Asian Century Holdings Inc v Fleuris Pty Ltd - [2000] WASCA 59

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE FULL COURT (WA)

CITATION: ASIAN CENTURY HOLDINGS INC -v- FLEURIS PTY LTD [2000] WASCA 59

CORAM: KENNEDY J
IPP J
HEENAN J

HEARD: 15 NOVEMBER 1999

DELIVERED : 15 MARCH 2000

FILE NO/S: FUL 73 of 1999

BETWEEN: ASIAN CENTURY HOLDINGS INC
Appellant
AND
FLEURIS PTY LTD (ACN 009 010 495)
Respondent

Catchwords:

Corporations - Winding up - Grounds for winding up - Insolvency - Statutory demand - Whether genuine dispute as to indebtedness - Statutory demand upheld

Procedure - Judgments and orders - Order setting aside statutory notice - Whether final order

Legislation:

Corporations Law s 459G, s 459H

Result:

Appeal allowed

Representation:

Counsel:

Appellant: Mr J C Vaughan
Respondent: Mr D H Solomon

Solicitors:

Appellant: Freehill Hollingdale & Page
Respondent: Solomon Brothers

Case(s) referred to in judgment(s):

A-Pak Plastics Pty Ltd v Merhone Pty Ltd (1995) 13 ACLC 896
Brouwer v Titan Corporation Ltd (1997) 149 ALR 50
Carr v Finance Corporation of Australia Ltd (1981) 147 CLR 246
Hall v Nominal Defendant (1966) 117 CLR 423
John Holland Construction and Engineering Pty Ltd v Kilpatrick Green Pty Ltd (1994) 12 ACLC 716
A Hudson Pty Ltd v Legal & General Life of Australia Ltd (1985) 1 NSWLR 701
Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290
Paratoo Pty Ltd v Frizzell, unreported; FCt SCt of WA; Library No 970612; 21 October 1997
Salter Rex and Co v Ghosh [1971] 2 QB 597
Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 147 ALR 444
Tampion v Anderson (1973) 3 ALR 41
Terranora Group Management Pty Ltd v Terranora Lakes Country Club Ltd (in liq), unreported; SCt of NSW (Santow J); BC9706535; 1 December 1997
Turner Equity Pty Ltd v Melvista Park Pty Ltd, unreported; FCt SCt of WA; Library No 960538; 5 September 1996

Case(s) also cited:

Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170
Capital Bay Investments Pty Ltd v Richard Szklarz Architects Pty Ltd, unreported; SCt of WA (Murray J); Library No 980503; 8 September 1998
Eden Bay Pty Ltd v Bennett & Co (1997) 15 ACLC 1,634
Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACLC 669
House v The King (1936) 55 CLR 499
Hughes v Gales (1995) 14 WAR 434
Jarrett v Seymour (1993) 46 FCR 557
Joshua Corporation Pty Ltd v KTX Technology Pty Ltd, unreported; SCt of WA (Master Sanderson); Library No 980158; 3 April 1998
Licul v Corney (1976) 180 CLR 213
London Economics (Aust) Pty Ltd v Frontier Economics Pty Ltd [1999] FCA 932
Malouf v Malouf (1999) 86 FCR 134
Rohalo Pharmaceutical Pty Ltd v RP Scherer SpA (1995) 13 ACLC 94
Scanhill Pty Ltd v Century 21 Australasia Pty Ltd (1994) 12 ACLC 111
Re R & G Shelley Pty Ltd (in liq) (No 2) (1991) 103 FLR 220
Venetian Nominees Pty Ltd v Conlan (1998) 20 WAR 96
The State of Western Australia v Bond Corporation Holding Ltd (1991) 5 WAR 40
Wilson v Metaxas [1989] WAR 285

