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Sunfrt Pty Ltd v Lithium Battery Storage Pty Ltd[2023] QSC 164

Sunfrt Pty Ltd v Lithium Battery Storage Pty Ltd[2023] QSC 164

SUPREME COURT OF QUEENSLAND

CITATION:

Sunfrt Pty Ltd v Lithium Battery Storage Pty Ltd  [2023] QSC 164

PARTIES:

SUNFRT PTY LTD (ACN 119 338 671) AS TRUSTEE FOR TYRRELL FAMILY TRUST NO 2 TRADING AS BAINBRIDGE TECHNOLOGIES

(applicant)

v

LITHIUM BATTERY STORAGE PTY LTD (ACN 608 590 503) TRADING AS LITHIUM BATTERY SYSTEMS

(respondent)

FILE NO/S:

6056/23

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

21 July 2023

DELIVERED AT:

Brisbane

HEARING DATE:

29 May 2023 and 7 June 2023

JUDGE:

Muir J

ORDER:

  1. The applicant is to bring in minutes of order reflecting these reasons.
  2. I will hear the parties as to costs.

CATCHWORDS:

CORPORATIONS – WINDING UP – WINDING UP IN INSOLVENCY – STATUTORY DEMAND – APPLICATION TO SET ASIDE DEMAND – OFFSETTING AND OTHER LIKE CLAIMS – GENERALLY – where applicant has been served with a statutory demand – where the applicant seeks to set aside a statutory demand issued by the respondent for liquidated debt due and owing – where the applicant contends that is has a number of genuine offsetting claims including a claim for unliquidated damages – where an offsetting claim requires the identification of a genuine cause of action as well as a claim advanced in good faith with evidentiary basis for the amount claimed – where the applicant contends that the offsetting claim is not precisely quantifiable but exceeds the amount of the debt owed to the respondent – where the applicant contends there is a genuine off-setting claim in excess of the amount of debt that is owed – whether the statutory demand should be set aside or varied

Corporations Act 2001 (Cth) s 459H

Britten – Norman Pty Ltd v Analysis and Technology Australia Pty Ltd (2013) 85 NSWLR 601; [2013] NSWCA 344

C & E Pty Ltd v Corrigan [2006] 2 Qd R 399

Chadwick Industries (South Cost) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37

Chase Manhattan Bank Australia Ltd v Oscty Pty Ltd (1995) 17 ACSR 128

Crontec Automotive Tooling Pty Ltd v Allsteel Australia Pty Ltd [2006] NSWSC 555

Edge Technology Pty Ltd v Lite-On Technology Corporation (2000) 34 ACSR 301

Eng Mee Young v Letchumanan [1980] AC 331

Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785

Fleur de Lys Pty Ltd v Jarrett (2004) 51 ACSR 238

Gabriel Hotels Pty Ltd v Corlita Pty Ltd [2010] NSWSC 826

Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452

Group Pty Ltd v Premier Drywall Pty Ltd [2006] NSWSC 1012.

JD Enterprises (Qld) Pty Ltd v Staedtler (Pacific) Pty Ltd [2014] QSC 237

John Shearer Ltd v Gehl Company [1995] FCA 1034; (1995) 60 FCR 136

Karimbla Construction Services Pty Ltd v Alliance Group Building Services Pty Ltd [2003] NSWSC 617

Ligon 158 Pty Ltd v Huber [2016] NSWCA 330

Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743

Metro Chatswood Pty Ltd v CRI Chatswood Pty Ltd [2010] NSWSC 1017

Ozone Manufacturing Pty Ltd v DCT (2006) 94 SASR 269; [2006] SASC 91

QNI Resources Pty Ltd v North Queensland Pipeline No 1 Pty Ltd [2017] QCA 297

Re Brink; Ex parte Commercial Banking Company of Sydney Ltd (1980) 30 ALR 433; (1980) 44 FLR 135

Sewmail (Australia) Pty Ltd v Booby Traps Pty Ltd (1997) 23 ACSR 339 

Viva 4 Enterprises Pty  Ltd v Octobay Pty Ltd [2011] QSC 281

WEC Pty Ltd v Cypriot Community of Queensland Inc [2002] QCA 506

COUNSEL:

