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Supreme Court of South Australia |
Last Updated: 16 June 2006
SUPREME COURT OF SOUTH
AUSTRALIA
(Civil)
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CLIMAT AIR CONTROL & ENERGY CENTRES PTY LTD v CLIMATE TECHNOLOGIES PTY LTD
Judgment of Judge Withers a Master of the Supreme Court
Genuine offsetting claim.
Corporations Act 2001 ss 459G and 459H, referred to.
Genesis Management Services Pty Ltd v Soniclean Pty Ltd [2005] SASC 224; Ozone Manufacturing Pty Ltd v Deputy Commissioner of Taxation[2006] SASC 91
; Re Morris Catering (Australia) Pty Ltd (1993) 11 ACLC 919; Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37 ; Federico's Restaurant Pty Ltd v Warwick Entertainment Centre Pty Ltd (1995) 18 ACSR 702; D & S Group v O'Connor Investments and Ors (1997) 15 ACLC 1794; JJMMR Pty Ltd v LG International Corporation [2003] QCA 519; Energy Equity Corporation Ltd v Sinedie Pty Ltd [2001] WASCA 419; (2001) 166 FLR 179; Crawford Fitting Co and Others v Sydney Valve & Fittings Pty Ltd and Another (1988) 14 NSWLR 438, considered.
CLIMAT AIR CONTROL &
ENERGY CENTRES PTY LTD v CLIMATE TECHNOLOGIES PTY
LTD
[2006] SASC 166
1 JUDGE WITHERS. This is an application pursuant to Section 459G of the Corporations Act for an order setting aside a creditor’s statutory demand made by the defendant and dated 1 December 2005. In support of the application an affidavit of Robert Van Der Hoeven was filed on 22 December 2005. Further affidavits in support were filed by Mr Van Der Hoeven on 3 March 2006 and George Sotiriou on 2 March 2006. In opposition to the application an affidavit of Timothy O’Leary on behalf of the defendant was filed on 17 February 2006. 2 It was confirmed by plaintiff’s counsel at argument that the plaintiff does not seek to establish a genuine dispute in relation to the debt of $107,162.84 on which the statutory demand is based. Rather, the plaintiff asserts that it has an offsetting claim within the meaning of Section 459H of the Corporations Act for an amount in excess of the amount of the debt upon which the statutory demand was based and that it is therefore appropriate that an order should be made setting aside that demand. If there is no offsetting claim that meets the requirements of Section 459H then the plaintiff’s application should be dismissed. 3 Section 459G of the Corporations Act allows a company to apply to the Court for an order to set aside a statutory demand that has been served on it, which application must be made within 21 days of such service. Any supporting affidavit must be filed within the same period. Section 459H sets out the requirements for an offsetting claim. Those provisions of the Corporations Act are as follows:
SECTION 459G COMPANY MAY APPLY
459G(1) [Company may apply] A company may apply to the Court for an order setting aside a statutory demand served on the company.
459G(2) [Time limit] An application may only be made within 21 days after the demand is so served.
459G(3) [Affidavit and copy of application] An application is made in accordance with this section only if, within those 21 days:
(a) an affidavit supporting the application is filed with the Court; and
(b) a copy of the application, and a copy of the supporting affidavit, are served on the person who served the demand on the company.
SECTION 459H DETERMINATION OF APPLICATION WHERE THERE IS A DISPUTE OR OFFSETTING CLAIM
459H(1) [Court satisfied of dispute or offsetting claim] This section applies where, on an application under section 459G, the Court is satisfied of either or both of the following:
(a) that there is a genuine dispute between the company and the respondent about the existence or amount of a debt to which the demand relates;
(b) that the company has an offsetting claim.
459H(2) [Calculation of substantiated amount] The Court must calculate the substantiated amount of the demand in accordance with the formula:
Admitted total – Offsetting total
where:
admitted total means:
(a) the admitted amount of the debt; or
(b) the total of the respective admitted amounts of the debts;
as the case requires, to which the demand relates.
offsetting total means:
(a) if the Court is satisfied that the company has only one offsetting claim – the amount of that claim; or
(b) if the Court is satisfied that the company has 2 or more offsetting claims – the total of the amounts of those claims; or
(c) otherwise – a nil amount.
459H(3) [Substantiated amount less than statutory minimum] If the substantiated amount is less than the statutory minimum, the Court must, by order, set aside the demand.
