AMD Resources Ltd v TRS Management Pty Ltd

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

CORPORATIONS LIST

S ECI 2018 02816

IN THE MATTER of AMD RESOURCES LIMITED (ACN 602 696 873)

AMD RESOURCES LIMITED (ACN 602 696 873)	Plaintiff
v
TRS MANAGEMENT PTY LTD (ACN 616 282 814)	Defendant

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JUDGE:	Randall AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	18 March 2019
DATE OF JUDGMENT:	26 April 2021
CASE MAY BE CITED AS:	AMD Resources Ltd v TRS Management Pty Ltd
MEDIUM NEUTRAL CITATION:	[2021] VSC 202

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CORPORATIONS – Corporations Act 2001 (Cth) – Application to set aside a statutory demand pursuant to s 459G – Whether the statutory demand ought to be set aside for some other reason – s 459J(1)(b) – Whether debt is described in the affidavit accompanying the statutory demand adequately or at all – Whether the failure to specify adequately or at all is a formal or technical defect to which r 1.7(1) of the Supreme Court (Corporations) Rules 2013 (Vic) applies – Whether an invoice is a debt – Whether there is a genuine dispute as to existence of the debt – Whether conduct constitutes an admission as to the debt – Whether conduct constitutes a promissory estoppel by way of representation – Whether there is a genuine dispute that a debt is owed.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Ms MJ Harris	LL Gold Lawyers
For the Defendant	Mr E Batrouney	Andrew Woolfe & Co

TABLE OF CONTENTS

Some other reason under s 459J(1)(b)............................................................................................. 1

The plaintiff’s submissions.......................................................................................................... 1
The defendant’s submissions...................................................................................................... 3
Consideration................................................................................................................................ 3
Supreme Court (Corporations) Rules 2013 (Vic)............................................................ 9
Circumstances that have been considered under s 459J(1)(b).................................... 10
Nature of the debt.............................................................................................................. 13
Application to this proceeding........................................................................................ 17

Genuine dispute............................................................................................................................... 19

Background.................................................................................................................................. 19
The submissions.......................................................................................................................... 20
The plaintiff’s written submissions................................................................................. 20
The defendant’s written submissions............................................................................. 21
Oral submissions............................................................................................................... 22

Consideration.............................................................................................................................. 26
Acknowledgement of debt............................................................................................... 37
Purchase orders.................................................................................................................. 38

Conclusion......................................................................................................................................... 40

Orders................................................................................................................................................. 40

HIS HONOUR:

This is an application to set aside a statutory demand dated 28 November 2018 and served by the defendant, TRS Management Pty Ltd (‘TRS’). The statutory demand sought payment of the sum of $29,787.45 from the plaintiff, AMD Resources Limited (‘AMD’). The schedule to the statutory demand described the debts as being due pursuant to three invoices respectively dated 1 July 2018, 1 September 2018 and 10 October 2018. The affidavit accompanying the statutory demand was sworn by Mr Perkes, a director of the defendant.

The plaintiff contends that the statutory demand ought to be set aside by reason of:

(a) there is a genuine dispute; or

(b) there are several grounds upon which the statutory demand should be set aside pursuant to either s 459J(1)(a) or (b) of the Corporations Act 2001 (Cth) (‘the Act’).

Some other reason under s 459J(1)(b)
The plaintiff’s submissions

AMD contends that the affidavit accompanying the statutory demand did not comply with s 459E(3)(b) of the Act as it did not comply with the court rules. Rule 5.2 of the Supreme Court (Corporations) Rules 2013 (Vic) (‘Corporations Rules’) relevantly provides that the affidavit accompanying a statutory demand must ‘be in accordance with Form 7 and state the matters mentioned in that Form’.

AMD submitted that the affidavit accompanying the statutory demand did not adhere to Form 7 as:

(a) the affidavit accompanying did not sufficiently state the nature of the debt relied upon as required by Form 7;

(b) the affidavit accompanying included in paragraph 1 the words ‘named in the statutory demand, which this affidavit accompanies’. It was put that the words were in excess of the requirements of Form 7; and

(c) paragraph 1 of the affidavit accompanying refers to ‘a debt’ in the singular without specifying the quantum of the same. Paragraph 4 of the affidavit accompanying sets out: ‘[t]he total of $29,787.45 being the total of the amounts of the debts specified in the accompanying statutory demand is due and payable by the [AMD]’. AMD submitted that even if the ‘debt’ referred to in paragraph 1 could include the plural, the affidavit accompanying was defective in that paragraph 4 did not refer back to paragraph 1 as required by adherence to Form 7.

AMD also contended that the statutory demand is itself defective because:

(a) the claimed money did not become due and payable simply because AMD issued a purchase order on receipt of any document titled ‘tax invoice’ from TRS. I have taken that submission and during the course of argument took that submission to be directed at whether there was a genuine dispute rather than a defect in the demand or the affidavit accompanying; and

(b) the statutory demand fails to unambiguously specify the debt(s) on which the demand is based. The gravamen of the submission is that there had been a previous tax invoice numbered 00015, dated 1 June 2018 in the sum of $15,557.85, and that TRS is seeking payment for the 1 July 2018 invoice of the same number for the sum of $10,060.05. As the schedule to the statutory demand sets out the three amounts comprising of the total debt referred to in the three specified invoices, I find it is clear that AMD was ‘on notice in an unambiguous way’[1] of the amount sought to be recovered.

[1]Main Camp v Australian Rural (2002) 20 ACLC 726, 732 [23] (Barrett J) (‘Main Camp’).

AMD also sought to set aside the statutory demand as it contended it was an abuse of process. However, the grounds set out under this heading are merely those repeated in the genuine dispute grounds and further contentions which are wholly unsupported. That is, TRS used the statutory demand process to put pressure on the plaintiff to complete payment of the debt, and has allowed itself to be used as a commercial vehicle to advance Kidston North’s real ambition to take the joint venture’s confidential information by stealth and AMD’s assets at a fire sale from a liquidator. I am dismissive of each of the grounds relied upon to constitute an abuse of process. Firstly, in the ordinary course, service of a statutory demand seeks payment of the amount alleged to be due or, in the absence of payment, is used to deem insolvency. AMD has not demonstrated in this proceeding that service of a statutory demand was for any other purpose other than what occurs in the ordinary course. Secondly, the second ground is not made out other than by contention.

The defendant’s submissions

TRS acknowledges that there are some deficiencies in the affidavit accompanying the statutory demand. However, TRS submits that the deficiencies are of no moment and relies upon r 1.7 of the Corporations Rules. TRS submitted that r 1.7 provides that substantial compliance was sufficient.

As to the issue that the nature of the debt was not properly set out in the affidavit accompanying the statutory demand, TRS submitted that I ought to follow the decision of Gardiner AsJ in Re Ozlift Pty Ltd (‘Ozlift’)[2] and adopt a practical approach to determine that the debt due was sufficiently specified.
[2][2018] VSC 824 (‘Ozlift’).

Consideration

Section s 459J of the Corporations Act 2001 (Cth) sets out:

Setting aside demand on other grounds
(1)On an application under section 459G, the Court may by order set aside the demand if it is satisfied that:
(a)because of a defect in the demand, substantial injustice will be caused unless the demand is set aside; or
(b)there is some other reason why the demand should be set aside.

(2)Except as provided in subsection (1), the Court must not set aside a statutory demand merely because of a defect.

The creditor’s statutory demand for payment of debt follows Form 509H. It is addressed to AMD. It sets out that:

1.The company owes TRS Management Pty Ltd … the amount of $29,787.45, being the total of the amount of the debts described in the Schedule.
2.Attached is the affidavit of Raymond David Perkes dated 28 November 2018, verifying that the amount is due and payable by the Debtor Company.
3.The Creditor requires the Debtor Company, within 21 days after service on the company of this demand:
(a) to pay to the Creditor the total amounts of the debts; or
(b)to secure or compound for the total of the amounts of the debts, to the Creditor’s reasonable satisfaction.

…
Schedule

Description of the debts

Amount of the debt

1.    The amount due by the Debtor Company to the Creditor pursuant to Invoice No. 00015 dated 1 July 2018:

$10,060.05

2.    The amount due by the Debtor Company to the Creditor pursuant to Invoice No. 00016 dated 1 September 2018:

$11,226.60

3.     The amount due by the Debtor Company to the Creditor pursuant to Invoice No. 00018 dated 10 October 2018:

$8,500.80

Total Amount

$29,787.45

The affidavit accompanying was sworn by Raymond David Perkes on 28 November 2018. The affidavit set out:

1.I am a Director of the Creditor named in the statutory demand, which this affidavit accompanies, relating to a debt owed by AMD Resources Limited, the Debtor Company.
2.I am authorised by the Creditor to make this affidavit on its behalf.
3.I have inspected the business records of the Creditor in relation to the Debtor Company’s accounts with the Creditor.
4.The total of $29,787.45 being the total of the amounts of the debts specified in the accompanying statutory demand is due and payable by the Debtor Company.
5.The debts are due and payable because the Tax Invoices are unpaid notwithstanding purchase orders have been issued by the Debtor Company in relation to the Invoices, and payment is past due.
6.I believe that there is no genuine dispute about the existence or the amount of the debts.
7.I believe the above matters to be true.

The invoices referred to in the statutory demand were not annexed to the statutory demand or exhibited to the affidavit accompanying.

Section 459E(3) of the Act provides:

Unless the debt, or each of the debts, is a judgment debt, the demand must be accompanied by an affidavit that:
(a)verifies that the debt, or the total amount of the debts, is due and payable by the companies; and
(b)complies with the rules.