KENNEDY J: In these proceedings, the appellant has appealed, or, in the alternative, has sought leave to appeal, from the decision of a Master of this Court setting aside a statutory demand served by the appellant on the respondent pursuant to s 459E of the Corporations Law. The respondent has argued that the appellant required leave to appeal, on the basis that the judgment of the learned Master was an interlocutory judgment, and that leave to appeal was therefore necessary under s 60(1)(f) of the Supreme Court Act 1935. This raises once again an issue on which differing views have been expressed, although, as we indicated during the course of the argument, this is a case in which, if leave to appeal should be necessary, we would grant that leave.
In Brouwer v Titan Corporation Ltd (1997) 149 ALR 50, the Full Court of the Federal Court (Black CJ, Lindgren and Sackville JJ), at 52 ‑ 53, summarised the question to be decided as follows:
"It has been said that "[t]he question whether a judgment is final or interlocutory for the purpose of the rules relating to appeals is one productive of much difficulty": Carr v Finance Corp of Australia (No 1) (1981) 147 CLR 246 at 248 (Carr), per Gibbs CJ. But it may now be taken to be settled that the test for determining whether a judgment is final, as distinct from interlocutory, is whether the judgment finally determines the rights of the parties to proceedings: Licul v Corney (1976) 50 ALJR 439 at 444; Computer Edge Pty Ltd v Apple Computer Inc (1984) 54 ALR 767 (HC) (Computer Edge); Carr, at 248; Arrowcrest Group Pty Ltd v Gill (1993) 46 FCR 90 (Fed C, Full Court) at 100-1. In applying this test, the court must have regard to the legal rather than the practical effect of the judgment, so that the question is whether the judgment finally determines, in a legal sense, all the rights of the parties that are in issue in the proceedings: Carr, at 248; Computer Edge at 768."
The application before the Master was made under s 459G(1) of the Corporations Law for an order setting aside the statutory demand. In the New South Wales case of A‑Pak Plastics Pty Ltd v Merhone Pty Ltd (1995) 13 ACLC 896, a strong Court of Appeal, comprising Kirby P, Priestley and Sheller JJA, has held that the relevant lis in such an application is whether the opponent is entitled to have the statutory demand set aside. Sheller JA, in whose judgment the other members of the court agreed, identified the issue before the court as being whether the company was insolvent (or, perhaps, whether it owed the claimant the debt which was the subject of the statutory demand) or whether the statutory demand should be set aside. Following the decision in A Hudson Pty Ltd v Legal & General Life of Australia Ltd (1985) 1 NSWLR 701, his Honour pointed out that the only proceedings on foot between the parties at that time were those commenced by the company for setting aside the demand. He concluded that the order which had been made setting aside the statutory demand was a final order.
Subsequent to the decision of the Court of Appeal in the A‑Pak Plastics case, although without any reference to it, Santow J in Terranora Group Management Pty Ltd v Terranora Lakes Country Club Ltd (in liq), unreported; SCt of NSW (Santow J); BC9706535; 1 December 1997, held that the proceedings before him seeking to set aside a statutory demand constituted in reality merely a procedural step aimed at effecting the recovery of an undisputed debt under threat of winding up, based on an unmet notice of demand, and that the proceedings were of an interlocutory character. The demand provided the means by which a creditor could prove insolvency preliminary to a winding up application. This point arose in the context of determining whether the proceedings were interlocutory, with the consequence that, if they were, pursuant to s 75 of the Evidence Act 1995 (NSW), they were excluded from the hearsay rule.
The respondent sought to rely upon the earlier decision of Hayne J in the Supreme Court of Victoria in Mibor Investments v Commonwealth Bank [1994] 2 VR 290, which had been decided prior to the A‑Pak Plastics case. Hayne J was concerned in that case with whether some of the affidavit evidence in an application before him to set aside a statutory demand was inadmissible as having been based merely upon the deponent's information and belief. That evidence was only admissible if the proceedings were interlocutory. His Honour concluded that proceedings under s 459G do not finally determine the rights of the parties. They determine only whether or not a demand may stand. Although his Honour had indicated that the question of whether an application was interlocutory for the purposes of r 43.03(2) of the Victorian Supreme Court Rules (cf r 37.6(2) of the Western Australian Rules) was not to be decided according to whether the order made on the determination of the application would be interlocutory for the purposes of appeal, this was said in the context of his deciding that the order ultimately made would not finally determine the rights of the parties. Nevertheless, neither this case, nor the preceding case, decided the question now to be answered.
In this State, the position seems not to have been fully considered. While it is true that in Paratoo Pty Ltd v Frizzell, unreported; FCt SCt of WA; Library No 970612; 21 October 1997, on an application for leave to appeal from the decision of a Master refusing to set aside a statutory demand, the court refused that leave, with both parties proceeding on the basis that leave to appeal was required and the court not having itself raised the issue. Subsequently, in Turner Equity Pty Ltd v Melvista Park Pty Ltd, unreported; FCt SCt of WA; Library No 960538; 5 September 1996, Malcolm CJ, with Franklyn and Owen JJ agreeing, in an appeal from an order refusing to set aside a statutory demand, expressed the view, in dismissing the appeal, that the order of an Acting Master had finally disposed of the subject matter of the litigation, which was the status of the statutory demand. It does not appear from the judgment whether this particular point was fully argued.