459H(4) [Substantiated amount equal to or greater than statutory minimum] If the substantiated amount is at least as great as the statutory minimum, the Court may make an order:
(a) varying the demand as specified in the order; and
(b) declaring the demand to have had effect, as so varied, as from when the demand was served on the company.
459H(5) [Definitions] In this section:
admitted amount, in relation to a debt, means:
(a) if the Court is satisfied that there is a genuine dispute between the company and the respondent about the existence of the debt – a nil amount; or
(b) if the Court is satisfied that there is a genuine dispute between the company and the respondent about the amount of the debt – so much of that amount as the Court is satisfied is not the subject of such a dispute; or
(c) otherwise – the amount of the debt.
offsetting claim means a genuine claim that the company has against the respondent by way of counterclaim, set-off or cross-demand (even if it does not arise out of the same transaction or circumstances as a debt to which the demand relates).
respondent means the person who served the demand on the company.
459H(6) [Sec 459J] This section has effect subject to section 459J.
4 The law in relation to offsetting claims has been recently considered by this Court in Genesis Management Services Pty Ltd v Soniclean Pty Ltd [2005] SASC 224, and Ozone Manufacturing Pty Ltd v Deputy Commissioner of Taxation
It was not necessary for the Master to determine whether the alleged offsetting claim was likely to succeed. In the case of a disputed debt, the question is whether there is a genuine dispute, and in the case of an offsetting claim the question is whether there is a genuine claim.
5 Perry J in paragraph 46 then referred to Re Morris Catering (Australia) Pty Ltd (1993) 11 ACLC 919 per Thomas J at 922 and cited therefrom with approval:
Broadly speaking the Court is required to examine the claim, assess the undisputed parts of the debt that has been demanded, and deduct from it any offsetting claims of the debtor company. If the result is $2,000 or more, the Court has a discretion to vary the demand and to declare the varied demand to have had effect from the time when the original demand was served. It is possible to discern an intention that a company should pay the undisputed part of a demanded debt even if the demand may have been excessive, but that it should not be placed under pressure of being wound up with respect to any part of the debt that is genuinely disputed, or where there is any genuine contra-claim, whether or not it arises out of the same transaction as the debt to which the demand relates. ..
There is little doubt that Division 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 result of it) and to identify the genuine level of an offsetting claim (not the likely result of it).
6 His Honour noted with approval the words of Lockhart J in Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd:
... what appears clearly enough from all the judgments is that a standard of satisfaction which a court requires is not a particularly high one ...
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.
7 In paragraph 54 and referring to the approach of Lehane J in Federico’s Restaurant Pty Ltd v Warwick Entertainment Centre Pty Ltd, his Honour approved Lehane J’s conclusion that "... an offsetting claim the amount of which, at least arguably, exceeds the amount of the debt claimed in the statutory demand" is sufficient. 8 In considering his earlier reasons in D & S Group v O’Connor Investments and Ors, where he had found that the Court in an offsetting claim must be satisfied as to the total of that claim, Perry J said at para 52:
On reflection, that may be pitching the onus too high. There may be cases where it is evident that very substantial damages, clearly exceeding the admitted total within the meaning of s 459H(2), are the subject of a genuine offsetting claim, even although a figure, even a broad estimate, cannot be put on the offsetting claim.
9 In the Ozone Manufacturing case, a decision of the Full Court of 31 March 2006, Debelle J in considering the requirements for an offsetting claim said at paragraph 46:
... Thus, when deciding whether an offsetting claim exists, the test is whether the court is satisfied that there is a serious question to be tried that the person on whom the demand has been served has an offsetting claim: [authorities not cited], or that the claim is not frivolous or vexatious: [authorities not cited], or that it is not fictitious or merely colourable: [authorities not cited].
The test whether an offsetting claim exists is the same as for a genuine dispute, that is to say, the claim must be bona fide and truly exist in fact and that the grounds for alleging the existence of the dispute are real and not spurious, hypothetical, illusory or misconceived. The issue is whether the offsetting claim is bona fide, real and not spurious: Edge Technology per Santow J at [25].
I do not think that the test identified by Santow J imposes a more onerous task on the party disputing the statutory demand than the serious question test. The expression "good faith" means arguable on the basis of facts asserted with a sufficient particularity to enable the court to determine that the claim is not fanciful: [authorities not cited].