Rule 5.2 of the Corporations Rules provides as follows:

Affidavit accompanying statutory demand (s 459E(3) of the Corporations Act)—Form 7
For the purposes of section 459E(3) of the Corporations Act, the affidavit accompanying a statutory demand relating to a debt, or debts, owed by a company must—
(a)be in accordance with Form 7 and state the matters mentioned in that Form;
… (emphasis added)

Form 7 of the Corporations Rules sets out the form of the affidavit accompanying a statutory demand as follows:

1.I am [state deponent’s relationship to the creditor(s), eg ‘the creditor’, ‘(name), one of the creditors’] in respect of *a debt of $ [amount]/*debts totalling $ [amount] owed by [name of debtor company] to *it/*them relating to [state nature of debt, or debts, ensuring that what is stated corresponds with the description of the debt, or debts, to be given in the proposed statutory demand, with which this affidavit is to be served on the debtor company]. (emphasis added)
2.[If the deponent is not the creditor, state the facts entitling the deponent to make the affidavit, eg ‘I am authorised by the creditor(s) to make this affidavit on its/their behalf’].
3.[State the source of the deponent’s knowledge of the matters stated in the affidavit in relation to the debt or each of the debts, eg ‘I am the person who, on behalf of the creditor(s), had the dealings with the debtor company that gave rise to the debt’, ‘I have inspected the business records of the creditor in relation to the debtor company’s account with the creditor’].
4.*The debt/*The total of the amounts of the debts, mentioned in paragraph 1 of this affidavit, is due and payable by the debtor company.
5.I believe that there is no genuine dispute about the existence or amount of the *debt/*any of the debts.

By operation of r 5.2 and s 459E(3), it is a statutory requirement to state the nature of the debt or debts relied upon. Referring to an invoice or referring to the statutory demand itself does not satisfy the requirement. One would expect a short description such as: ‘for accounting services at the request of the debtor company during the period X to Y’ or something similar.

A defect in an affidavit accompanying a statutory demand will constitute ‘some other reason’ under s 459J(1)(b) of the Act if it is substantive and not merely formal or technical and where injustice would be caused in the context of the statutory regime. Unlike a consideration pursuant to s 459J(1)(a) of the Act, ‘substantial injustice’ is not strictly required as an element of the consideration under s 459J(1)(b).

For reasons which I will set out, I have determined that I ought to follow Reeves J in Aromas Cafe Toowoomba Pty Ltd v Aromas Tea & Coffee Merchants Pty Ltd (‘Aromas Cafe’)[3] and determine that the defect in the affidavit accompanying statutory demand by not specifying the nature of the debt relied upon does in this proceeding constitute ‘some other reason’. The affidavit does not verify the nature of the debt as required by s 459E(3)(a) of the Act. It is therefore a substantive defect in the affidavit.
[3][2019] FCA 1699 (‘Aromas Cafe’).

The ‘some other reason’ ground under s 459J(1)(b) of the Act gives the Court power to set aside a statutory demand for a reason ‘not otherwise indicated by the legislation as a ground for the setting aside of a statutory demand’.[4] Bryson J in Portrait Express (Sales) Pty Ltd v Kodak (Australasia) Pty Ltd (‘Portrait Express’)[5] held that a statutory demand should not be set aside under s 459J(1)(b) ‘unless the decision to do so is supported by some sound or positive ground or good reason which is relevant to the purposes for which the power exists’.[6]
[4]Saferack Pty Ltd v Marketing Heads Australia Pty Ltd (2007) 214 FLR 393, 400 [27] (Barrett J) (‘Saferack’), citing Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452, 459 (‘Spencer Constructions’).
[5](1996) 132 FLR 300 (‘Portrait Express’).
[6]Ibid 311, quoted in Meehan v Glazier Holdings Pty Ltd (2005) 53 ACSR 229, 240 [59] (Young CJ in Eq) (‘Meehan’).

While Barrett JA observed in Kisimul Holdings Pty Ltd v Clear Position Pty Ltd[7] that the ‘substantial injustice’ criterion in s 459J(1)(a) is not imported into s 459J(1)(b),[8] s 459J(1)(b) has been held to extend to conduct that ‘may be described as unconscionable, an abuse of process, or which gives rise to substantial injustice’.[9] However, it must be determined by reference to the legislative intention of Pt 5.4 of the Act and the relative position of both parties.[10] Further, Barrett J held in Saferack Pty Ltd v Marketing Heads Australia Pty Ltd (‘Saferack’)[11] that s 459J(1)(b) applies ‘whenever there is a need to counter some attempted subversion of the statutory scheme’.[12]
[7][2014] NSWCA 262 (‘Kisimul’).
[8]Ibid [23], citing Meehan (n 6). See also Aromas Cafe (n 3) [48] (Reeves J).
[9]Arcade Badge Embroidery Co Pty Ltd v Deputy Commissioner of Taxation (2005) 157 ACTR 22, 26 [27], citing Hoares Bros Pty Ltd v Commissioner of Taxation (1996) 62 FCR 302, 317–8 (‘Hoares Bros’).
[10]Meehan (n 6) 239–40 [52] (Santow JA), 240 [58] (Young CJ in Eq).
[11]Saferack (n 4).
[12]Ibid 401 [33].

In MNWA Pty Ltd v Deputy Commissioner of Taxation,[13] Rares J observed that:

The Explanatory Memorandum explained (at [688]) that the use of the expression ‘some other reason’ in Pt 5.4, including s 459J(1)(b), was to ensure that the Court had power to set a demand aside ‘on the basis of the commercial justice of the matter, rather than on the basis of technical difficulties’.[14]

[13](2016) 250 FCR 381 (‘MNWA’).

[14]Ibid 408 [115].

In Meehan v Glazier Holdings Pty Ltd (‘Meehan’),[15] Young CJ in Eq observed that:

Although the wording of s 459J(1)(b) of the Corporations Act appears wide, its context and history requires reading it down to encompass in general terms only cases where the court is satisfied that injustice will be caused unless the demand is set aside because of a defect relating to, but not in, the demand: see Kezarne Pty Ltd v Sydney Asbestos Removal Services Pty Ltd (1998) 29 ACSR 11 at 17.
…
It is not possible to set out fully the cases that might fall within s 459J(1)(b) nor if it were possible would it be wise to do so. The sort of case that will be covered will include gross defects in supporting affidavits and documentation and where the alleged creditor has made statements or representations relating to the statutory demand which have reasonably induced a change of the alleged debtor’s position.
A judge is not at liberty to set aside a demand under s 459J(1)(b) merely because he or she subjectively considers it fair to do so.[16]

[15]Meehan (n 6).

[16]Ibid 240 [58], [60]–[61].

In B & M Quality Constructions Pty Ltd v Buyrite Steel Supplies Pty Ltd,[17] McLelland CJ in Eq opined that ‘the departure from the relevant rule in respect of the affidavit accompanying the statutory demand is a matter of substance’.[18]
[17](1994) 15 ACSR 433.
[18]Ibid 435.

In ‘On Time’ Nurses Agency Pty Ltd v Deputy Commissioner of Taxation,[19] Ferguson J (as her Honour then was) summarised the law with respect to s 459J(1)(b) as follows:[20]

The discretion under s 459J(1)(b) is broad and the circumstances which will give rise to ‘some other reason’ to set aside the demand have not been prescribed either by statute or the case law.[21] Nor should the court attempt to set out all the circumstances in which a demand might be set aside for some other reason.[22] This does not mean though that the discretion is at large such that a judge may set a demand aside simply because, subjectively, that judge is of the view that it is fair to do so.[23]

Some of the authorities have given examples of the types of situation where the discretion is likely to be exercised in favour of setting aside a demand for some other reason. They include situations where there are gross defects in the affidavit supporting the statutory demand; where the creditor, following service of the demand, has made representations which have induced the debtor to change its position; and where the creditor’s conduct is unconscionable, an abuse of process or gives rise to substantial injustice.[24]

[19](2010) 81 ATR 278.

[20]Ibid 281–2 [7]–[8].

[21]Hoare Bros v DCT (1996) 62 FCR 302; 32 ATR 148; 96 ATC 4163; 135 ALR 677; Arcade Badge Embroidery Co Pty Ltd v DCT (2005) 58 ATR 456.

[22]Hoare Bros v DCT (1996) 62 FCR 302; 32 ATR 148; 96 ATC 4163; 135 ALR 677; Meehan v Glazier Holdings Pty Ltd (2005) 53 ACSR 229 at 240 per Young CJ in Equity.

[23]Meehan v Glazier Holdings Pty Ltd (2005) 53 ACSR 229 at 240 per Young CJ in Equity.

[24]Meehan v Glazier Holdings Pty Ltd (2005) 53 ACSR 229 at 240 per Young CJ in Equity; Hoare Bros Pty Ltd v DCT (1996) 62 FCR 302; 32 ATR 148; 96 ATC 4163; 135 ALR 677; Arcade Badge Embroidery Co Pty Ltd v DCT (2005) 58 ATR 456.

Further, in O’Brien Real Estate Pty Ltd v Vorontsov,[25] Hetyey AsJ observed that:[26]

In Arcade Badge Embroidery Co Pty Ltd v DCT,[27] the Court of Appeal of the Australian Capital Territory found that the other reasons envisaged by s 459J(1)(b) include ‘conduct that may be described as unconscionable, an abuse of process, or which gives rise to substantial injustice’.[28] Whilst the discretion conferred by the provision is broad, a judge should not set aside a statutory demand under s 459J(1)(b) simply because she or he subjectively considers it fair to do so.[29] The Court’s power under the sub-section exists to maintain the integrity of the statutory demand procedure in Part 5.4 of the Corporations Act and to counter its subversion.[30]

[25][2020] VSC 697.

[26]Ibid [26].

[27](2005) 157 ACTR 22.

[28]Ibid 26 [27] (Crispin P, Gray and Marshall JJ). See also Hoare Bros Pty Ltd v DCT (1996) 19 ACSR 125 and Neutral Bay Pty Ltd v DCT (2007) 25 ACLC 1341.

[29]Meehan v Holdings Pty Ltd (2005) 53 ACSR 229, 240 [60]–[61].

[30]Rinfort Pty Ltd v Arianna Holdings Pty Ltd (2016) 111 ACSR 607, 633 [84] (Black J).

Accordingly, a defect in an affidavit accompanying a statutory demand will not be a reason to set aside the statutory demand unless injustice will be caused in the context of the statutory demand regime such that the defect is substantive and not merely technical.[31]

Supreme Court (Corporations) Rules 2013 (Vic)

[31]See also Aromas Cafe (n 3) [59] (Reeves J).