MT de Waard for the applicant

SW Trewavas fand G M Gunn for the respondent

SOLICITORS:

Rostron Carlyle Rojas for the applicant

Mott and Associates for the respondent

  1. [1]
    The applicant applies for an order under s 459G of the Corporations Act 2001 (Cth) to set aside a creditor’s statutory demand for payment dated 28 April 2023 served upon it on 3 May 2023.[1] 
  2. [2]
    The statutory demand is for payment of a debt of $331,332.61 “being the total of the amounts of debts described in the Schedule.”[2] The Schedule attaches 21 invoices from the respondent for the supply of lithium batteries to the applicant between 9 December 2022 and 10 February 2023.  
  3. [3]
    Initially, the applicant disputed the existence of the debt and maintained that the issuing of the statutory demand was an abuse of process. But ultimately those issues resolved and the applicant conceded that there was no genuine dispute as to the existence of the debt [of $331,332.61].[3]  Various iterations of an offsetting claim against the respondent were also cast by the applicant.  But during the course of oral argument on the second return date of the application, counsel for the applicant conceded that the crux of the applicant’s claim is as follows:[4]

“….the loss of sales in relation to the allegations of the breach of this distribution agreement is really where the application lives or dies for today’s purposes.”

  1. [4]
    That was a practical concession made in light of the fact that it was accepted by the applicant that the total of the other set-off claims (arising from 71 batteries being defective and recalled) did not exceed the amount of the debt.
  2. [5]
    The real issue for my determination is therefore whether the applicant has a genuine offsetting “loss of sales or loss of profits” claim that exceeds the amount of the debt. But given how the application was argued, it remains necessary to address the other heads of set-off claimed. 
  3. [6]
    Before turning to the relevant factual background from which the set-off claims emerge it is instructive to set out the guiding legal principles. 

Relevant legal principles

  1. [7]
    The applicant’s case is that it has an offsetting claim which exceeds the amount of the debt.
  2. [8]
    The expression “offsetting claim” is defined in s 459H(5) as follows:

“…a genuine claim the company has against the respondent by way of counterclaim, set-off or cross-demand (even if it does not arise out of the same transaction or circumstances as a debt to which the demand relates).”

  1. [9]
    The counterclaim or set-off is not the reciprocal of the statutory demand debt and can exist independently. It is a means of offsetting the statutory demand debt with a genuine counterclaim or set-off.[5] The offsetting claim raised must be genuine in the sense of being authentic or bona fide.[6]  The expression ‘genuine dispute’ connotes a plausible contention requiring further investigation.[7]  But more than “implausible assertion” is required.[8] 
  2. [10]
    Unlike a debt that supports a statutory demand, an offsetting claim is not confined to debts that are due and payable.[9]   But the counterclaim, set-off or cross-demand must be something sounding in money,[10] that is, “[i]t must be in respect of a money demand, whether liquidated or unliquidated”.[11]  
  3. [11]
    The applicant submitted that once a genuine cause of action for unliquidated damages is shown by a company, the court is compelled to accept at face value the damages claimed by the plaintiff as the amount of the offsetting claim for the purpose of the calculation required by s 459H(2).[12]  I reject this submission because it misconstrues the authorities. For example, in Sewmail (Australia) Pty Ltd v Booby Traps Pty Ltd[13] a director’s unsubstantiated assertions of an offsetting claim without evidence were found by Burley J not to constitute a genuine offsetting claim for the following reasons:

“While I am satisfied, on the basis of the affidavit evidence filed by the plaintiff, that a genuine offsetting claim exists, I am not satisfied that the claim amounts to $50,000 or any other amount.  To support the genuineness of an offsetting claim amounting to $50,000, the plaintiff relies upon the unsubstantiated assertion of Mr Taylor, a director of the plaintiff, that the offsetting claim amounts to $50,000.  That in my view is not sufficient.  There needs to be evidence supporting quantum of the offsetting claim so that the Court may determine whether or not there is a genuine offsetting claim of a given amount.  It is not necessary that the evidence be such as might be advanced at a trial, but it is, in my view, necessary to adduce some evidence in that regard…In the absence of such evidence it is impossible for the Court to determine whether or not the statutory demand must be altered or set aside in accordance with the provisions of s 459H of the Law.”