10 His Honour cited with approval the words of McPherson JA in JJMMR Pty Ltd v LG International Corporation [2003] QCA 519 at [18] where he said:
Anyone can make a claim to a right of setoff against a creditor. What the definition in s 459H(5) requires, however, is that it be "genuine". The same word in s 459H(1) has already elicited so many synonyms and shades of meaning that it will not help to add more. Its antithesis is to be seen in the word "artificial". The claim to set off against the debt demanded must not have been manufactured or got up simply for the purpose of defeating the demand made against the company. It must have an existence that is objectively demonstrable independently of the exigencies of the demand that evoked it.
Debelle J then said at paragraph 49:
The task for the court, therefore, is not to decide the issue on its merits but examine whether there is a genuine offsetting claim. If there is a genuine claim sufficiently quantified to give rise to an offsetting amount the demand must be offset: see s 459H(4) and Edge Technology at [55].
11 The essence of the defendant’s opposition to the plaintiff’s application is that the material filed by the plaintiff in support of its application did no more than assert the existence of a contract and assert the existence of a loss. There was either no material or, at best for the plaintiff, insufficient material put forward to support those assertions. Therefore the Court was not able to be satisfied that there was a genuine offsetting claim advanced supported by some evidence sufficient to dispel descriptions such as "artificial" or "vexatious". The defendant objected to the receipt by the Court of affidavit evidence based on belief in relation to some of the content of Mr Van Der Hoeven’s affidavits and the affidavit evidence of Mr Sotiriou where he expressed an opinion in the nature of an unqualified expert opinion. 12 It appears from the material filed that it is not contested that for some ten years the plaintiff and defendant had an ongoing business association. What is contested is whether or not that business association over ten years is evidence of a contract between the two parties or is simply a long ongoing annual or six monthly renewal of a distributorship arrangement. 13 The plaintiff is a retailer of airconditioning equipment. The defendant is a supplier of such equipment. Pursuant to their business arrangement the defendant provided airconditioning equipment to the plaintiff under the brand names of Bonaire and Vulcan on certain pricing terms and conditions that were agreed each year. It appears that there was a separate agreement reached each year in relation to the pricing terms and conditions for Bonaire ducted cooling equipment and in relation to the pricing terms and conditions for Vulcan heating equipment. In the middle of 2005 circumstances changed. The arrangement was not renewed. That cessation of the arrangement or non-renewal of the agreement gives rise to the dispute between the parties. 14 Mr Van Der Hoeven, who is a director of the plaintiff and authorised to swear an affidavit on its behalf, asserts that there was an ongoing retainer agreement between the plaintiff and the defendant for the plaintiff to distribute the defendant’s products. There was an exclusivity about that arrangement in that as part of the agreement the plaintiff was not able to sell ducted evaporative airconditioning for any other brand beyond that of Bonaire. It is accepted that terms and conditions about pricing, warranty and some other features were agreed on an annual basis. However, Mr Van Der Hoeven asserts that this business arrangement had been ongoing for ten years. He asserts that he, together with one other distributor, were the major distributors of this particular product of the defendant and that together they held a substantial share of the market in South Australia. 15 In any event there was a meeting between representatives of the plaintiff and Mr O’Leary representing the defendant on 30 August 2005 when what is described as the "2005/2006 Evaporative Cooling Proposal" was put by the defendant to the plaintiff – see RVDH7 to the affidavit of Mr Van Der Hoeven of 22 December 2005. Mr Van Der Hoeven asserts that the provision of this proposal and the discussion of arrangements for the sale of the defendant’s Bonaire and Celair airconditioning products was unusually late for the 2005/2006 years. He asserts that such discussions usually happened at least in a preliminary way in June and July of each year to enable various advertising orders to be placed. That is a matter of dispute with Mr O’Leary who asserts that it was normal to have the discussions after a dealer’s trip which usually meant they occurred at the end of August. The 2006 proposal describes the Bonaire cooling product range and the Celair cooling product range and then addresses the following topics: warranties, pricing, exclusivity, bulk order pricing, ducted EAC advertising allowance, 2005/2006 trip incentive, monthly promotions, and 2005/2006 volume incentive. The 2004/2005 proposal, Exhibit RVDH5 to the affidavit of Mr Van Der Hoeven of 22 December 2005, had dealt with a similar range of topics although that proposal did not include the item monthly promotions but did include an item Bonaire advertising campaign which referred to the distribution of sales leads through a particular telephone line. 16 In any event at the meeting on 30 August 2005 Mr O’Leary informed Mr Van Der Hoeven that the defendant had entered into an arrangement with Mannix Airconditioning for Mannix to distribute these products. Mr Van Der Hoeven attests that this caused him considerable concern as he asserted his company had previously been the primary distributor of this particular product range of the defendant and he was concerned that the South Australian market would not support two major