Rule 1.7(1) of the Corporations Rules states that:

It is sufficient compliance with [the Corporations Rules] in relation to a document that is required to be in accordance with a form in Schedule 1 if the document is substantially in accordance with the form required or has only such variations as the nature of the case requires.

Rule 1.7(1) refers to formal or technical defects. In Portrait Express,[32] the then equivalent O 1 r 7(2) in the Federal Court Rules 1979 was held to be substantial compliance as to form. In that case, the affidavits accompanying the statutory demands included a title in the Supreme Court and referred to parties in a non-existent litigation, therefore they did not comply with the form. However, Bryson J stated that ‘[t]he departure from the form consists of superfluous inclusions and does not relate to anything which [the form] requires to be included’.[33] Bryson J held that the affidavits were in substantial compliance with the rules and in compliance with s 459E(3)(b) as they would ‘not impede any reasonable reader from understanding what the affidavits and the statutory demands have to say’.[34]
[32]Portrait Express (n 5).
[33]Ibid 308.
[34]Ibid.

Further, where the originating process did not state the nature of the proceeding and listed the relief sought rather than specifying the claims, r 1.7(1) would also likely apply if the parties are able to understand the case sought against them from the affidavit material lodged.[35]
[35]Smolarek v Liwszyc (2006) 32 WAR 101, 112–13 [33], [35].

Circumstances that have been considered under s 459J(1)(b)

A defect in an affidavit accompanying, whereby there is no statement that the debt is due and payable, constitutes ‘some other reason’ to set aside the statutory demand.[36] In Saferack,[37] the deponent of the affidavit, the director of the defendant, stated that the plaintiff is ‘indebted’ to the defendant for the sum; however, he did not state that the debt was due and payable by the plaintiff. Barrett J held that while s 459E(2)(e) requires that the statutory demand itself state that debt is due and payable, s 459E(3)(a) separately and independently requires that the affidavit accompanying verify that the debt is due and payable. This requirement was not satisfied and is a ‘material departure from the statutory demand process envisaged by s 459E’.[38] Barrett J held that:

The legislative intention is that, where a corporation claims to be a creditor entitled to serve a statutory demand, some natural person acting in the interests of (and with the authority of) the corporation must turn his or her mind consciously and deliberately to one of the fundamentals of the statutory scheme — namely, that there is not only a debt in existence but also that the debt is due and payable. The fundamental nature of that matter comes from the description in s 459E(1) of the type of debt in respect of which a statutory demand may be served. Having considered the characteristics of the debt, the person concerned must say on oath that the debt is due and payable. There is no such sworn statement in this case. So far as Mr Wakeling’s affidavit is concerned, he says, by using the words ‘is indebted’, no more than that the debt exists.[39]

[36]Saferack (n 4) 402–3 [39]–[41], 405 [45] (Barrett J).

[37]Saferack (n 4).

[38]Ibid 403 [41].

[39]Ibid 403 [40].

Further, a defect in an accompanying affidavit, whereby it did not contain a sworn statement of belief that there was no genuine dispute as to the existence and amount of the debt, constitutes ‘some other reason’ to set aside the statutory demand.[40] Tamberlin J in IFA Homeware Imports Pty Ltd v Shanghai Jerrys Candle Co Ltd[41] held that the absence of a statement as to the belief of no genuine dispute as to the existence or amount of the debt is a ‘material failure of significance’.[42] In Saferack, Barrett J held that it is a foundation of the statutory regime that the debt is undisputed and that:

A creditor resorting to the statutory demand procedure has a duty to consider and to convey to the alleged debtor company certain sworn confirmations about the quality of the debt on which reliance is placed with a view to obtaining the benefit of a presumption of insolvency if the demand for payment is not met.[43]

[40]Ibid 403–5 [42]–[43], [45] (Barrett J); Kisimul (n 7); IFA Homeware Imports Pty Ltd v Shanghai Jerrys Candle Co Ltd [2003] FCA 533 (‘IFA Homeware’).

[41]IFA Homeware (n 40).

[42]Ibid [22].

[43]Saferack (n 4) 403 [42].

In Ozlift,[44] the affidavit accompanying the statutory demand did not conform to Form 7 of the Corporations Rules, including that it did not verify that the debt was due and payable in the form required. Gardiner AsJ held that while the relevant paragraph in the affidavit accompanying the statutory demand was ‘unhappily drafted’,[45] the ‘reasonable construction of the paragraph as a whole verifies that the debt claimed in the demand was due and payable at the date of the demand in compliance with s 459E’.[46] Accordingly, Gardiner AsJ did not set aside the statutory demand under s 459J(1)(b) on that ground with respect to whether the affidavit verified that the debt was due and payable. Therefore, this indicates that strict adherence to the form is not required and that technical defects would not constitute ‘some other reason’ to set aside the statutory demand.
[44]Ozlift (n 2).
[45]Ibid [20].
[46]Ibid.

Further, Gardiner AsJ quoted Barrett J in Main Camp v Australian Rural (‘Main Camp’)[47] with respect to the policy underlying s 459E.[48] In Main Camp, Barrett J stated:
[47]Main Camp (n 1).
[48]Ozlift (n 2) [16].

By serving a statutory demand on a company, a creditor takes the first step towards bringing into existence a statutory presumption of insolvency on the basis of which the creditor may proceed to ask the court to supplant the existing custodians of the company’s property and affairs in favour of an officer of the court whose first duty is to attend to the interests of the general body of creditors. If the court accedes to that request, the established order of administration within the company is put into abeyance and a regime in which the interests of shareholders are subordinated or deferred comes to the fore. The first step to which I have referred involves, in essence, a clear delineation of the creditor’s assertion of an entitlement to receive payment of a debt in respect of which there exists not only an unquestionable obligation to pay but also an unconditional obligation to pay immediately. …
In the light of the radical consequences which may thus result from non-compliance with a statutory demand, the value to be placed on adherence in all material respects to the statutory requirements is necessarily high. It is not open to a creditor whose debt is merely owing to resort to the statutory demand procedure. … Nor can it be suggested that slavish use of a particular verbal formula for its own sake is essential when exactly the same message may be quite adequately conveyed in different words: compare Daewoo Australia Pty Ltd v Suncorp-Metway Ltd (1999) 33 ACSR 481, a case to which the Master referred, where a requirement that an affidavit ‘state that the deponent believes those matters to be true’ was held sufficiently satisfied where the deponent set out the relevant matters and concluded with the words, ‘and I so verify’.
What is essential is that the documents put the company on notice in an unambiguous way of all the matters the legislation requires. The creditor’s contention that the debt, as well as being a debt (that is, owing), is both due and payable is one such matter. That contention is indispensable to the full understanding the legislation requires a company receiving a statutory demand to obtain from that demand and its accompanying affidavit. That full understanding was not conveyed by the creditor in this case. It is true that a demand for payment within the specified period was made. But the important fact (or assertion) that the company was under a legal obligation to make that payment without any further step on the creditor’s part, without the satisfaction of any intervening condition and without the passage of any further time was omitted. It is to clear notification of that important fact (or assertion) that the legislation attaches particular significance by the clear requirements expressed by reference to the words ‘due and payable’.
The affidavit which accompanied the statutory demand did not convey the verification called for by s 459E(3)(a). In my judgment, the Master was correct in his conclusion that that failure on the creditor’s part was a sufficient reason under s 459J(1)(b) to set aside the demand.
In stating this conclusion, I do not lose sight of the submissions made by Mr Eassie by reference to the decision of Hayne J in Azed Developments Pty Ltd v Frederick & Co Ltd (1994) 12 ACLC 949; (1994) 14 ACSR 54 . It is true that the affidavit in that case did not use the words ‘due and payable’. It is clear, however, that the deponent’s rather long recitation of the circumstances surrounding the debt sufficiently conveyed that message. The recitation included a statement that the company was:
… truly indebted to the creditor in the sum of $120,456.19 as moneys had and received by the company to the use of the creditor, or as moneys paid by the creditor at the request of the company.

This specification of the debts in terms in which common money counts might be pleaded, with its clearly implied message of an immediate right to sue, carries the necessary connotation of ‘due and payable’.[49]
[49]Main Camp (n 1) 732–3 [21]–[25], quoted in Ozlift (n 2) [16].

Nature of the debt

I note that the wording of the affidavit in Ozlift is similar to in the present proceeding with respect to the nature of the debt, whereby the deponent in that case had deposed to:

On 8 November 2017 a letter of Demand was sent to the Debtor Company which enclosed the two outstanding invoices totalling €60,946.00, being the total of the amounts specified in the accompanying demand is due and payable by the debtor to the creditor. Now produced and shown to me and marked ‘RM-1’ is a true copy of the letter and invoices.[50]

[50]Ozlift (n 2) [12].

However, no issue was raised before Gardiner AsJ in Ozlift with respect to the nature of the debt as required by the form and this was not referred to by Gardiner AsJ. Accordingly, from this alone, it is unclear from Ozlift as to whether the requirement of the nature of the debt in the affidavit accompanying the statutory demand can give rise to ‘some other reason’ to set aside the debt if it is not satisfied.

Despite this, the nature of the debt may be a requirement as to the verification of the debt the subject of the statutory demand. In Ozlift,[51] with respect to the issue of hearsay in the affidavit accompanying the statutory demand, Gardiner AsJ referred to Barrett J’s decision in Faji (Australia) Constructions Pty Ltd v AC Professional Accounting Pty Ltd (‘Faji’).[52] Of particular relevance, Barrett J stated:
[51]Ibid [24].
[52][2009] NSWSC 180.

