Case: Scanhill Pty Ltd v Century 21 Australasia Pty Ltd (1993) 47 FCR 451
Outcome: followed
This brings me to consider the claim made in the application filed on 21 December 2006 and in the supporting affidavit of Dr Chisholm sworn and filed on that date (the "first affidavit"). In this process it is necessary to bear in mind the strict requirements imposed by s 459G(3)(a) and (b). Those requirements must be understood in the context of Division 3 of Part 5.4. As Beazley J noted in Scanhill Pty Ltd v Century 21 Australasia Pty Ltd (1993) 47 FCR 451 at 454, Part 5.4 has its origins in the Corporate Law Reform Bill 1992 (Cth). The explanatory memorandum to that Bill makes it clear at [689] that a key purpose of Division 3 of Part 5.4 is to avoid technical arguments and to facilitate speedy resolution of disputes "by requiring debtor companies to raise genuine disputes (about, for example, whether a debt is owed) at an early stage". 37 Although not established to the standard expected at final trial, it can reasonably be assumed, given the nature of this application, that the dye supplied by the defendant in early 2005 is the dye that generated problems from the middle of 2005. Given the difficulties that arose with this dye, I am thus satisfied that the plaintiff's claim to have an offsetting claim raises "a serious question to be tried"; Scanhill 47 FCR at 467. The threshold that the plaintiff must cross "is not a high one"; Federico's Restaurant Pty Ltd v Warwick Entertainment Centre Pty Ltd (1995) 18 ACSR 702 at 706. I am satisfied that the plaintiff has done more than simply assert a claim and some basis for it without more; Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37 at 39. 51 In cross-examination of Dr Chisholm, Mr DeBuse made much of the fact that the only written correspondence describing the thickening problem is an email of 21 June 2004 from Dr Chisholm to Mr Choksi, a copy of which is annexed to Dr Chisholm's second affidavit, which describes the dye as "good except the layer of High viscosity which caused me big headache!" There is no record of any attempt made by Canpoint to recover the USD50,000 it lost through the thickening from the defendant, and it is not in dispute that the plaintiff continued to trade with the defendant following the incident. Dr Chisholm was quite emphatic that "many telephone conversations" had taken place in which the plaintiff had requested some discount from the defendant, but that the defendant refused, asserting it was prevented from offering such discounts by Indian law. Dr Chisholm further testified that he did not feel taking legal action to recover the debt was practical, and that the plaintiff refrained from doing so as it was attempting to "build up a relationship" with the defendant. Even if I were minded not to accept this evidence, "failure to complain at an earlier point of time, ... of itself is not sufficient to demonstrate that the claim made by the applicant is not genuine"; Scanhill 47 FCR at 468. 52 Dr Chisholm has attested that in his experience international companies require written confirmation that Direct Blue 218 is not used in paper production. It is his evidence that he was told that Pindo Delhi was making a claim against the plaintiff for USD350,000 for paper that had been returned because of the presence of Direct Blue 218. Annexed to his second affidavit is a letter dated 5 September 2006 on the letterhead of IndoAsia, the plaintiff's agents in Indonesia, asserting that they had been advised that Pindo Delhi planned a claim against the plaintiff for both the costs of the paper returned and loss of its export business. The plaintiff has not put forward any amount in relation to Pindo Delhi's anticipated claim for loss of business. 56 In his first affidavit, Dr Chisholm attests to a conversation with representatives of IndoAsia in which total sales to the Sinar Mas Group were said to be worth "USD500,000/year, with a potential for us to obtain sales of USD5 million". Although it is unclear from the affidavit whether these figures refer to sales of the plaintiff or of IndoAsia, it is clear from Dr Chisholm's report of the conversation in his second affidavit that the figures refer to IndoAsia. As noted above, annexure "F" to the first affidavit estimates the value of the plaintiff's business with the Sinar Mas Group as "USD1.0 million". Dr Chisholm also attests that he advised Mr Choksi that shipment of the wrong dye had damaged the plaintiff's reputation and endangered its business in Indonesia, which he valued at USD1.0 million/per year. Although this evidence was admitted only for a limited purpose, a strict approach to admissibility is not appropriate in these matters; see Scanhill 47 FCR at 460. Finally, annexure "O" to Dr Chisholm's second affidavit, a print-out from the plaintiff's book-keeping database, shows total sales to Pindo Mill of USD936,625.00 in 2004, and USD1,100,175.00 in 2005. 57 Accordingly, I am willing to accept that the plaintiff's business with Sinar Mas was worth approximately USD1 million per year. It is Dr Chisholm's evidence that Canpoint has not received any orders to supply dyes to Pindo Delhi in either 2006 or 2007, through IndoAsia or otherwise. There is no evidence relating to any sales to other parts of the Sinar Mas group. 63 Beazley J's observations in Scanhill 47 FCR at 464 are apposite: It must be remembered that s 459G requires that the supporting affidavit be filed and served within 21 days. This time period reflects the expeditious mode which the legislature has determined is to be the manner of staying the operation of a statutory demand. That is not to say, however, that the mere assertion of the amount of loss, or the amount of the claim, however based, is sufficient to satisfy the Court of the amount of the offsetting claim. One would normally expect that there would be reference to at least some primary material in the affidavit to enable the Court to have the requisite satisfaction for the purposes of s 459H. 64 It follows from the above that the plaintiff has a genuine claim against the defendant in the amount of USD404,400.00. 65 As noted above, the "admitted total" of the defendant company's debt for the purposes of s 459H is USD280,664.50. As I am satisfied that the plaintiff has an offsetting claim of USD404,400.00, there is an "offsetting total" in that amount. The offsetting total exceeds the admitted total by USD123,735.50 and accordingly the "substantiated amount" is less than the statutory minimum of $2,000 and the statutory demand must be set aside; s 459H(3).