Emphasis added.

  1. [12]
    An offsetting claim for the purpose of s 459H(1) and (2) requires more than just the identification of a genuine cause of action.[14]  It requires a claim on a cause of action advanced in good faith, for an amount claimed in good faith and with some evidentiary basis for the amount claimed. Good faith means “arguable on the basis of facts asserted with sufficient particularity to enable the Court to determine that the claim is not fanciful.”[15] The amount claimed does not necessarily have to be precisely quantifiable to the last dollar and cent but rather needs to be of a “fairly quantifiable or calculable amount.”[16]
  2. [13]
    The onus of establishing a genuine offsetting claim rests with the applicant. The standard of proof for the quantification of an offsetting claim has been described as  “plausible contention” as opposed to “balance of probabilities.”[17] The  standard of satisfaction is therefore not a particularly high one.[18]  The evidence need only show a “serious question to be tried” or an “issue deserving of a hearing” and need not conclusively prove the claim or be “incontrovertible or substantially non- contestable”.[19] But there must be a “plausible and coherent” basis for the claim which, despite aspects of uncertainty, can be seen to be more than the debt the subject of the statutory demand.[20] 
  3. [14]
    As Applegarth J relevantly observed in Viva 4 Enterprises Pty  Ltd v Octobay Pty Ltd [2011] QSC 281, the Court is not required to accept every statement in an affidavit that purports to raise a genuine dispute on its face without criticism, particularly if it is unequivocal, lacks precision, is inconsistent with other statements by the same deponent or is inherently improbable.[21]
  4. [15]
    Before turning to the applicant’s various claim(s) for a set-off it is necessary to outline  what are said to be the accepted or agreed facts for the purpose of this application.

Relevant  factual background.

  1. [16]
    The applicant is a retailer of battery and power products to the automotive and marine industries. The respondent is a manufacturer and supplier of battery products. The parties commenced discussions in early 2020 to work together in the supply and sale of battery systems. On 7 July 2021, the applicant and respondent entered into a written distribution agreement by which the applicant is said to have obtained the exclusive rights to sell the respondent’s lithium battery products in Australia. The respondent’s evidence and submissions initially contested the validity and enforceability of this  agreement. But subsequently it conceded that for the purposes of this application, the court should proceed on the basis that there is a valid and enforceable distribution agreement in place between the parties. 
  2. [17]
    Initially the parties enjoyed a successful and harmonious commercial relationship, with the respondent selling a number of battery products to the applicant, including 12, 24 and 26 volt lithium batteries. But then in October 2021, the applicant started receiving complaints in relation to the 24-volt and 36-volt lithium batteries on-sold by it. On 14 April 2022, the Australian Securities and Investments Commission  (ACCC) issued a product safety recall in relation to the 24-volt and 36-volt lithium batteries. Of the approximate 7,517 battery products delivered to the applicant over the last three years, 71 (or 72) batteries sold between 9 July 2020 and February 2022 were subject to this recall notice.[22]
  3. [18]
    The applicant continued to order about 2,408 units of batteries from the respondent  after the recall notice – up until about 21 February 2023, when the respondent declined to continue supplying battery products due to the outstanding accounts the subject of the statutory demand.
  4. [19]
    The applicant was served with the demand on 3 May 2023. The invoices attached to the affidavit accompanying the statutory demand relate predominantly to the 12-volt batteries. The respondent has not received a warranty claim from the applicant on any of the batteries that are subject of the statutory demand. This is not surprising as it was only the 24-volt and 36-volt batteries that were the subject of the product safety recall from the ACCC.
  5. [20]
    It is against this general background that the applicant contends that it has offsetting claims that total “at least $378,890.79.”[23]

Applicant’s offsetting claims

  1. [21]
    Seven distinct offsetting claims were raised by the applicant during the course of the application. These claims totalled over $3M under the following categories of loss:
  1. (a)
     

Loss of profits for defective batteries

$57,750.02

  1. (b)
     

Two lots of freight company charges

$5,704.92

  1. (c)
     

Refunds and credits

$55,052.52

  1. (d)
     

Loss of future profits

$127,228.94

  1. (f)
     

Cost price of defective batteries

$149,919

  1. (g)
     

Staff costs

$65,959.00

  1. (h)
     

Loss of sales for breach of the distribution agreement batteries

$2,073,564.37

  1. [22]
    It is useful to address each of the smaller set-off claims (which arise from the defective and recalled batteries) [20(a) to (g)] before turning to the $2.7 million claim for loss of sales for breach of the distribution agreement [20(h)].