In B & M Quality Constructions Pty Ltd v Buyrite Steel Supplies Pty Ltd (1994) 15 ACSR 433, McLelland CJ in Eq referred to the requirements that are now imposed by a combination of Rule 5.2(a) of the Supreme Court (Corporations) Rules 1999 and paragraphs 4 and 5 of Form 7 prescribed by those rules. After referring to the specifications in predecessor rules concerning affidavits for s 459E(3) purposes, his Honour said at pp435 to 436:
It is important in this regard to bear in mind that the relevant matters include not only a belief as to the existence and amount of the debt, but also a belief as to the absence of any genuine dispute about the existence or amount of the debt. The express requirement in the rule that the person making the affidavit depose to his or her belief that there is no genuine dispute is a significant mechanism for filtering out cases where there is in fact such a dispute, so as to prevent such cases from reaching the court on such an application as the present, with a consequent waste of time and resources. This mechanism would be substantially weakened unless a person likely to have personal knowledge of the existence of a dispute if there is one makes the affidavit. A statement of a belief that there is no genuine dispute based solely on hearsay is unlikely to have anything like the same degree of reliability. I therefore do not regard what has occurred in the present case as a merely technical breach of the rules.

…
The affidavit in this case makes it clear that the deponent did not have first-hand knowledge of the matters to which he deposed. The sworn assurance that the recipient of a statutory demand is entitled to expect as to the essential substance of the demand, the existence of the debt, its quality as a debt due and payable, and the absence of genuine dispute about its existence or amount, was denied the Faji companies in this case. No one who might have been expected to have first-hand knowledge of those matters — for example, a company officer with access to the books and records of the defendant company — was put forward by the defendant company to give that sworn assurance.[53]

[53]Ibid [27], [29] (emphasis added).

While Barrett J’s observations were with respect to the deponent making the affidavit accompanying the statutory demand, they are also relevant to the general requirements of the affidavit. Therefore, as the nature of the debt may be seen as crucial in establishing the existence of the debt, the absence of specific reference to the nature of the debt in the affidavit accompanying a statutory demand may constitute ‘some other reason’ to set aside the statutory demand under s 459J(1)(b).

In Wollongong Coal Ltd v Gujarat NRE India Pty Ltd,[54] Wigney J set aside the relevant statutory demand on the basis that the affidavit accompanying the statutory demand predated the same and therefore was defective. However, Wigney J also considered the description of the debt.
[54](2015) 104 ACSR 425.

Wigney J considered s 459J(1)(a) and the definition of ‘defect’ in s 9 of the Act. Wigney J then continued:

Because the definition of ‘defect’ is an inclusive definition, it is necessary first to consider the ordinary meaning of the word. A defect, according to ordinary meaning, means ‘a lack or absence of something necessary or essential for completeness; a shortcoming or deficiency; an imperfection’: Topfelt Pty Ltd v State Bank of New South Wales Ltd (1993) 47 FCR 226 at 237; 120 ALR 155 at 166; 12 ACSR 381 at 392 (Topfelt).[55]

[55]Ibid 445–6 [108].

A defect in the wording of the nature of the debt in an affidavit accompanying has been held to not provide the ‘requisite verification of the debt it claimed in the statutory demand as required by s 459E(3)(a) of the Act’.[56] In Aromas Cafe,[57] the director of the defendant stated, ‘The debt … relates to unpaid invoices for the costs associated with stock which was provided to [Aromas Cafe]’.[58] The defendant accepted that the wording was inaccurate and that the debt was not created by the issuing of the invoices but by the order and the supply of the relevant goods. In that case, Reeves J held that the subject words in the affidavit were ‘ambiguous and therefore did not provide requisite verification of the debt it claimed in the statutory demand as required by s 459E(3)(a) of the Act’.[59] Reeves J concluded that this defect, along with other factors, constituted ‘some other reason’ to set aside the statutory demand.[60] However, Reeves J had found that the words of this defect did not provide the requisite verification of the debt as required by s 459E(3)(a).
[56]Aromas Cafe (n 3) [59].
[57]Aromas Cafe (n 3).
[58]Ibid [24].
[59]Ibid [59].
[60]Ibid.

Reeves J rejected the contention that the failure of a creditor to specify in the demand the precise legal basis upon which a debt is claimed was sufficient in that particular case to justify an order setting aside the demand.[61]
[61]Ibid [50]–[53].

As to the ‘some other reason’ question, Reeves J said the following:

Finally, I turn to the separate ground stated in s 459J(1)(b) of the Act: whether there is ‘some other reason’ why the statutory demand should be set aside. In this respect, Aromas Cafe has relied on defects it claims to exist in the affidavit of Mr Andrew Skarparis that accompanied the statutory demand in this matter. Since Aromas Merchants’ debt was not a judgment debt, such an affidavit was required under s 459E(3).
In Assaf F, Statutory Demands: Law and Practice, the author discusses the authorities concerning what constitutes ‘some other reason’ under s 459J(1)(b) (see at [7.22]–[7.24]). Without closely reviewing that discussion, it reveals that the expression ‘some other reason’ has a ‘broad compass’ and that the courts have therefore eschewed adopting any fixed categories. Nonetheless, the following general principles have been adopted: that the reason should not fall under any other ground in the Act; and that it should be a ‘sound or positive ground or good reason’ for setting aside the demand. Furthermore, where the reason relates to defects in supporting affidavits under s 459E, those defects should constitute substantive deficiencies and not be merely formal or technical (see at [7.49]. See also the discussion in MNWA at [103]–[105] and [114]–[117]).

Aromas Cafe claimed there are two defects in Mr Andrew Skarparis’ affidavit supporting the statutory demand. First, it submitted that he had not stated the source of the knowledge he relied upon to make that affidavit. That submission can be rejected immediately. Mr Andrew Skarparis clearly stated the source of his knowledge and his capacity to make the affidavit on behalf of Aromas Leasing at [1]–[3] of his affidavit (see at [24] above).
Secondly, Aromas Cafe claimed that the words ‘unpaid invoices for the costs associated with stock which was provided’ in [7] of that affidavit gave rise to a defect. In particular, it pointed to the fact that the invoices listed in the schedule to the statutory demand contained items which were not associated with the supply of stock. Those items are set out above (see at [50]).
In response, Aromas Merchants accepted that the above words were inaccurate and it agreed that the debt in this matter was not created by it issuing the invoices to Aromas Cafe, citing Growth Equities Corporation Ltd v Genesis Growth Investments Pty Ltd [2010] NSWSC 1302 per Barrett J at [4]. Rather, it said that the debt arose from the ordering by Aromas Cafe, and the supply by Aromas Merchants, of the goods concerned. Nonetheless, it submitted that Aromas Cafe could not rely on this ground because this defect was not mentioned anywhere in Ms Nguyen’s supporting affidavit and therefore the Graywinter principle applied to prevent it being relied upon in this application. Finally, it also appeared to contend that this was only a technical defect or formal defect.
I do not accept that the Graywinter principle applied to prevent Aromas Cafe relying on this ground in this application. Before explaining why that is so, it is appropriate to record the following. First, having regard to Aromas Merchants’ contentions above that its debt essentially arose out of a straightforward claim for the sale and delivery of goods to Aromas Cafe, I consider the subject words in Mr Andrew Skarparis’ affidavit above were ambiguous and therefore did not provide the requisite verification of the debt it claimed in the statutory demand as required by s 459E(3)(a) of the Act. Moreover, I consider that ambiguity effectively masked the fact that approximately 20% of the invoices upon which the statutory demand was based related to items that could not have been genuinely claimed as debts by Aromas Merchants. Specifically, the items described at [50] above, which related to the operating costs of the cafe business and to other dealings between Aromas Cafe and the two Aromas entities. To these observations may be added the apparent inaccuracy in [6] of the same affidavit discussed at [40] above. In my view, these ambiguities and inaccuracies constitute fundamental and substantive defects in the affidavit supporting Aromas Merchants’ statutory demand. Secondly, and conversely, I do not consider that these defects in Mr Andrew Skarparis’ supporting affidavit are matters of formality or technicality. Thirdly, and finally, I consider these matters are compounded by the circumstances in which Aromas Merchants has sought to use the statutory demand process under Part 5.4 of the Act in the manner discussed earlier in these reasons (see at [38] above). Accordingly, I consider these matters constitute ‘some other reason’ under s 459J(1)(b) why Aromas Merchants’ statutory demand should be set aside.[62]

[62]Ibid [54]–[59].

Reeves J noted that[63] Aromas Merchants accepted that the description was inaccurate and agreed that the debt in this matter was not created by issuing the invoices to Aromas Cafe, citing Growth Equities Corporation Ltd v Genesis Growth Investments Pty Ltd (‘Growth Equities’).[64] In that case, Barrett J said:

The first of the alleged debts referred to in the statutory demand is said to be ‘pursuant to’ the particularly described invoice. It must be said at once that an invoice of its nature cannot in general create or be the source of a debt. Rather, it has the character of a request or demand for payment in respect of a sum for which liability has already arisen from some independent source, such as by the supply of goods or services.[65]
[63]Ibid [58].
[64][2010] NSWSC 1302, [4] (‘Growth Equities’).
[65]Ibid.

Application to this proceeding

In the affidavit accompanying the statutory demand, the director of TRS, Raymond Perkes, did not state the nature of the debts claimed in the statutory demand in paragraph 1 as required by the Corporations Rules and Form 7. Instead, he had only stated ‘[t]he total of $29,787.45 being the total of the amount of the debts specified in the accompanying statutory demand is due and payable …’ in paragraph 4. In the context of the Act, s 459E(3)(a) requires that the affidavit verify that the debt or debts are due and payable by the company. The obligation of verification extends not only to the fact that the debts are due and payable and that there is no genuine dispute as to the existence or amount of the debt, but also extends to the nature of the debt claimed. The nature of the debt claimed is the foundation of the statutory demand. Even if the reference to the debts in the statutory demand is a reference to the unpaid invoices, it is insufficient given that it does not refer to what the invoices were in relation to. The invoices do not create the debts but merely record the claims.[66] Following Aromas Cafe,[67] this defect would constitute a substantive departure from the Corporations Rules and the requirement in s 459E(3) and therefore may constitute ‘some other reason’ to set aside the statutory demand under s 459J(1)(b).
[66]Ibid; Core Toughened Pty Ltd v Lisec Australia Pty Ltd [2015] VSC 534, [18] (Randall AsJ).
[67]Aromas Cafe (n 3).