In the end, although there is some attraction in the contrary view, I am persuaded that this Court should follow the decision of the Court of Appeal in New South Wales in the A‑Pak Plastics case. The fact that this decision was effectively reversed by the Parliament in that State by an amendment to s 101(2) of the Supreme Court Act 1970, which required leave to appeal from a judgment or order on an application under s 459G of the Corporations Law, is not material for the present purposes. On this basis, the appeal before us lies as of right, and I therefore turn to the facts of the case.
Towards the end of 1997, Port Kennedy Resorts Pty Ltd ("PKR"), of which Mr R A Lukin and Mr G K Sheehan are directors, was urgently in need of additional funding to enable it to proceed with a development known as the Port Kennedy Project. By a letter dated 1 December 1997, Pac‑Asia (Holdings) Pte Ltd ("Pac‑Asia"), a Singapore registered company, wrote to the directors of PKR advising that, "together with its associates", it was prepared to provide additional funding of $4 million for the development, on the conditions set out in that letter. Those conditions included the acquisition by Pac‑Asia of 75 per cent of the existing shares in PKR. In order to enable the respondent, of which Mr Lukin and Mr Sheehan are also directors, to maintain its existing 20 per cent shareholding in PKR, Pac‑Asia undertook to procure that one of its associates would provide security to an Australian financial institution for an advance to the respondent of $800,000 (later described as "the Commercial Loan"), which sum would be applied by the respondent in subscribing for an additional 800,000 shares of $1 each in PKR. The associate in question was later identified as being the appellant.
The terms of the proposed advance of $800,000 had been set out in a previous letter, dated 4 November 1997, from the Singapore solicitors acting for both Pac‑Asia and the appellant addressed to Mr Lukin and Mr Sheehan as directors of the respondent, as modified by a letter from Mr Lukin to the solicitors for Pac‑Asia, written on the letterhead of PKR, dated 4 November 1997, and a letter from the solicitors to Mr Lukin and Mr Sheehan, as directors of the respondent, dated 10 November 1997. The proposed loan to the respondent was to bear interest at commercial rates and was to be repaid within five years. It was a term of the arrangement that the respondent was required to indemnify the appellant for any loss or damage in connection with its providing the standby letter of credit, and the obligations of the respondent were to be guaranteed severally by Mr Lukin and Mr Sheehan.
By its letter of 1 December 1997, Pac‑Asia also indicated that, until approval had been obtained under the Foreign Acquisitions and Takeovers Act 1975 (Cth) permitting it to take up its proposed 75 per cent interest in PKR, Pac‑Asia (or one of its associates) would procure and advance the sum of $800,000 to the respondent for on‑lending to PKR. The respondent, in order to secure that advance, was required to grant a charge over 1.8 million of its shares in PKR, and Mr Lukin and Mr Sheehan were required severally to guarantee the obligations of the respondent. The terms of this temporary advance were said to be the same as those applying to the provision of the standby letter of credit. They accordingly incorporated conditions that the respondent would indemnify the lender against any loss or damage suffered or incurred by it in connection with the temporary loan and that the obligations of the respondent would be guaranteed severally by Mr Lukin and Mr Sheehan. All documentation relating to the transaction was to be "in form and substance" approved by Pac‑Asia. There was no express requirement placed upon Pac-Asia or its associate lending the money that it should itself prepare the documentation. No provision was made in the agreement for the payment of interest on the temporary advance to be made to the respondent, and no claim has since been made in that respect.
On 6 February 1998, the solicitors for Pac‑Asia wrote to Mr Lukin regarding the proposed temporary advance of $800,000 to the respondent. In their letter, it was indicated that the appellant (then known as Asian Century Fund Inc), which is a substantial shareholder in Pac‑Asia, was prepared to make a temporary loan to the respondent in the sum of $200,000 pending the finalisation of the Commercial Loan from "National Australia Bank or other financial institution", on the following terms and conditions:
"(a)unless a demand for repayment is made, in which case [the respondent] will repay the Advance on demand, [the respondent] will repay the Advance from the proceeds of the Commercial Loan; and
(b)the Advance will be disbursed into the account of [PKR] and such disbursement will be treated as disbursement of the Advance to Fleuris."
The respondent, by Mr Lukin, agreed to the terms and conditions set out in the letter by his signing it, and the sum of $200,000 was duly advanced by the appellant on or about the date of the letter.
Further advances on identical terms and conditions, on each occasion being acknowledged and agreed to by Mr Lukin, were made by the appellant to the respondent, comprising sums of $200,000 on or about 10 March 1998, $200,000 on or about 24 April 1998 and $200,000 on 20 May 1998, by which time the whole of the agreed sum of $800,000 had been advanced. A letter to Mr Lukin dated 18 May 1998 confirmed that the fourth payment of $200,000 represented the final instalment of the temporary loan of $800,000. Subsequently, an additional amount of $100,000 was advanced by the appellant, payment of which was acknowledged in a letter dated 16 July 1998, written by Mr Lukin on behalf of the respondent to the solicitors for the appellant, accepting the advance "on the same terms and conditions in respect of previous advances". Mr Lukin's letter described the advance as "a further temporary advance". It was not strictly a part of the previous arrangement for a temporary loan of $800,000 and, clearly enough, the proposed Commercial Loan of $800,000 would be insufficient to pay out in full the total of the temporary advances made by the appellant unless at least $100,000 had already been repaid by the respondent.