Loss of profits due to defective batteries. 

  1. [23]
    The applicant initially claimed an entitlement to a set-off of $57,750.02 for lost profits it would have realised if the forty-eight 24-volt batteries and the twenty-four 36-volt batteries were not defective. This claim was underpinned by the evidence from Mr Tyrrell that the applicant paid $149,919.00 (inc GST) for these batteries and the forty-one 12-volt models, and incurred freight costs of $5,286.09. The total of these costs was then deducted from the amount of $212,955.11 in total sales revenue received for the 113 batteries.[24]  On the second return date counsel for the applicant conceded that this calculation was wrong as it was premised on 113 batteries (and not the 71 or 72 that were recalled).  
  2. [24]
    Counsel for the applicant then submitted that the quantum of this claim was in fact $36,285.41. This figure was based on 71 batteries being defective and was said to be 62.83% of the previous claim (of $57,750.02).
  1. [25]
    This claim, in my view, is a spurious one based on speculative and unsubstantiated assertion of an unrealised loss for three reasons:
    1. (a)
      First, a coherent legal basis underpinning this claim is not apparent from the evidence or the submissions. For example the amount now claimed appears to be premised on an unrealised and unreasonable assumption that no warranty will be honoured by the respondent. Yet the uncontroversial evidence is that the 71 or 72 batteries that were recalled were provided to the respondent to repair and replace;[25]    
    2. (b)
      Second, a clear basis for calculating the actual quantum of this claim was not advanced during the hearing with counsel for the applicant submitting that “[i]t ultimately probably doesn’t matter because the final arithmetic of this will not get my client over the line”;[26] and
    3. (c)
      Third, the claim is a hypothetical one and regardless, I am not persuaded was in existence at the time of application.[27]   

Freight charges (two claims)

  1. [26]
    Freight charges of $2,852.46 are conceded by the respondent as a genuine set-off for the purpose of this application. That is a reasonable concession that I accept. The applicant’s other claim of $2,852.46 for freight charges is not substantiated and appears to be a double up. I am not satisfied on the evidence (or convinced by the applicant’s submissions) that the second amount claimed for freight charges is a genuine set-off amount.

Refunds and credits

  1. [27]
    Mr Tyrell’s most recent affidavit particularises the cost of $55,052.52 as the amount of “refund credits and diagnosis” said to have been incurred by the applicant as a result of the defective batteries.
  2. [28]
    The respondent conceded that an amount of $35,376.00 is supported by credit notes or bank transfers. This is a reasonable concession which I accept.
  3. [29]
    This is not the trial of the matter and it is not necessary for the applicant to adduce its best evidence or all of its evidence. But I am not satisfied that having been afforded the chance to substantiate the claim beyond mere assertion that the applicant has otherwise established a genuine off-setting claim as to the balance for two reasons:
    1. (a)
      First, the balance of the claim is speculative and underpinned by unknown items; and
    2. (b)
      Second, a plausible and logical explanation as to why the speculation as to the balance is not reliable is found in the respondent’s evidence that it replaced or repaired a number of the batteries directly with the customer.    

Loss of future profits

  1. [30]
    The applicant’s supplementary written submission maintained that the applicant had a claim for lost future profits (arising from the defective batteries) in the sum of $127,229.94 due to a loss of sales from April 2022 to March 2023. This claim was said to be underpinned by the further evidence of Mr Tyrrell. But counsel for the applicant conceded during oral addresses that such a claim could not be sustained as a genuine one. I accept this concession. This claim is not supported by any evidence such as sales figures, there is no evidence of how the claim is calculated; and the applicant has not demonstrated any link between this claim and any act or omissions of the respondent.
  2. [31]
    The maintaining of this claim, together with other claims I have identified elsewhere in the reasons as replete with erroneous methodology, exemplifies the applicant’s desperation to find sufficient set-off numbers. It supports my overall conclusion that leaving aside the small amounts conceded by the respondent, the applicant’s claim to set-off claims in excess of the debt are not genuine.    

