauhan by that statement to be admitting that the creditor had supplied to the debtor thirty-five sheets of defective glass, but to be saying that fifteen of those thirty-five sheets had been dealt with by replacing them, while the remaining twenty had been dealt with by giving the debtor credit for them.  It is not the Court’s function on this review to seek to resolve the dispute between the debtor and creditor as to whether the creditor did replace fifteen of the thirty-five defective sheets or did give the debtor credit for the remaining twenty.  I propose to proceed on the basis that there exists a genuine dispute between the debtor and creditor as to those matters and will therefore reduce the sum specified in the statutory demand by a further $5,500.

46                  Finally, as to the oversupply of glass, the evidence relied upon by the debtor was again in Mr Tornya’s affidavit.  In it, having referred to the fact, just discussed, that thirty-five sheets of glass supplied by the creditor were defective, Mr Tornya continued,

“The rest of the glass supplied by [the creditor] … has been used in the balustrade installation and in accordance with approved plans which are in a bundle exhibited to me and marked ‘ AGT 1’ I say that the total area of glass to be installed in the balustrading provided in the said plans is 1264 metres. The total area of glass charged [by the creditor] … is 1546 square metres. Accordingly, I say that [the creditor] … has charged for 282 square metres of glass which has not been supplied and with a contract value of $122.00 per square metre, that is a total sum of $34,404.”

47                  Accepting for the purpose of dealing with this aspect of the matter Mr Tornya’s assertion that the creditor has charged the debtor for 1546 square metres of glass at $122 per square metre, nevertheless, for numerous reasons, I am not prepared to act upon the evidence which I have just set out in order to conclude that there is a genuine dispute between the debtor and creditor as to the sum of $34,404.  First, Mr Tornya’s assertion that certain unidentified plans called for a total area of glass of 1264 square metres for the balustrading was explicitly rested upon the contents of exhibit “AGT 1”, but the debtor did not tender that exhibit before me.  Secondly, that those plans called for a total area of glass of 1264 square metres for the balustrading is contradicted by other evidence given by Mr Tornya, which makes it inherently improbable.  Mr Tornya, in the same affidavit, deposed to telling Mr McCluskey, either at the end of May, 1997 or the beginning of June, 1997, that the debtor wanted a price for “approximately 1,500 metres” of glass, at a time when the related company, of which Mr Tornya was managing director, had already been bound to supply the balustrading to Baulderstone for many months.  It is impossible for me to conceive that Mr Tornya’s request for a price for approximately 1500 metres of glass was not based upon detailed knowledge by him of the related company’s obligations under its subcontract with Baulderstone.  Finally, even if the mysterious plans did call for 1264 metres of glass, that does not prove that the creditor did not supply 1546 metres of glass.  What matters is not what those plans called for, but what quantity of glass the debtor actually ordered from the creditor.  That is a subject upon which Mr Tornya was surprisingly reticent in the paragraph from which I have quoted above.

48                  The upshot of all of the above is that the sum specified in the statutory demand should be reduced by the sums of $12,639.28 and $5,500, in part because I am satisfied that there is a genuine dispute as to those sums and in part because of a concession by the creditor.  As a result of a further concession by the creditor, it should also be reduced by the further sum of $221.62, said rather cryptically by Mr Chauhan in his affidavit to which I have referred above to have been written off by the creditor on “22 September 1998 [sic]” from its final invoice to the debtor.  Those three sums total $18,360.90.  I therefore make an order varying the creditor’s statutory demand to specify the sum of $79,317.80 and declare the demand to have had effect, as so varied, as from when the demand was served on the debtor.

49                  There remains only the matter of costs. Section 459N of the Law provides that the Court hearing an application under s 459G of the Law may make a costs order of a certain type in certain circumstances, which circumstances are not the present ones. I do not, however, take that provision as having been intended to imply that the Court has no power to make orders for costs in a s 459G application in circumstances other than those mentioned in s 459N.  Instead, I proceed on the basis that, in circumstances other than those mentioned in s 459N, the Court may exercise the general power to order costs conferred on it by subs 1335(2) of the Law.  In the present proceeding, I consider that the appropriate costs order, given the extent and circumstances of the debtor’s success in having the statutory demand varied, is that the debtor should pay four-fifths of the creditor’s costs.  As to the costs of the proceeding before the Registrar, if the power conferred by subs 1335(2) of the Law is not applicable, then the power conferred on the Court by subs 35A(6) of the Federal Court Act, which is to make such order(s) as it thinks fit with respect to the matter with respect to which the power was exercised by the Registrar, appears to me to be applicable.  In either event, I consider that the appropriate order is that the debtor should pay four-fifths of the creditor’s costs of the proceeding before the Registrar as well.

Associate

Dated:              21 April 1999