distributors. Accordingly, this new information significantly affected the value of the proposal. Mr Van Der Hoeven asserts that this was the first occasion when he had been advised that Mannix had been appointed. It is agreed between the parties that there had been earlier occasions when Mr Van Der Hoeven had advised the defendant that if it moved to appoint Mannix as a distributor then the plaintiff would no longer retail their products. Some time was sought by Mr Van Der Hoeven to consider the proposal and a further meeting was set for 6 September 2005. At that meeting Mr Van Der Hoeven advised that he needed more time to consider the impact and the defendant agreed to extend the proposal to 9 September 2005 after which it would be withdrawn. During the period between 6 September 2005 and 9 September 2005 Mr Van Der Hoeven sought more time. The defendant withdrew the proposal on 9 September 2005. The effect of this was that the plaintiff would no longer be a distributor of the defendant’s products. 17 By a notice of claim given by the plaintiff’s solicitors on 26 October 2005 some five or six weeks before the issue of the statutory demand in this matter, the plaintiff’s solicitors asserted that there had been an ongoing retainer between the plaintiff and defendant. They noted that the term included exclusivity. They asserted that the annual meeting only related to pricing attributable to the next period and to warranties. They asserted that the plaintiff was a major distributor of the defendant’s products. They asserted that the defendant had breached a contract between the plaintiff and the defendant by terminating the arrangement without giving reasonable notice. It was argued that reasonable notice was implied into the arrangement as a matter of law. As a result of the unlawful termination the plaintiff had suffered damage and the plaintiff’s solicitors then sought some documentation from the defendant to enable the plaintiff to quantify its claim before it issued proceedings. This letter was described as a Rule 6A Notice under the Rules of Court. 18 A response to that Notice was forwarded by the solicitors for the defendant on 23 December 2005, some three weeks or so after the issue of the statutory demand and two days after the issue of these proceedings. In any event the response was within the two month period contemplated by Rule 6A.06. The defendant asserted that there was no ongoing retainer arrangement or ongoing contract. Rather the arrangements between the parties were a yearly arrangement and no more than that. There was no expectation by either party of any continuation of the arrangement beyond the year’s agreement. On the material provided it is arguable that the defendant’s position is really that the arrangement between the parties was a six monthly or seasonal arrangement, namely one arrangement each year in respect of cooling products and one arrangement each year in respect of heating products. The documents provided are described as proposals and do not have the appearance of a stand-alone commercial contract. The parties are not described. There is no termination period described. There is no duration of the contract described. There is no provision for resolution of disputes and many of the usual features of an ordinary commercial contract for the supply of product are absent. 19 A further affidavit was filed by Mr Van Der Hoeven on 3 March 2006. Counsel for the defendant referred to the decision of Wallwork J in Energy Equity Corporation Ltd v Sinedie Pty Ltd, a decision of the Full Court of the Supreme Court of Western Australia [2001] WASCA 419; (2001) 166 FLR 179. Counsel referred to paragraph 29 of Wallwork J’s decision where he said:
In my view it now seems to be accepted that an affidavit filed outside the 21-day period which raises a new ground or grounds to set aside a statutory demand (as opposed to an affidavit which expands on grounds in an earlier affidavit which has satisfied the threshold test) cannot be used in an application of this nature [a Section 459G application]. The Corporations Law operates throughout Australia and uniformity of approach is desirable.
20 I do not think the parties disagree on the law in this matter. That statement by Wallwork J is mirrored by Perry J’s comments in D & S Group v O’Connor Investments and Ors where he said:
It seems to be implicit in that observation and from the terms of s 459G(3) that if an affidavit is to be used in support of the application, it must be filed within the defined period of 21 days.
It seems to me then that the affidavit of Mr Savvas having been filed and served well after the expiration of the period of 21 days, insofar as it raises any ground offered in support of the application not identified in the affidavit of Mr Gerovasilis filed within time, it could not be taken into account in determining the application.
21 The affidavit of Mr Van Der Hoeven of 3 March 2006 responds to the affidavit of Mr O’Leary. Areas of dispute are apparent with Mr O’Leary asserting that it was the defendant’s practice to offer distributors a proposal in August/September of each year and Mr Van Der Hoeven asserting that meetings commenced in June or July each year. Mr Van Der Hoeven asserts that ordinarily the discussions as to product range and funding arrangement would be complete or substantially concluded in June or July of any given year so that advertising for the approaching summer season could be undertaken. Those funding arrangements also related to advertising. Again, Mr Van Der Hoeven repeats what he had asserted in his earlier affidavit, namely that in his view there was an ongoing retainer between Climate Technologies and Climat with annual discussion as to pricing and advertising in any given year. He says that had the option been open:
Climat would have preferred to stay with Climate Technologies given the summer season was approaching.