With respect to the defect in the affidavit in which paragraph 4 did not link back to paragraph 1, this would likely be a technical failure to comply with the Corporations Rules given that there is no ambiguity in understanding which debt is referred to. Therefore, it is unlikely that it will constitute ‘some other reason’ under s 459J(1)(b).

In the same way, the reference to a single debt in paragraph 1 and then plural debts in paragraphs 4, 5 and 6 are likely to be construed as technical failures and are unlikely to constitute ‘some other reason’ under s 459J(1)(b). The same applies for the reference to the quantum of the claimed debt in paragraph 4 rather than paragraph 1 of the affidavit accompanying.

The contention that the affidavit accompanying included in paragraph 1 the words ‘named in the statutory demand, which this affidavit accompanies’ were in excess of the requirements of Form 7 is likely to be construed as a technical failure and would not constitute ‘some other reason’ under s 459J(1)(b).

Accordingly, the failure to describe the nature of the debt is sufficient reason for me to set aside the statutory demand under s 459J(1)(b) of the Act.

Genuine dispute
Background

AMD is a junior mining exploration company with legal and equitable interests in exploration tenements in Papua New Guinea and equitable interests in exploration tenements held by IsMins Pty Ltd (‘IsMins’) in Queensland and in the Northern Territory.

AMD had applied to the ASX for an IPO in July 2018 but withdrew the application due to a change in the market and the opportunity for AMD to improve its assets for investors. The ASX listing would have triggered AMD’s obligation to purchase all of the shares in Kidston North, which itself owns all the shares in IsMins.

A joint venture agreement between AMD, Kidston North and IsMins (‘JV agreement’), as amended from time to time in respect to the Australian tenements, was terminated by Kidston North and there is a dispute as to what percentage interest AMD has in the Australian tenements and what are the consequences of termination.

TRS had provided geological services to the joint venture for the Australian tenements and to AMD for its PNG tenements.

TRS had provided exploration and tenement compliance management services to AMD pursuant to an agreement dated 1 April 2017 (‘April 2017 agreement’) which was terminated by AMD on or about 31 January 2018. Following the termination, on 25 June 2018 the parties entered into a further written agreement, the commencement date of which was to be the date on which AMD was admitted to the official list of the ASX.

In September 2018, Ray Perkes of TRS wrote and confirmed that the 25 June 2018 agreement was ‘now otiose’ and proposed new terms. Although initial drafts for a new agreement had been exchanged, no further agreement had been reached.

TRS had been the sole provider of exploration management services to AMD in PNG.

TRS had also been the sole provider of exploration management and tenement compliance services with respect to the tenements of the joint venture.

On 3 and 4 December 2018, the plaintiff received a total of four statutory demands from four creditors. It is only the statutory demand of TRS dated 28 November 2018 which is before the Court in this application.

AMD accepted that it would be responsible to pay TRS for services it provided for the PNG tenements.

AMD did not accept that it was solely liable for the TRS services provided for the tenements of the joint venture. It contends that the terms of the JV agreement then in force identified that IsMins is responsible for those expenses.

TRS contends that from 1 February 2018 until 30 September 2018, AMD retained the services of TRS on the basis that monthly invoices would be issued by TRS to AMD for fees incurred by TRS and payable to its consultants plus a five per cent overhead margin, plus GST. That agreement was referred to by TRS as the ‘second agreement’.

Pursuant to the second agreement, invoices numbered 00012 through to 00015 were provided to AMD from 5 March 2018 through to 1 June 2018. Each of the invoices was promptly paid.

On 1 July 2018, a second invoice which again was numbered 00015 was provided (‘July invoice’). On 1 September 2018 and 10 October 2018, two further invoices were provided but not paid (‘September invoice’ and ‘October invoice’, respectively).

The submissions
The plaintiff’s written submissions

AMD submitted that Spencer’s admission that the invoices were in dispute and the uncontested evidence in the first affidavit of Tony Bell, of the plaintiff, provided:

prima facie plausibility to merit further investigation as to the truth of:
a.what work and/or services have Spencer and Perkes, as directors of TRS, properly undertaken for AMD for its PNG tenements;
b.what work and/or services have Spencer and Perkes, as directors of TRS, properly undertaken for the Australian tenements, and for that work and services:
(i)what work was undertaken under the [joint venture] of which AMD may have only a part liability …
(ii)what work was undertaken after the termination of the [joint venture] on 31 March 2018 …

c.whether, AMD has been asked to pay Ray Perkes for providing legal services which it did not ask for or agree to pay given that it was outside the scope of works for which TRS was retained …

In support of those primary submissions referred to in the previous paragraph, AMD contended that the joint venture dispute was significant with respect to the genuine dispute grounds to set aside statutory demand.

The defendant’s written submissions

In April 2017, AMD engaged TRS to provide project management services in respect of its mining tenements. That agreement was terminated by AMD with effect from 31 January 2018.

The defendant contends that in an email exchange on 13 December 2017 and 1 February 2018, the parties reached an agreement whereby TRS was to continue to provide project management services to AMD on a ‘business as usual’ basis and in accordance with ‘normal hourly rates’. That had been described as the second agreement.

Between March and June 2018, TRS issued monthly invoices to AMD in respect of project management work undertaken pursuant to the second agreement. Upon receiving each of those invoices, AMD issued a purchase order and then paid the amounts owing.

TRS issued the three invoices the subject of the statutory demand in July, September and October 2018. Like the previous invoices, the July, September and October invoices concerned work undertaken by AMD’s mining projects in Papua New Guinea, Queensland and the Northern Territory. Despite the issue of purchase orders in respect of the September and October invoices, AMD has not paid any of the invoices.

Oral submissions

During the course of oral submissions the gravamen of the dispute between the parties came to the fore. That is, whether I should accept that the conduct of AMD in issuing purchase orders in relation to at least the latter two invoices constituted conduct which could be taken as an acknowledgement of each of those two debts.

AMD submitted that the issuing of the purchase order operated as an acknowledgement of receipt only. Reliance was placed upon the affidavit affirmed by Mr Halliwell on 12 March 2019. Of itself, that affidavit is not convincing as to what steps are undertaken to ensure the payment is due and payable.

In addition to what is set out in the Halliwell affidavit, AMD relies upon a course of conduct where the invoice is acknowledged by the raising of the purchase order and the supporting material of the invoices are considered prior to payment being made.

The July invoice dated 1 July 2018 sets out:

To:Project Management fees for June

2018 comprised of:
L K Spencer fees $6,500
L K Spencer communications charges

$200.00
R D Perkes fees $2,000.00 and internet

expenses $10.00
TRS Management overhead margin

$8,710 @ 5% $435.50 AUD$9,145.50
GST AUD$914.55
AUD$10,060.05

That invoice appears to be supported by material which includes:

(a) an invoice from L Spencer addressed to TRS, which sets out:

For the following services during the

month of June, 2018. Time spent at

Georgetown invoiced separately.
Time: 32.5 hours @ $200/hour

(see attached)  Aud$6,500
Incidentals: Comms. Charges  Aud$200.00
GST @ 10%:  Aud$670.00
Total This Invoice Aud $7,370.00

(b) an invoice from Raymond Perkes, solicitor, dated 2 July 2018 addressed to TRS. That invoice records 10 hours at $200 per hour for attendances in June of 2018 with respect to:

(i) tenement schedules to AMD;

(ii) attendance on Daniel van der Hayden re minimum expenditure;

(iii) Normanby Operations Meeting at Woy Woy;

(iv) review weekly report; Lidar Support letter; Bank Ban Springs letter and related advice.

The TRS September invoice dated 1 September 2018 sets out:

To:Project Management fees for August 2018 comprised of:
L K Spencer fees $8,000
L K Spencer communications charges

$200.00
R D Perkes fees $1,500.00 and internet

expenses $20.00
TRS Management overhead margin

$9,720 @ 5% $486.00 AUD$10,206.00
GST AUD$1,020.60
AUD$11,226.60

The supporting material includes an invoice from L Spencer addressed to TRS for the month of August 2018.
Time spent on various admin requests

from AMD.
Time:             40 hours @ $200/hour   Aud  $8,000
Incidentals:     Comms. Charges  Aud$200.00
GST @ 10%:  Aud$820.00
Total This Invoice     Aud $9,020.00
There was a further invoice from Mr Perkes addressed to TRS in relation to:
Description  Charge          GST
…
Tenement Schedules to AMD
Ban Ban Springs letter, emails and

related advice
Advising and consultations generally

during August
7.5 hours @ $200.0 per hour  $1,500.00            $150.00
Google Fees (July and August 2018)       $20.00                $2.00
Total  $1,672.00

The purchase order raised by AMD on 7 September 2018, in its description, sets out what had been referred to in the September invoice.

The October invoice, dated 10 October 2018, provided by TRS to AMD sets out:

To:Project Management fees for September

2018 comprised of:
L K Spencer fees $6,600.00
L K Spencer communications charges

$250.00
R D Perkes fees $500.00 and internet

expenses $10.00
TRS Management overhead margin

$7,360.00 @ 5% $368.00 AUD$7728.00
GST AUD$772.80
AUD$8,500.80

Again, in the support of that invoice there is a further invoice from L Spencer in the previous form totalling $7,535.00 for 33 hours at $200 per hour and incidental charges of $250.00. In addition, there is a timesheet which sets out that 33 hours were required to attend to the tasks referred to in the timesheet. There are approximately 28 tasks set out.

The October invoice is also supported by an invoice from Mr Perkes. That relates to:
Description  Charge          GST
…
Tenement Schedules to AMD
Ban Ban Springs letter, emails and

related advice
Advising and consultations generally

during September
2.5 hours @ $200.0 per hour  $500.00             $50.00
Google Fees (September 2018)   $10.00              $1.00
Total  $561.00

The purchase order provided by AMD dated 11 October 2018 recites what is set out in the October invoice including the total amount charged. I note that despite the total being correct, one of the items was overstated.