Staff costs

  1. [32]
    The applicant alleges that it has incurred internal staffing costs of $65,959.00 due to the respondent’s supply of defective batteries. In support of this claim it adduced evidence of its employees, their annual salaries, their estimated percentage of time spent in dealing with customers and defective batteries and applied a cost on an annualised basis (based upon the arithmetic of the percentage of time spent in relation to their annual salary).
  2. [33]
    This claim is a spurious one for two reasons:
    1. (a)
      First, the claim is obviously inflated. For example, the applicant identified its highest wage earner as spending 70% of his time over the period of a year dealing with deficit batteries (despite there only being 71 or 72 batteries out of about 7,517 battery products delivered to the applicant over the previous three years); and other staff members spending between 10% and 40% of their annual time dealing with purported defective batteries; and
    2. (b)
      Secondly, as a matter of common sense it is not clear why these staff costs are not included in the applicant’s fixed costs – and in that sense I accept the respondent’s submission that this is an obvious attempt by the applicant to “double dip”.
  3. [34]
    I am therefore not satisfied that the amount claimed by the applicant for staff costs is a genuine set-off amount. 

Offsetting claim [of $149, 919.00]

  1. [35]
    The affidavit material filed on behalf of the applicant asserted a claim for  $149,919.00 being the cost of the 113 batteries the applicant  purchased from the respondent that were subject to the ACCC product recall notice. This claim was maintained in both sets of written submissions from the applicant. But during the second hearing, counsel for the applicant conceded that the quantum of this claim was wrong and that the claim was in fact one for $94,194.10 taking into account the fact that only 71 batteries were recalled. 
  2. [36]
    I reject the applicant’s claim of a set-off for this sum or any other amount under this heading is a genuine one for four reasons:
    1. (a)
      First, the basis of such an entitlement was not cogently articulated in either the evidence or developed in the submissions;
    2. (b)
      Second, this claim appears to be one that may exist in the future (for example if the batteries are not covered under warranty);
    3. (c)
      Third, such a claim appears to be in direct conflict with the claim for refunds and credits discussed under that heading above; and
    4. (d)
      Fourth, the claim is confusing and appears to conflict with the claim for loss of profits arising from the defective batteries. That claim was premised on the input costs being deducted – but then under this head, those actual costs are said to be a valid but separate claim.  In that sense this claim is double dipping.

Conclusion in relation to the smaller set-off claims.

  1. [37]
    Apart from the amounts totalling $38,228.46, which were conceded by the respondent as being genuine (potential) off-setting claims, I am not satisfied that the applicant has overcome the low threshold requirement of satisfying me that any claims said to arise as a result of the defective batteries are genuine offsetting claims. My findings on these claims are generally based on the inadequacy of the evidence and the lack of bona fides, cogency or reasoning behind the claims. During the course of argument, Counsel for the applicant conceded that none of these claims were his best points because they didn’t get the applicant across the line. My findings are therefore consistent with the real focus in the application being on the applicant’s claim in excess of the debt.
  2. [38]
    Turning now to turn to that claim.

Loss of sales of over $2 million

  1. [39]
    The applicant’s primary contention was[28] that it has an offsetting claim against the respondent for “loss of sales” in the sum of $2,073,564.37 for breach of the exclusivity clause in the distribution agreement.  The breach is said to arise because the respondent granted other parties rights to distribute its products in Victoria.
  2. [40]
    For the purpose of this application, the respondent accepted the breach. But it submitted that the court could not be satisfied that the claim is a bona fide claim or that the quantum of the claim is in excess of the debt.
  3. [41]
    The claim for over $2 million was premised on the gross loss of sales in Victoria from 1 July 2022 to May 2023, being $2,073,564.37.  This figure is extracted from an interrogation of two single page undated excel spreadsheets in evidence.[29] One sets out the monthly sales for each State in the financial year ending June 2022. Relevantly the total sales in Victoria for that year are stated to be $2,405,765.23. The other spreadsheet does not set out the monthly figures but simply shows the total sales to date (apparently as at May 2023) for each State.  Relevantly, the sales figure for Victoria to May 2023 is $332,200.86.[30] The claim for loss of sales was therefore premised on the difference in these two amounts.[31] The reasoning behind the applicant’s claim is that the drop in sales is causally linked to the respondent having supplied battery products to other distributors in Victoria.
  4. [42]
    The evidence from Mr Tyrrell about this claim is as follows:[32]