- see paragraph 6 of his affidavit filed
3 March 2006.
22 In support of the plaintiff’s position an affidavit was filed from George Sotiriou. In that affidavit filed 2 March 2006, Mr Sotiriou attests that he was employed by the defendant from 20 September 2002 to 6 September 2005 as a technical sales manager primarily responsible for the day-to-day contact between the defendant and its specialist dealers in South Australia. He says that the specialist dealers during his period were the plaintiff, Scotts Airconditioning Pty Ltd, Gasworks Group, J J Stevenson and Devilees. Mr Sotiriou in paragraphs 5 and 6 says:
5. Climate had retained Climat and Scotts as the principal Specialist Dealers for a number of years to retail the Products in the South Australian market. As specialist dealers they were entitled to benefits such as extended warranty conditions.
6. I recall that Climat and Scotts distributed some 50% to 60% of the Products in the South Australian market. Climat was the largest Specialist Dealer in South Australia.
23 While Mr Sotiriou is not in a position to opine on the legal position as to whether there was a retainer agreement between the plaintiff and the defendant, his comments express an understanding on his part from his observations as technical sales manager for the defendant. Mr Sotiriou supports the assertions of Mr Van Der Hoeven in relation to discussions about proposals for the summer season being concluded by June or at the latest July of each year. He confirms that some aspects, such as price lists, would be finalized in August/September. He confirms the evidence of Mr Van Der Hoeven that he had been endeavouring to meet with Mr O’Leary after the dealer trip during the latter half of August 2005. He says in paragraph 15:
15. In late August 2005 I attended a meeting with Mr O’Leary at the offices of Climate. We met with representatives of the Gas Work Group. At that meeting Mr O’Leary said to the representative words to the effect that Climat would no longer be selling the Bonaire product and there would be a change from Climat/Scotts to Mannix who would sell the Bonaire product.
24 Mr Sotiriou attested that his position was terminated 6 September 2005 by Mr O’Leary, who advised that Climat and Scotts "would no longer need to be looked after as they were taking on Mannix as their major dealer and another employee would service this account". On Mr Sotiriou’s evidence that conversation occurred some three days before the proposal in the hands of the plaintiff expired. 25 As earlier indicated the evidence on behalf of the defendant was contained in the affidavit of Mr O’Leary. In essence he attested that the arrangement between the plaintiff and the defendant was never more than an annual arrangement. New agreements were negotiated each year. There was no expectation on either side of an ongoing arrangement. He asserts in paragraph 7.4 of his affidavit that there were two separate agreements each year with "no expectation of a right of renewal from one season to the next". In essence he appears to be suggesting that there was never anything more than a seasonal contract between the plaintiff and the defendant. Mr O’Leary attests that it was not usual for him to talk to dealers in terms of pricing and proposals until after the dealers’ trip as otherwise dealers would discuss proposals amongst themselves. The proposal for 2005/2006 did not include leads from the telephone line which had been a feature of earlier proposals. 26 The onus to be satisfied by a plaintiff on a Section 459G application is not high. As Debelle J said in the Ozone Manufacturing case:
I do not think that the test identified by Santow J [in Edge Technology] imposes a more onerous task on the party disputing the statutory demand than the serious question test. The expression "good faith" means arguable on the basis of facts asserted with a sufficient particularity to enable the court to determine that the claim is not fanciful: ...
27 In my view the assertion by the plaintiff of an ongoing arrangement between plaintiff and defendant that can be categorised as a contract or retainer requiring reasonable notice is not fanciful. There is sufficient in the assertions of the plaintiff, in the lack within the proposal document of the ordinary features of a stand-alone contract, and in the assertions of Mr Sotiriou to make it arguable at the very least that there was an ongoing contract arrangement. It is a serious question to be tried – a contention seriously advanced. The plaintiff had already given notice of its contentions in the letter from its solicitors to the defendant of 26 October 2005. The claim was not an afterthought in response to the Notice of Demand but had been seriously advanced some five weeks or so before that demand was issued. 28 With an ongoing arrangement by way of retainer or contract or commercial agreement, the plaintiff asserts that a term that would be implied as a matter of law was that reasonable notice should be given of a termination of that agreement and that as a matter of fact such notice had not been given. In the matter of Crawford Fitting Co and Others v Sydney Valve & Fittings Pty Ltd and Another, Court of Appeal, (1988) 14 NSWLR 438, McHugh JA at page 444 in considering whether or not a presumption of permanency applied in the case of an indefinite commercial arrangement said:
In principle, the better view would seem to be that, although there is a presumption against implying a term that an agreement is terminable, ordinarily the nature of a commercial agreement will lead to the conclusion that the parties must have intended it to be terminable on notice. ...