AMD contends that none of the supporting documentation was provided with the July, September and October invoices. TRS contends that it was unnecessary to provide supporting documentation. In the absence of any material that demonstrate that the supporting documentation was provided with the July, September and October invoices, the inference is that TRS does not contend that the supporting documentation was provided.

TRS did not concede that the purchase orders were a necessary component. The Court could infer that the debts were due and payable within 21 days from past conduct arising from the April 2017 agreement which had specified 21 days for payment. TRS also referred to Barrett J’s observation in Growth Equities[68] that the invoice itself does not create a debt and that it arose from the performance of the services. It was submitted that the plaintiff had not established issues requiring further investigation and that they were mere bluster and spurious allegations.
[68]Growth Equities (n 64) [4].

Consideration

The law in relation to a genuine dispute is well established. In determining whether there is genuine dispute, I am not required to ‘embark upon an extended inquiry’[69] nor to ‘attempt to weigh the merits of that dispute’.[70] I am only required to ‘conclude that there is a dispute and that it is a genuine dispute’,[71] which ‘connotes a plausible contention requiring investigation’.[72] The dispute must be ‘bona fide and truly exist in fact and … the grounds for alleging the existence of a dispute [must] be real and not spurious, hypothetical, illusory or misconceived’.[73]
[69]Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290, 295 (Hayne J).
[70]Ibid.
[71]Ibid.
[72]Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, 787 (McLelland CJ in Eq).
[73]Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (in liq) [2015] VSCA 330, [49] (Kyrou, Ferguson and Kaye JJA).

A genuine dispute will only not be found when the contention raised is ‘so devoid of plausibility that no further investigation was required’.[74]
[74]Ligon 158 Pty Ltd v Huber (2016) 117 ACSR 495, 508 [73].

The Corporations Act 2001 (Cth) does not define the term ‘debt’, and, in the context of the Act, ‘debt’ has been held to have its common law meaning. In HL Diagnostics Pty Ltd v Psycadian Ltd,[75] Master Newnes (as his Honour then was) held:

There is no definition of ‘debt’ in the Corporations Act, but there is authority for the proposition that the term bears its common law meaning: Commonwealth Bank of Australia v Butterell (1994) 35 NSWLR 64. It is clear that at common law a debt is distinct from a liability in damages or some other unliquidated obligation: Commonwealth Bank of Australia v Butterell (supra), Jelin Pty Ltd v Johnson (1987) 5 ACLC 463. The essence of a debt at common law is an obligation of one person to pay a certain, or liquidated, sum to another: Young v Queensland Trustees Ltd (1956) 99 CLR 560 at 567. That is, the characteristic of a debt is that it is a liquidated sum of money which is immediately payable or which, by reason of a present obligation, will become payable in the future: In Re European Life Assurance Society (1869) LR 9 Eq 122 at 127; Webb v Stenton (1883) 11 QBD 518 at 526; Re Australia and New Zealand Savings Bank Ltd [1972] VR 690 at 692. In Rothwells Ltd v Nommack (No 100) Pty Ltd (1990) 2 Qd R 85 (at 86) McPherson J described a debt, for the purposes of a statutory demand, as a liquidated sum in money presently due, owing and payable by one person, called the debtor, to another person called the creditor.

In Hawkins v Bank of China (1992) 26 NSWLR 562, in considering the meaning of the word ‘debt’ in s 556 of the Corporations Law, Gleeson CJ observed (at 572) that the word ‘debt’ is not a word of precise and inflexible denotation and, wherever it appeared in s 556, it ought to be applied in a practical and commonsense fashion, consistent with the context and the statutory purpose. That observation appears to me, with respect, to be equally applicable to s 459E of the Corporations Act.[76]

[75][2005] WASC 234.

[76]Ibid [27]–[28].

Furthermore, a debt for the purposes of s 459E is a liquidated sum, as opposed to a liquidated claim or liquidated demand. In Vimblue Pty Ltd v Toweel (‘Vimblue’),[77] Barrett J distinguished between these terms:
[77][2009] NSWSC 494 (‘Vimblue’).

A ‘debt’, for present purposes, is ‘a liquidated sum in money presently due, owing and payable by one person, called the debtor, to another person, called the creditor’. These are words of McPherson J in Rothwells Ltd v Nommack (No 100) Pty Ltd [1990] 2 Qd R 85 at 86. That was a case concerning a statutory demand under earlier but analogous provisions.
It may be noted that McPherson J referred to a ‘liquidated sum’, not a ‘liquidated demand’. The nature of a ‘liquidated sum’ was explained by Knox CJ and Starke J in Spain v Union Steamship Co of New Zealand Ltd [1923] HCA 21; (1923) 32 CLR 138 at 142 by quoting from the then current edition of Odgers on Pleading:
Whenever the amount to which the plaintiff is entitled … can be ascertained by calculation or fixed by any scale of charges or positive data it is … liquidated.

There was reference in Spain’s case to Stephenson v Weir (1879) 4 LR Ir 369. It was held in that case that a common count claim for work done was a ‘liquidated demand’. Palles CB said at 372:
[D]emands for work and labour on a quantum meruit, or for goods sold, although the price was not fixed by contract, are clearly ‘liquidated demands’; … when the value of the work or the goods as the case may be, is ascertained, that value determines and therefore liquidates the claim.

This statement identifies the distinction between ‘liquidated claim’ or ‘liquidated demand’ and ‘liquidated sum’. A process of valuation or assessment or the application of some standard of measurement is necessary to cause the latter to emerge from or be distilled from the former.
The process by which a claim is translated into a right to a liquidated sum was described by Cohen J in Re Ahearn; Ex parte Palmer (1906) 6 SR (NSW) 576, a case concerning an unliquidated claim. His Honour said at 577:
For failure to meet his contracts he was liable in damages, and, so long as it rested in damages, the liability was not a liquidated sum; before it could become so, it would have to be assessed either under the Stock Exchange rules, or by the ordinary tribunals, or by agreement between the parties, for the parties may meet and agree upon an amount which one shall be deemed to owe the other. There is no special virtue in having the amount assessed by a Court or a domestic tribunal, for an assessment between the parties is equally efficacious for the purpose of constituting the amount a liquidated sum.[78]

[78]Ibid [13]–[17].

In Timberland v Abercrombie,[79] Macready AsJ applied the reasoning of Barrett J in Vimblue and held that the amount of $75,000 in that case, which was fixed by a clause in the contract, was a ‘“liquidated sum” and not a “liquidated claim” or “liquidated demand” since there [was] a mechanism to determine the amount’.[80]
[79][2012] NSWSC 379 (‘Timberland’).
[80]Ibid [35].

Therefore, where a contract or agreement between parties provides for a mechanism to calculate or ascertain a specific amount that is due and payable, that amount is a liquidated sum and is a debt for the purposes of s 459E of the Act.[81] Where a contract or agreement does not provide such a mechanism, an amount claimed under the contract will only constitute a liquidated claim or liquidated demand and will not constitute a debt for the purposes of s 459E of the Act.
[81]See also Meales Concrete Pumping Pty Ltd v Probuild Constructions (Aust) Pty Ltd (2015) 302 FLR 393, 405 [42]–[43], 406 [47]; AMI Australia Holdings Pty Ltd v PHD Networks Pty Ltd [2011] NSWSC 161, [62] (‘AMI Australia’).

The April 2017 agreement, which was terminated, provided for fees in clause 4 as follows:

4.1 Amount of fees
The fees for the provision of the services by the manager shall be as set out in the fee schedule contained in Schedule 3 — A and B hereto.

4.2 Payment of fee
The principal shall pay the fees payable to the manager in arrears within twenty-one (21) days after submission of a GST tax invoice by the manager to the principal.

4.3 Variation of fee
If to properly provide services pursuant to this deed it is agreed that the manager needs to employ resources additional to those required to undertake the Services referred to in Schedule 2 then the manager shall be entitled to an equitable adjustment to the fee.

4.4 Out of pocket expenses
The manager may with the prior written consent of the principal incur out of pocket expenses in connection with the provision of the Services. The amount of any such out of pocket expenses shall be invoiced and paid in the same manner as the fees.

Schedule 2 sets out the scope of works. Schedule 3 is the fees payable. It provides:

A. From 31 March 2017 to the date of the IPO
·An upfront mobilization fee of A$15,000.00 …
·Monthly fixed fee being $40,000 (excl GST) per month to be paid monthly in advance within 7 days of receipt of a tax invoice from TRS to [AMD].
·The cost of any site visit by TRS Consultants will be invoiced to [AMD] at agreed daily rates plus a 5% margin.

I have not set out the fee structure following the IPO as that did not eventuate.

Until the termination of the April 2017 agreement, there had been agreement between the parties to pay a retainer amount per month plus the specified extras. That amount was payable within 21 days of the invoice being provided.

TRS relied upon an exchange of emails on 1 February 2018 to demonstrate the existence of the second agreement. The initial email from Lee Spencer on behalf of TRS dealt with the issue of TRS’s ongoing relationship with AMD. It did, however, note that ‘the December [2017] and January [2018] … invoices were currently outstanding’.

Tony Bell, on behalf of AMD, relevantly responded:

Please continue ‘business as usual’ however until we get the final TRS agreements signed off you and Ray should bill AMD at your normal hourly rates.

Lee Spencer, on behalf of TRS, responded relevantly: ‘Ok, Tony just need to get all formalised.’

Finally, Tony Bell, on behalf of AMD, responded, ‘All good’.

Although TRS contended that Tony Bell’s reference to ‘should bill AMD at your normal hourly rates’ is to an agreed hourly rate of $200 per hour (plus GST) and a daily rate of $1,000.00 per day (plus GST), TRS falls short of identifying a process for determining whether the hours billed are appropriate.

I need to be satisfied that an agreement between the parties was concluded. I need to be satisfied that all terms of the second agreement are certain and had been agreed. Once reaching that degree of satisfaction, I need to consider if such agreement could lead to an amount claimed pursuant to the second agreement that could constitute a debt due and payable for the purposes of the statutory demand regime.