“48. In or around June 2022, at a meeting in the Applicant’s boardroom, I confronted the director of the Respondent, Chris, about the Respondent selling to a direct competitor, in breach of the Distribution Agreement.  Chris admitted to me that the Respondent was selling lithium batteries to Federal Batteries, and he said that this was because Federal Batteries were only selling them in Melbourne Victoria, and that the Respondent was selling to them at a higher price than he was selling batteries to the Applicant.

49. I expressed my disagreement with this and explained that the Applicant sells the lithium batteries to customers in Melbourne Victoria, in both online sales and by a contracted sales representative, and in fact, the state with the most sales in the 2022 financial year (approximately $2,405,765.23) was Victoria.  The Respondent was aware that the Applicant sold lithium batteries that were the subject of the Distribution Agreement in Victoria.  I asked Chris to leave the meeting after this.

50. Around this time, the sales in Victoria had started to decrease, which I attributed to being because of the covid lockdowns, but later realised that was most likely because the Respondent was selling to Federal Batteries, a direct competitor.

51. The Applicant has lost the profit that it would have made if the Respondent had not breached the exclusivity clause in the Distribution Agreement, and that amount can be quantified by the Respondent disclosing its sales records to other competitors in Australia such as Federal Batteries.”

(Emphasis added)

  1. [43]
    In his later evidence, Mr Tyrrell also stated that “the only feasible explanation [for the drop in sales in Victoria] is the “sales by the respondent of products to the competitor”; and that “the applicant will seek damages for the lost profit on such sales in further proceedings to be commenced.”[33]
  2. [44]
    At first blush it might be thought that given that a breach of the distribution agreement has been conceded it necessarily follows that there is a plausible contention requiring further investigation sufficient to establish a genuine off-setting claim.[34] But this view must be measured by the requirement that the set-off claim must be a plausible and coherent one, made in good faith and made with sufficient particularity to enable the court to quantify or calculate an amount that is not fanciful.[35]
  3. [45]
    The evidence establishing a plausible offsetting claim need not be precise but it must be sufficient to at least enable the court to carry out the calculation required to determine that the scope of the offsetting claim, which if accepted, reduces the debt to less than the statutory minimum of $2,000.[36] The court must consider all of the circumstances emerging from the evidence in determining whether the set-off is propounded in good faith and is not one apparently constructed in response to the pressure of being served with the statutory demand.[37]
  4. [46]
    With these principles in mind and having considered the evidence and submissions, I am not satisfied that the applicant has satisfied the onus in this case for the following five reasons:
    1. (a)
      First, a plain reading of the spreadsheets does not support the applicant’s case.  For example:
      1. The monthly sales figures in Victoria had dropped prior to June 2022 (contrary to Mr Tyrrell’s contention above); and
      2. Sales had dropped in nearly all of the states over the preceding two years. For example, the total sales in Queensland for the year ending June 2022 was some $1.4 million and in the year to date [May 2023] it was only $292,604.24. 
    2. (b)
      Second, the classification for the claim as one for loss of profits was entirely misconceived from its inception. During the course of the oral submissions before me it became apparent that the claim was one for loss of profits – not sales. With the applicant’s counsel conceding this and that the claim did not take into account any input or expense costs;
    3. (c)
      Third, the evidence supporting such a large claim was lacking in particularity. The second spreadsheet was devoid of detail and more crucially there was no evidence of the expenses, or input costs that might assist in even a basic or rough attempt to make an assessment of the value of the claim for loss of profits. This might be thought to be explained by the relatively short time allowed under s. 459G(2) for the filing of affidavit material in support of an application to set aside a demand – which of course “militates against the presentation of the fullest and best evidence in some cases.”[38] But in the present case it cannot be overlooked that the application was adjourned for over a week to allow the applicant to adduce further evidence in support of its set-off claims (that had been validly raised within the 21 day time period);[39] 
    4. (d)
      Fourth, upon the realisation of the error in the articulation of the claim, the applicant’s claim morphed into one for $562,317.49 for loss of profits. These figures were based on a profit margin 27.22% extracted (on the spot) from the figures the applicant relied upon to underpin the loss of profits from the defective batteries claim. The claim does not need to be calculated to the last dollar, but it is artificial to calculate a potential claim for loss of profits for breach of the distribution agreement based on a rough estimate of the percentage profit margin from the sale of two different products – in two different circumstances; and
    5. (e)
      Fifth, the applicant failed to identify a proper legal basis for a quantum loss of sales claim in excess of $2 million nor a sufficient evidentiary basis to establish a calculable claim for loss of profits – let alone one in excess of the debt. Any attempt by the court to do so now would be entirely speculative – it would literally involve plucking a figure from the air.[40]
  5. [47]
    The evidence underpinning the applicant’s claim for a set-off for breach of the distribution agreement is devoid of any real detail and is insufficient. In the context of this case (including my earlier findings in relation to the other six claims discussed under each of their headings above), I am satisfied this claim has been constructed in response to the pressure of being served with the statutory demand. In these circumstances there is no plausible contention requiring further investigation. 
  6. [48]
    I therefore find that the applicant does not have a genuine offsetting claim under this heading.