In the meantime, the appellant had been seeking a credit facility in the form of a term loan of $800,000 in favour of the respondent, notwithstanding that its obligation to the respondent was, on the face of it, limited to providing the ultimate lender with security in the form of a standby letter of credit. Initially, it appears that the National Australia Bank had been approached to provide this facility, but subsequently negotiations for the provision of the facility were entered into with the Overseas Union Bank Ltd ("OUB"), a Singapore registered bank having a branch in Sydney. Terms and conditions were discussed and, by letters dated 6 March 1998 and 16 March 1998, OUB wrote to the respondent directly, setting out "indicative" terms and conditions. The respondent was later advised by letter dated 23 April 1998, from Mr Ho Swee Huat, who appears to have been a director of the appellant, that the loan from OUB had been approved, and that OUB was in the process of issuing the offer letter.
On 12 May 1998, Mr Lukin wrote to Mr Ho. The letter is headed "Standby Letter of Credit" and reads: "Can you please arrange for this Standby Letter of Credit from Banque Paribas as soon as possible as this is urgent". There apparently followed a telephone conversation between Mr Lukin and Mr Ho, after which Mr Ho wrote to Mr Lukin on 18 May 1998 confirming their conversation and stating, inter alia:
"1.Pac‑Asia Holdings will organise to lend another AUD200,000 to Fleuris Pty Ltd for on‑lending to PKR bringing the total to AUD800,000 by mid‑week.
2.As and when all legal documentation is complete, Pac‑Asia's principal shareholder will organise to extend an SBLC [Standby Letter of Credit] to OUB Australia to enable Fleuris to drawdown AUD800,000 which will be remitted back to Singapore to pay Pac‑Asia Holdings the AUD800,000 loan to Fleuris (Remittance instructions shall be provided in due course).
3.Pac‑Asia will thereafter use the AUD800,000 to make advance payments to PKR for the subscription of new shares in PKR."
This letter, which, of course, preceded the making of the fourth advance of $200,000 and the additional advance of $100,000, went on to request information from Mr Lukin as to the "list of creditors (and amounts) who were paid with the AUD600,000 previously released to PKR via the loan to Fleuris Pty Ltd" and "written confirmation that none of the lots reserved by the directors of PKR has been "released" by the government and an indication when the release may occur". The letter continued: "Your partner feels that in view of PKR's tight cash flow situations, directors should pay as soon as possible for their lots". The reference in this letter to the appellant's providing the standby letter of credit "as and when all legal documentation is complete" is significant.
At some time prior to 24 July 1998, the evidence not indicating precisely when, the respondent executed an agreement with OUB, which had been prepared by the latter's solicitors, under which the bank agreed to place a loan facility not exceeding $800,000 at the disposal of the respondent. Provision was made for the payment of interest on the moneys advanced. The repayment date was defined in the agreement to mean the earliest of -
"(a)the day which is one calendar year from the date of first drawdown under this agreement or such other date as agreed to in writing by the Bank; and
(b)14 days before the expiry of the Letter of Credit; and
(c)the date on which the Facility is terminated or cancelled by the Bank in accordance with this agreement."
By cl 6.2 of the agreement, OUB was to review the Facility on an annual basis.
The letter of credit which was required to be provided pursuant to the respondent's agreement with OUB was a standby letter of credit from Banque Paribas, Singapore branch, in favour of OUB for $880,000 in the form attached to the agreement. It was a further term of the respondent's agreement with OUB that Mr Lukin and Mr Sheehan should each give a guarantee and indemnity with respect to the liabilities of the respondent, limited to $400,000, in favour of OUB.
Various conditions precedent to any advance to the respondent were set out in cl 14 of the agreement. One of the conditions was that the guarantee and the letter of credit should be executed and delivered by the parties together with a certificate of independent legal advice in relation to the execution of the guarantee by each of the guarantors.
Mr Lukin claimed in his affidavit which was filed in these proceedings that the respondent, "in satisfaction of its obligations pursuant to the Commercial Loan", had executed the loan agreement; but he made no reference to the conditions precedent set out in the agreement or to the appellant's requirement with respect to the provision of an indemnity and guarantees in connection with the provision of the standby letter of credit. By a letter dated 24 July 1998, from OUB's solicitors to the respondent, enclosing a copy of the executed facility agreement, the solicitors indicated that they looked forward to hearing from the respondent that it was in a position to complete the matter, which is clearly a reference to its satisfying the conditions precedent in the agreement. There is nothing before us to indicate whether the respondent has satisfied those conditions with which it was required to comply.