AMD disputes that there was any concluded agreement in the form contended by TRS. Further, AMD disputes that there was any obligation to pay the invoices until supporting documentation has been provided. The onus remains on AMD to demonstrate a genuine dispute. However, even if I do not accept the contentions put forward by AMD, I still need to be satisfied that there is still a debt due and payable. Putting aside AMD’s disputes, considering the contentions of TRS in isolation, I need to be satisfied that the second agreement:

(a) was certain as to what services were to be provided and in respect of which tenements;

(b) specified the value of such services;

(c) alternatively, set out a mechanism for the calculation of the value of such services; and

(d) provided for the value of such services to be due and payable by a particular date.

The primary submission by TRS was that the provision of purchase orders was not a necessary element of the second agreement nor was the provision of the same necessary to crystallise liability to pay.

I consider that the second agreement as propounded by TRS, at the highest, was an agreement for monthly services. In contrast to the April 2017 agreement, the services were not certain and varied from month to month. At best, the provision of the monthly services gave rise to a claim for compensation each month.

Although there might have been an agreement as to the appropriate rates and when the amount claimed might be due and payable, there is an absence of a mechanism to calculate whether the time spent is appropriate or necessary. In AMI Australia Holdings Pty Ltd v PHD Networks Pty Ltd,[82] Macready AsJ held that there was an agreement between the parties in which the amount of the debt could be determined and therefore the debt was a liquidated sum. In that case, although there was no evidence with respect to the processes used to place orders for services or their agreed rates, there was a repayment plan in which the amount was fixed and the affidavit of the director of the plaintiff admitted that the amount was owed. But it is not the case in this proceeding. Even accepting the submission of TRS, it is uncertain whether or not the second agreement called for the provision of any particular services per month. Further, in the absence of definite monthly services, the necessity and value of such services are matters which require further investigation. There is no material upon which a court could determine any concluded agreement as to all important elements between the parties. Whether or not there was any agreement that purchase orders would be required prior to any amount stated in the invoice is due and payable or whether or not the provision of the purchase orders crystallised liability to pay are matters which require further investigation.
[82]AMI Australia (n 81) [62].

Alternatively, the invoices may give rise to quantum meruit claims. A quantum meruit claim does not arise from a contract, but arises where ‘there is no applicable genuine agreement or where such an agreement is frustrated, avoided or unenforceable’.[83] A quantum meruit claim is a claim for reasonable remuneration for work done.
[83]Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221, 256 (Deane J).

In Vimblue,[84] Barrett J held that the distinction between a liquidated sum and a liquidated claim also applies to a quantum meruit claim:
[84]Vimblue (n 77).

The same reasoning applies to a liquidated claim upon a quantum meruit for work done. In the Irish case to which I have referred, Palles CB held that an action for debt is maintainable upon such a claim, adding at 373:
When it was said that an action of debt would lie only for a sum certain, it was sufficient that the sum should be capable of being ascertained by a jury by positive data, and not merely measured by opinion or conjecture. In the present case, for instance, when the value of the work was ascertained, the sum to be recovered became definite, and the case would not be like one of assault in which there were not any certain data to fix the amount of damages.

The words of particular importance in this passage are, ‘when the value of the work was ascertained, the sum to be recovered became definite’. ‘Definite’, in the context, is synonymous with ‘liquidated’
If a mechanic spends half an hour repairing my car and there is no agreement between us as to the amount he will charge and I will pay, his subsequent claim for $1 million may be regarded as a liquidated claim. But no liquidated sum is thereby owing, due and payable by me to him. His entitlement is to be paid a reasonable sum upon a quantum meruit. Until the value of the work is ascertained and in the absence of some process that fixes what is reasonable according to what Palles CB called ‘positive data’, as distinct from ‘opinion or conjecture’, the liquidated claim does not mature into an entitlement to a liquidated sum.[85]

[85]Ibid [18]–[20] (emphasis in original).

Hence, in Vimblue, Barrett J held that a quantum meruit claim will only be a debt when a reasonable value of the work has been ascertained and therefore the claim would be a liquidated sum.

However, I note that the term ‘liquidated sum’ has not always been used in earlier authorities to describe a ‘debt’ with respect to quantum meruit claims, but that a ‘liquidated demand’ has been considered to be a ‘debt’.

For this reason, Vimblue is potentially inconsistent with the earlier authority of The Roy Morgan Research Centre Pty Ltd v Wilson Market Research Pty Ltd (No 2) (‘Roy Morgan (No 2)’),[86] in which Santow J held that the common money count in that case was a ‘debt or liquidated demand’.[87] Santow J did not refer to a ‘liquidated sum’, but instead treated a ‘liquidated demand’ as a ‘debt’. Santow J referred to Alexander v Ajax Insurance Co Ltd:[88]
[86](1996) 20 ACSR 170 (‘Roy Morgan (No 2)’).
[87]Ibid 174.
[88][1956] VLR 436.

It is clear enough that such a common money count is for a debt or liquidated demand. The history applicable to such counts is conveniently collected in Alexander v Ajax Insurance Co Ltd [1956] VLR 436 at 445; ALR 1077 per Sholl J. Sholl J delineates the history of the phrase. He concluded that in 1852 any of the following categories of claim would have been for a debt or liquidated demand:
(a) for which the action of debt would lie;
(b)for which an indebitatius (or common) count would lie - including those cases formally covered by the quantum meruit or quantum valebat counts, notwithstanding that the only agreement implied between the parties in such cases was for payment at a ‘reasonable’ rate;
(c)for which covenant of special assumpsit, would lie, provided that the claim was for a specific amount not involving in the calculation thereof elements the selection whereof was dependent on the opinion of a jury.

Sholl J concludes:
In my opinion, subject to any specific inclusions or exclusions which the decisions of the courts may have made since 1852 to or from the area so delimited (as the case may be), that is still the meaning of the relevant expressions which have been carried down since that date into what are now Orders III, XIII, XIV and XXVII [of the Rules of the Victorian Supreme court].[89]

[89]Roy Morgan (No 2) (n 86) 174.

This potential inconsistency between the authorities was observed by Jackson J in Australian Communication Exchange Ltd v Pilot Partners Pty Ltd:[90]

There is also a potential question whether the entitlement to payment of a reasonable amount under an oral contract to perform services can constitute a debt that is due and payable that is not the subject of a genuine dispute if challenged by the alleged debtor. In The Roy Morgan Research Centre Pty Ltd v Wilson Market Research Pty Ltd (No 2), Santow J held that such a claim on a ‘common money count for work done’ was a ‘liquidated claim’ and one for a ‘debt or liquidated demand’ that established the claimant as a creditor. On the other hand, in Vimblue Pty Ltd v Toweel trading as Carpenters Core Building, Barrett J held that where there was no agreed method of calculation and had been no determination of a reasonable reward for the work done there was a genuine dispute as to the existence or amount of the alleged debt in the statutory demand. Neither of these cases was referred to by the parties in argument in the present case, so it would not be appropriate to explore the reasoning on which they were based further, beyond observing that they are potentially inconsistent.

[90][2017] QSC 176, [30] (citations omitted).

However, in Roy Morgan (No 2), Santow J also referred to the ascertainment of the claim with respect to whether the amount is liquidated:

Odgers on Pleading and Practice, 5th ed at 41 states that ‘whenever the amount to which the plaintiff is entitled … can be ascertained by calculation or fixed by any scale of charges or other positive data, it is … liquidated’. That proposition was approved by Knox CJ and Starke J of the High court [sic] in Spain v Union Steamship Co of NZ Ltd (1923) 32 CLR 138. While Ritchie comments that this does no more than state a very general proposition and that numerous cases have referred to the difficulty of ascertaining the true meaning of the phrase ‘debt or liquidated demand’, I am satisfied that the presently foreshadowed claim is no less an example of the liquidated claim than the earlier cited cases concerning quantum meruit claims.[91]

[91]Roy Morgan (No 2) (n 86) 174.

In light of this, it is apparent that Santow J did not distinguish between a ‘liquidated claim’ or ‘liquidated demand’ and a ‘liquidated sum’, but accepted that the amount claimed is ‘liquidated’ when it has been ascertained. Santow J did not use the terminology as distinguished by Barrett J, but, in effect, reached the same conclusion — that the amount claimed is a debt if it can be ascertained by calculation or is fixed. Using Barrett J’s terminology in Vimblue, it is a ‘liquidated sum’ and not just a ‘liquidated demand’. Understood in this way, Vimblue and Roy Morgan (No 2) can, therefore, be read together and are not inconsistent.

In Roy Morgan (No 2), the plaintiff provided evidence of the ‘substantiation, calculation and costing of work allegedly done’,[92] which, at the stage of the proceeding, was not disputed by the defendant. Santow J held that the plaintiff’s claim for work done was a common money count for work done and that it was a debt or liquidated demand.[93] Therefore, it can be inferred that Santow J accepted that the amount claimed by the plaintiff has been ascertained such that it can constitute a debt.
[92]Ibid 172.
[93]Ibid 173–4.

Further, in Edwards v Australian Securities and Investments Commission (‘Edwards v ASIC’),[94] Macfarlan JA, with Spigelman CJ and Campbell JA agreeing, held that there was no significant difference between a ‘debt’ and a ‘liquidated demand’, and that a quantum meruit claim can be a ‘debt’ for the purposes of s 588G of the Act. His Honour held that:
[94](2009) 264 ALR 723 (‘Edwards v ASIC’).