Conclusion

  1. [49]
    The applicant has demonstrated a genuine offsetting claim for the sum of $38,228.46 The statutory demand is varied by this amount.[41] The applicant has failed to demonstrate that there is a genuine offsetting claim as to the balance. 
  2. [50]
    The applicant is to bring in minutes of order reflecting these reasons. I will hear the parties as to costs.

Footnotes

[1]  The application was first heard in the applications list on 29 May 2023 but at the end of a two hour hearing, the application was adjourned (with an order that the applicant pay the respondent’s costs thrown away) to allow the applicant to adduce further evidence as to its alleged offsetting claim. That evidence was subsequently filed and the application was ventilated further before me on 7 June 2023.

[2]  The statutory demand  is pages 10 to 38 of the exhibits to the Macdonald affidavit filed 29 May 2023.

[3]  This concession is a reasonable one as the affidavit material filed by the applicant within the mandatory 21-day period did not raise any factual basis for this assertion such that any attempt to raise it later would have offended the principle in Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452 (the principle is commonly referred to as the Graywinter Principle).

[4]  T2-5, lines 17 to 23.

[5] Edge Technology Pty Ltd v Lite-On Technology Corporation (2000) 34 ACSR 301 at 306 per Santow J.

[6] John Shearer Ltd v Gehl Company [1995] FCA 1034; (1995) 60 FCR 136 at 139.

[7] Edge Technology Pty Ltd v Lite-On Technology Corporation (2000) 34 ACSR 301 at 306 per Santow J.

[8] WEC Pty Ltd v Cypriot Community of Queensland Inc [2002] QCA 506 at [11].

[9] Fleur de Lys Pty Ltd v Jarrett (2004) 51 ACSR 238 at [30] per Hely J.

[10] Chase Manhattan Bank Australia Ltd v Oscty Pty Ltd (1995) 17 ACSR 128 per Lindgren J at 135; See also Ozone Manufacturing Pty Ltd v DCT (2006) 94 SASR 269; [2006] SASC 91 at [45] per Debelle J, Besanko and Layton JJ agreeing. CCD Group Pty Ltd v Premier Drywall Pty Ltd [2006] NSWSC 1012.

[11] Re Brink; Ex parte Commercial Banking Company of Sydney Ltd (1980) 30 ALR 433 at 436; (1980) 44 FLR 135 at 138 per Lockhart J.

[12]  Applicant’s submission dated 29 May 2023 at para 25 with reference to Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743 at [17] per Palmer J; but cf applicant’s supplementary submissions at paragraphs 4 to 6.

[13]  (1997) 23 ACSR 339.