The material before us does not reveal anything regarding the actions of the parties in the second half of 1998, apart from the evidence as to the making of the additional advance of $100,000 by the appellant, although Mr Lukin has claimed, without elaboration, that he repeatedly requested the appellant to arrange for the standy letter of credit to be provided and Mr Ho has claimed that he, "on occasions too numerous to particularise", had informed Mr Lukin that the letter of credit would be arranged upon finalisation of the documentation.
The next evidence of any activity on the part of either party is that, on 12 January 1999, the appellant's solicitors wrote to Mr Lukin and Mr Sheehan with a list of outstanding matters which, it was said, had to be resolved, including documents which had to be executed, before any further funding would be provided by Pac-Asia or its shareholders. The list included an acknowledgment by the respondent of all sums loaned to it by the appellant, a facility agreement between the appellant and the respondent in relation to the OUB loan to the respondent under which the appellant agreed to arrange for a standby letter of credit to be issued in favour of the bank, an indemnity to be given by the respondent, a share mortgage to be given by the respondent in favour of the appellant by which 1.8 million shares of PKR were to be mortgaged to the appellant by way of security and a deed of guarantee and indemnity to be given by Mr Lukin and Mr Sheehan in favour of the appellant.
There is no evidence of a response to the letter of 12 January 1999. There has been no denial of the claim by the appellant in Mr Ho's affidavit that the required indemnity and guarantee have not been given to the appellant. Indeed, there has been no answering affidavit from the respondent, although it was granted leave to file such an affidavit.
By what was described in the document as a notice of default, dated 24 February 1999, but which was, in reality, a notice of demand, the appellant gave a formal notice demanding the repayment of the total sum of $900,000 within seven days after its date.
On 4 March 1999, Messrs Solomon Bros, solicitors, in a letter headed "Port Kennedy Resorts Pty Ltd (PKR)", wrote to the solicitors for the appellant in relation to a variety of matters regarding PKR. The third paragraph of the letter concerned the respondent and reads as follows:
"So far as the "notices of default" which have been served, we note that these documents are in fact "notices of demand" and not "notices of default". Under all of the loan agreements, the money is not repayable until after having been demanded, and accordingly it is not possible for any default to occur until the time for payment has passed. Accordingly the notices which you were forwarded headed "Notices of Default" are incorrect and are not, and cannot be treated as notices of default."
The letter did not address the merits of the claim. It raises no issue as to the provision of the letter of credit.
The appellant subsequently served on the respondent a statutory demand, dated 12 March 1999, pursuant to s 459E(2)(e) of the Corporations Law. On 1 April 1999, the respondent filed an application to set aside the statutory demand "on the grounds appearing in the accompanying affidavit".
The affidavit in support of the application contends that there is a genuine dispute between the appellant and the respondent as to the appellant's being entitled to demand repayment of what is described as the advance of $800,000 unless and until the appellant arranges a standby letter of credit, which it has failed to do, and also a genuine dispute as to the amount of the debt to the extent of $100,000 alleged to have been advanced on or around 16 July 1998 to which the statutory demand relates.
The application to set aside the statutory demand came on for hearing before a Master of this Court, who ordered that it be set aside. The learned Master referred to two submissions on behalf of the respondent, the first being that the failure of the appellant to provide the standby letter of credit was directly responsible for its inability to repay the appellant's temporary loan to the respondent and that, in the circumstances, the appellant was estopped from demanding repayment of the loan, and the second being that the appellant had engaged in misleading and deceptive conduct by making representations that it would provide the standby letter of credit and that, accordingly, the respondent having relied on those representations, it had a right of action under the Trade Practices Act.
The conclusion of the learned Master was summarised in the following paragraph:
"In all the circumstances of this case I am satisfied that there is a genuine dispute. In my view it is not entirely clear that the five separate advances totalling $900,000 stand apart from the framework agreement. It is at least arguable that repayment of these advances, once they had been used to subscribe for shares, was dependent upon the respondent complying with the requirement in the framework agreement that it provide the [standby letter of credit]. On the evidence, there is clearly a dispute as to who is responsible for the failure to provide the [standby letter of credit]. Whether this gives rise to a claim in contract, whether an estoppel is raised or whether there is a claim under the Trade Practices Act is not a matter which I have to decide, but I am of the view that there is a serious question to be tried."
The learned Master did not deal separately with the final advance of $100,000, with respect to the demand for payment of which there does not appear to be any answer
The appellant has appealed against the decision of the learned Master, claiming that there is no genuine dispute between the parties in relation to the debts the subject of the statutory demand and that there is no genuine dispute as to who is responsible for the failure to provide the standby letter of credit.
It is, in my view, apparent that the obligation of the respondent under the arrangement for the additional temporary advance of $100,000 was to repay that sum on demand, whilst retaining the requirement for repayment of the advance out of the Commercial Loan to the extent that funds were available from that source to satisfy the outstanding indebtedness. So far as the earlier advances are concerned, the terms expressly agreed upon by the respondent do not support the argument that, unless the proceeds of the Commercial Loan were then available, the respondent was not liable to repay on demand the moneys advanced by the appellant. The moneys were only contemplated as being repayable from the proceeds of the Commercial Loan in the event of a demand for repayment not previously having been made and satisfied. The terms in relation to repaying the advances on demand would have been pointless if the demands were only required to be repaid out of the Commercial Loan.
The contention of the respondent is that the loan transaction with the appellant proceeded after, and in the light of, unspecified discussions, and that the respondent "relied on the assurance given by [Mr Ho] that the [appellant] would arrange the Standby Letter of Credit, and has at all times assumed that, as a result of those representations, the [appellant] would not seek to make demand for repayment of the Advance unless and until the Standby Letter of Credit had been provided".
The explanation of the appellant, in the affidavit of Mr Ho, for not having provided the letter of credit was that the respondent and its directors had not complied with the conditions of the agreements reached in December 1997 and, in particular, had not provided the documentation, being the indemnity and guarantees, referred to therein. Subject to that, there is no denial on the part of the appellant that it is obliged to provide the letter of credit.
Mr Ho has also deposed that he has not informed Mr Lukin or anyone else that the letter of credit would be arranged without finalising the documentation. He has further deposed that at no time has Mr Lukin or anyone else informed him or the appellant that the respondent "assumed" that demand would not be made until the letter of credit had been provided. Indeed, it has not been suggested that either Mr Ho or the appellant has been so informed by the respondent. The respondent's assumption was not justified.
It is not necessary for the purposes of this appeal to examine in detail the meaning of the expression "a genuine dispute", as used in s 459H. It is well established that, on an application to set aside a statutory demand, a court will not determine contested issues of fact or law which have a significant or substantial basis. In Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 147 ALR 444, the Full Court of the Federal Court (Northrop, Merkel and Goldberg JJ) expressed the view that a genuine dispute requires that the dispute be bona fide and truly exist in fact and that the grounds for alleging the existence of a dispute are real and not spurious, hypothetical, illusory or misconceived. They referred in the course of their judgment to a number of cases in which this expression has been considered - see at 454 ‑ 455 and see also McPherson, The Law of Company Liquidation, 4th edn (1999) at 83 ‑ 87. The constructions placed upon the expression by courts in Australia have varied to some degree, but those variations are not material for the present purposes. In my opinion, it has not been demonstrated in this case that there is a genuine dispute. There has been no adequate answer to the appellant's claim that it was not required to provide the letter of credit before it received the indemnity and the guarantees which the respondent and the two directors were required to provide. The appellant was entitled to demand and receive repayment of the advances made by it to the respondent.
In my opinion, this appeal should be allowed, the order of the Master set aside, and, in its place, there should be an order that the respondent's application be dismissed.