There is a wealth of authority for the proposition that a claim for the reasonable value of work done, enforceable by a quantum meruit action, is a ‘debt or liquidated demand’ for the purposes of court rules conferring procedural advantages on persons suing for debts or making demands for liquidated amounts. There is no present significance in any difference that may exist between the concepts of ‘debt’ and ‘liquidated demand’. The concepts are substantially the same and case authority indicating that a quantum meruit claim of the nature which is in question in the present case is a ‘debt or liquidated demand’ may be taken as authority that such a claim is a ‘debt’ for the purposes of s 588G of the Act.
Relevant authority includes the following.
In Spain v Union Steamship Company of New Zealand Ltd (1923) 32 CLR 138; 29 ALR 311; [1923] HCA 21 (Spain) it was held that an action by the captain of a ship against the owner to recover the reasonable expenses incurred by the captain in relation to a hearing before a Court of Marine Inquiry into the cause of the wreck of the ship, was a claim for a ‘debt or liquidated demand’, with the consequence that the captain was entitled to issue a default summons pursuant to s 64 of the District Court Act 1912. Knox CJ and Starke J described the defendant’s contention that the claim was not for a debt or liquidated demand because the plaintiff’s right was to cover ‘reasonable expenses’ and ‘not a sum certain or any liquidated amount’ as untenable: at CLR 142; ALR 312. Isaacs and Rich JJ were of the same view and referred to the plaintiff being entitled ‘to a sum payable instanter before action and in law ascertained’ (at CLR 145; ALR 313) and to the plaintiff’s right being one ‘to instant payment of the reasonable sum’: (at CLR 154; ALR 317).

In Crisp & Gunn Co-operative Ltd v Hobart Corporation (1963) 110 CLR 538; [1964] ALR 822; [1963] HCA 55, the High Court held that a claim to recover compensation for compulsory acquisition of land was an action to recover a ‘debt’. McTiernan, Taylor and Windeyer JJ rejected the proposition that the claim was not an action for debt because it was ‘not an action for a sum certain’ but rather, involved an assessment of compensation: at CLR 543; ALR 825–6. In support they cited Spain, Segur v Franklin (1934) 34 SR (NSW) 67 (Segur) and Lagos v Grunwaldt [1910] 1 KB 41.
In Segur, a claim for fees due for acting as an arbitrator was held to be an action for ‘a debt or liquidated demand’. In Lagos, a claim by a solicitor for professional charges and disbursements was held to be a liquidated demand.
In Victorian WorkCover Authority v Esso Australia Ltd (2001) 207 CLR 520; 182 ALR 321; [2001] HCA 53, the plurality judgment referred to: ‘debts’ capable of being set-off under the Statutes of Set-Off as including ‘claims in quantum meruit and quantum valebat where goods had been sold or services were performed without the agreement of a price and the claims were disputed on grounds which could easily be resolved in the litigation’: at [30].
In Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221; 69 ALR 577; [1987] HCA 5, the High Court held that an action by a builder upon a quantum meruit for the value of work done and materials supplied under an oral, unenforceable building contract was a claim in debt: see particularly per Deane J at CLR 250–7; ALR 600–7.
In my view it is clear, in light of this authority, that a liability in quantum meruit to pay to a plaintiff reasonable remuneration for work done at the request of the defendant is a ‘debt’ within the meaning of s 588G of the Act.[95]

[95]Ibid 739–40 [81]–[88].

However, for a quantum meruit claim to be a ‘liquidated demand’ or ‘debt’, Macfarlan JA included the requirement of reasonableness in the amount claimed. As reasonableness requires an assessment of the value of the work done, if an amount claimed is reasonable, then the value of the work has been ascertained. Therefore, in the terminology of Barrett J in Vimblue, this definition of a ‘debt’ or ‘liquidated demand’ is effectively a ‘liquidated sum’.

Macfarlan JA in Edwards v ASIC did not refer to the decision of Barrett J in Vimblue, which was decided earlier in the same year. For this reason, it is possible that the distinction between ‘liquidated demand’ and ‘liquidated sum’ in Vimblue was not brought to his Honour's attention.

To find that the amounts claimed in the statutory demand are quantum meruit claims, in the absence of any applicable standards or taxation regime such as that imposed upon legal practitioners, there is no available mechanism to consider if TRS’s work is appropriate or required the number of hours specified. Further, I cannot be certain that the services provided by Mr Perkes, as a solicitor, were of a legal nature. Neither the second agreement nor April 2017 agreement provided anything more than appropriate rates.

Acknowledgement of debt

TRS relies upon an email exchange which took place on 9 October 2018 to demonstrate that AMD had acknowledged the amounts said to be due. Tony Bell, of AMD, wrote to Lee Spencer, of TRS:

As far as TRS, you, Jim MD and Richard, what pecking order do you want the bills to be paid as funds become available?

Lee Spencer replied:

Richard, Jim, me, TRS

The difficulty for TRS is that a degree of reading between the lines is required to determine if the exchange was anything more than a request for advice with respect to the order for payment. Cross-examination will be required. Further, the amount with respect to TRS is not identified. The exchange must also be considered in the context of the email of 4 October 2018 from Tony Bell to Lee Spencer, which set out:

Please prepare the required reports. I will call you later today so that we can agree a charge out basis whilst we amend the TRS agreement?

The email of 4 October seems to set out that the relationship between TRS and AMD was still being negotiated.

Accordingly, I conclude that whether or not the amounts claimed in the July and September invoices were acknowledged as being due by AMD is an issue which requires further investigation.

Purchase orders

Alternatively, to resist the application to set aside the statutory demand based upon a genuine dispute, TRS is required to demonstrate that the provision of the two purchase orders in relation to the September and October invoices is sufficient to constitute an acknowledgment of the debt.

While it is the plaintiff who generally has the onus to show there is a genuine dispute to set aside a statutory demand, with respect to the issue of whether there has been acknowledgment of the debt, the defendant has the onus to show that the plaintiff’s conduct gave rise to such claims.

An admission of a debt can constitute a finding that there is a debt for the purposes of s 459E of the Act. For example, in the context of whether there was a debtor and creditor relationship between the trustee and the beneficiaries, Foster J held in Gusdote Pty Ltd v Ashley[96] that the financial statements made it clear that the trust distributions had been made and there was a creditor/debtor relationship between the trustee and the beneficiaries.[97] His Honour referred to Chianti Pty Ltd v Leume Pty Ltd,[98] in which Buss JA said:

In the present case, I am of the opinion that the financial statements of the SJRF Trust and the evidence of Stephen Frederick Ryan … when considered in the context of the relevant factual and legal background including cl 3.5 of the SJRF Trust deed and the resolutions, constitute admissions by the appellant that the distributed amounts were owing by the appellant to the respondent, for the purposes of the principle referred to in Gummow J’s reasons in Roxborough (at [67]). The latest financial statements before Judge Eaton, namely, those for the year ended 30 June 2003, described the distributed amounts as an ‘Unpaid Beneficiary Entitlement’. When that description is read with cl 3.5, the resolutions and Stephen Frederick Ryan’s evidence, the proper conclusion is that the appellant’s admission was of an obligation to pay on demand. Although it is unnecessary to determine this point, my examination of Edwards v Lowndes and the other cases in the line of authority referred to in Meagher, Gummow & Lehane’s, Equity Doctrines & Remedies (4th ed, 2002) [1-215] and Gummow J’s reasons in Roxborough (at [67]), does not indicate that it is essential, for there to be a binding admission in relation to an amount owing by a trustee to a beneficiary, that the relevant amount is held as, or represented by, cash at bank or some other monetary sum when the alleged admission is made.[99]

[96](2011) 193 FCR 227 (‘Gusdote v Ashley’).

[97]Ibid 256 [130].

[98](2007) 35 WAR 488.

[99]Ibid 514–15 [77], quoted in Gusdote v Ashley (n 96) 256 [127].

Foster J also held that the trustee was estopped from denying that the income was distributed to the beneficiaries where the trustee had lodged its own tax returns to that effect and the beneficiaries had included that income in their own income tax returns at the instigation of the director of the trustee company.[100]
[100]Gusdote Pty Ltd v Ashley (n 96) 254 [119].

The provision of the purchase orders does not of itself constitute an agreement to pay. TRS does not contend that any formal agreement to acknowledge the debt has been entered into by the parties. In those circumstances, I have taken it that TRS contends that there is an acknowledgment of the alleged debts by AMD by way of promissory estoppel. However, I note that promissory estoppel was not raised by TRS. In the absence of a formal agreement to acknowledge the debt, it is appropriate that I deal briefly with the issue of promissory estoppel.

I note that promissory estoppel is a form of equitable estoppel. While the defendant does not refer to a specific test for the elements of promissory estoppel, a formulation of the test is elucidated by Brennan J in Walton Stores (Interstate) Ltd v Maher (‘Walton Stores’).[101] His Honour held that:

In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff’s action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise.[102]

[101](1988) 164 CLR 387 (‘Walton Stores’).

[102]Ibid 428–9.

For a representation to found an estoppel, it must be clear and unambiguous.[103]
[103]Legione v Hateley (1983) 152 CLR 406, 435–7 (Mason and Deane JJ); Olga Investments Pty Ltd v Citipower Ltd [1998] 3 VR 485, 499 (Charles JA).

All six elements referred to in Walton Stores (paragraph 127 hereof) must be satisfied before I can determine that there was a representation by the provision of the purchase orders capable of supporting a promissory estoppel. That is a matter which ought to be further investigated and, in particular, after consideration of cross‑examination to determine whether all the elements of promissory estoppel are made out.

Conclusion

I have determined that the statutory demand ought to be set aside for ‘some other reason’. If I had been required to do so, I would have also been satisfied that there is a genuine dispute as to the existence of the debts and that the defendant has not made out that the claims in any of the invoices are due and payable. Accordingly, the statutory demand dated 28 November 2018 is set aside.

Orders

The statutory demand dated 28 November 2018 and served on the plaintiff be set aside pursuant to s 459J(1)(b) of the Corporations Act2001 (Cth).
The defendant pay the plaintiff’s costs, including the reserved costs, on a standard basis.

Description of the debts	Amount of the debt
1. The amount due by the Debtor Company to the Creditor pursuant to Invoice No. 00015 dated 1 July 2018:	$10,060.05
2. The amount due by the Debtor Company to the Creditor pursuant to Invoice No. 00016 dated 1 September 2018:	$11,226.60
3. The amount due by the Debtor Company to the Creditor pursuant to Invoice No. 00018 dated 10 October 2018:	$8,500.80
Total Amount	$29,787.45

[2021] VSC 202

26 April 2021