Whether a contract is terminable on reasonable notice instead of at will also depends upon the existence of an implied term: ... That question is determined by the circumstances existing at the date of the contract: ... However, the reasonableness of the period of notice depends upon the circumstances existing when the notice is given: ...
When a contract is terminable on reasonable notice, the period of notice must be sufficiently long to enable the recipient to deploy his labour and equipment in alternative employment, to carry out his commitments, to bring current negotiations to fruition and to wind up the association in a businesslike manner: ...
29 In my view it is genuinely arguable and a serious question to be resolved that in light of the length of the business association of some ten years with bi-annual, seasonal pricing discussions, there should be implied into the arrangements between the plaintiff and defendant a requirement to give reasonable notice of the termination of that business arrangement. For the purpose of this application it is not necessary to go any further than that finding. Whether or not the plaintiff will succeed in the end analysis in establishing an ongoing relationship requiring reasonable notice of termination is a matter for another day. 30 The next question to be considered is whether or not the genuine offsetting claim in relation to damages arising out of the alleged breach of contract is at a level which arguably exceeds the amount of the debt claimed in the statutory demand. The only evidence about that is contained in the affidavit of Mr Van Der Hoeven of 22 December 2005 which he simply confirms in his affidavit filed 3 March 2006. He deals with loss in paragraphs 29 to 33 of his earlier affidavit. 31 The first claim relates to costs associated with a change of signage and refit. Such a cost would be associated with a proper termination on notice of a contract in any event and it is hard to see how these factors ought properly be taken into account. 32 However, in paragraphs 30 and 31 of his affidavit he refers to a downturn in sales since losing the Bonaire and Vulcan brands. He asserts that leads from the telephone line to which earlier reference had been made would ordinarily produce something in the nature of 450 leads per average summer season, of which 312 would result in sales. He calculated these sales would result in a gross return of $995,260.00 of which $288,600.39 would be profit. His affidavit was sworn on 21 December 2005. In paragraph 31 he asserted that from his knowledge of the books and records there had since July 2005 been a downturn in sales of some $446,000.00 with a corresponding reduction in gross profit of $129,000.00. He attributed this downturn significantly to the loss of leads from the 132288 line and it is roughly equivalent to half of a full summer season’s profit attributable to that line. 33 Mr Van Der Hoeven also asserted in paragraph 32 of his affidavit that the plaintiff had spent some $125,668.00 on advertising during the six months from January to June 2005. The advertising contained various references to the defendant’s products. He argued that in the 2004/2005 year seven per cent of sales revenue had been available to be spent advertising Bonaire evaporative cooling products. Mr Van Der Hoeven asserts that this equated to a payment of an amount in excess of $70,000.00 per year. He asserted that the defendant had had the benefit of the advertising yet deprived the plaintiff of the product. Therefore the defendant should account to the plaintiff for the cost of that advertising. Again, there can be significant arguments about this. In any event it seems to me that the impact of the termination will be better judged over an entire season for the sales of cooling product rather than half-way through such a season. There is sufficient material put forward to suggest that the offsetting claim to use the words of Lehane J in Federico’s Restaurant "at least arguably, exceeds the amount of the debt claimed in the statutory demand". Furthermore while supporting documentary evidence has not been produced, reference has been made to specific figures taken from the books and records of the plaintiff and the method of calculation of the loss has been explained. The material is more than "mere assertion". 34 Taking into account the foregoing it is my view that there is sufficient material produced to find that the plaintiff has an offsetting claim that is bona fide and truly exists in fact and that the grounds for alleging that offsetting claim are real and not spurious, hypothetical, illusory or misconceived – see paragraph 47 of Ozone Manufacturing. Further, there is sufficient material to find that the amount of that offsetting claim at least arguably exceeds the amount of the debt claimed in the statutory demand. For the foregoing reasons there will be an order that the statutory demand be set aside. The defendant is to pay the plaintiff’s costs of and incidental to the application. I certify fit for counsel
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