[14] Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743 at [17] per Palmer J. The applicant’s submissions of 29 May 2023 at [25] appear to have misconstrued the passage at paragraph 17.  

[15] Macleay Nominees at [18].

[16] Metro Chatswood Pty Ltd v CRI Chatswood Pty Ltd [2010] NSWSC 1017 at [13] per Barrett J.

[17] Crontec Automotive Tooling Pty Ltd v Allsteel Australia Pty Ltd [2006] NSWSC 555 at [34].

[18] Chadwick Industries (South Cost) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37 at 39 per Lockhart J; C & E Pty Ltd v Corrigan [2006] 2 Qd R 399 at 404 per Keane JA. 

[19] Ligon at [9].

[20] Karimbla Construction Services Pty Ltd v Alliance Group Building Services Pty Ltd [2000] NSWSC 617 at [28].

[21] Viva 4 Enterprises Pty  Ltd v Octobay Pty Ltd [2011] QSC 281 at [16]; with reference to Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 787 citing Eng Mee Young v Letchumanan [1980] AC 331 at 341.

[22]  The respondent’s evidence is 71 batteries were recalled. The applicant asserts that 72 were recalled. Given the way the case was run by the applicant, nothing turns on this factual dispute.   

[23]  Second affidavit of Tyrrell at [7].

[24]  Third affidavit of Tyrrell at [8] to [13].

[25]  There is a factual issue on the material as to whether all batteries have in fact been repaired and replaced – but given the way the off-set claims for the defective batteries were articulated nothing turns on this factual divergence.

[26]  T2-14, lines 11 to 16.

[27] NT Beverages Group Pty Ltd v PT Bromo Tirta Lestari [2017] FCA 755 at [19].

[28]  The word “was” is used because both the cause of action and the quantum changed during the course of the oral hearing on the second return date.

[29]  Exhibit M-4 to first Tyrrell affidavit.

[30]  It was not entirely clear from the first affidavit (MT-4 to Tyrrell first affidavit) but the figures were submitted to be “as at May 2023”.

[31]  The applicant also submitted that as the distribution agreement is in operation until 7 July 2024, it  has an arguable claim for lost sales (in the amount of $2.4M) for the following year. Given my findings about the claim for loss of sales or loss of profits for the first year not being a genuine one, it follows that I do not accept this submission. Otherwise this claim is a speculative one premised on potential future breaches and therefore not in existence at the time of the hearing.

[32]  First affidavit of Tyrrell at [48] to [51].

[33]  Third Tyrrell affidavit at [41] and [42].

[34]          QNI Resources Pty Ltd v North Queensland Pipeline No 1 Pty Ltd [2017] QCA 297 at [20].

[35]          See the discussion of the relevant authorities at [11] to [14] of these Reasons.

[36] JD Enterprises (Qld) Pty Ltd v Staedtler (Pacific) Pty Ltd [2014] QSC 237 at [22] per McMeekin J.

[37] Ligon 158 Pty Ltd v Huber [2016] NSWCA 330 at [10].

[38] Ligon 158 Pty Ltd v Huber [2016] NSWCA 330 at [9] with reference to Britten - Norman Pty Ltd v Analysis and Technology Australia Pty Ltd (2013) 85 NSWLR 601; [2013] NSWCA 344 at [30] – [31] and [39] –[55].

[39]  That is, those claims that did not offend the Graywinter Principle.

[40]        The applicant submitted that it is impossible, in the absence of third-party disclosure, to know with any accuracy the actual loss suffered by the applicant. But I reject this submission as it overlooks that the actual loss does not need to be substantiated rather there needs to be a fairly quantifiable or calculable amount. Unidentified third-party disclosure is not necessary for this task.

[41]  Section 459H(2) and (4).

Close

Editorial Notes

  • Published Case Name:

    Sunfrt Pty Ltd v Lithium Battery Storage Pty Ltd

  • Shortened Case Name:

    Sunfrt Pty Ltd v Lithium Battery Storage Pty Ltd

  • MNC:

    [2023] QSC 164

  • Court:

    QSC

  • Judge(s):

    Muir J

  • Date:

    21 Jul 2023

  • White Star Case:

    Yes

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

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