IPP J: I agree with the reasons of Kennedy J and have nothing further to add.
HEENAN J: On 13 May 1999 the learned Master heard an application under s 459G of the Corporations Law for an order setting aside a statutory demand served on Fleuris Pty Ltd ("Fleuris") by Asian Century Holdings Inc ("ACH") which was formerly known as Asian Century Fund Inc. On 21 May, having decided that there was a genuine dispute in relation to the debt the subject of the demand, the learned Master granted the application. Now ACH seeks leave to appeal, if leave be required, against the decision.
The background to these proceedings can be summarised as follows.
Fleuris was and is a major shareholder of Port Kennedy Resorts Pty Ltd ("PKR"), a property development company. During 1997 PKR was trying to raise capital of $4 million. In order to subscribe for further shares in PKR Fleuris proposed to borrow $800,000 from a bank or other financial institution. In November 1997 or early in the following month ACH agreed with Fleuris (in what the learned Master described as "the framework agreement") to provide security for the loan (which was described by the parties as "the Commercial Loan") in the form of a Standby Letter of Credit which ACH would procure from another financial institution and which in turn was to be the subject of guarantees and indemnities from Fleuris and its directors.
As it happened, PKR urgently needed funds before the Commercial Loan was granted. At the request of Fleuris, ACH agreed to pay or advance $200,000 as a temporary loan. On 6 February 1998 ACH's solicitors sent to Fleuris a letter which included the following passage:
"Asian Century Fund Inc ('ACF') is prepared to lend to Fleuris Pty Ltd ('Fleuris') a temporary loan of A$200,000 … ('Advance') pending the finalisation of Fleuris' loan from National Australia Bank or other financial institution ('Commercial Loan') on the following terms and conditions:
(a)unless a demand for repayment is made, in which case Fleuris will repay the Advance on demand, Fleuris will repay the Advance from the proceeds of the Commercial Loan; and

(b)the Advance will be disbursed into the account of Port Kennedy Resorts Pty Ltd and such disbursement shall be treated as disbursement of the Advance to Fleuris."

Fleuris agreed to the temporary loan of $200,000 on the above terms. The money was paid into PKR's account shortly afterwards.

By mid-July 1998 ACH had paid four further amounts, three of $200,000 and the last of $100,000, into the same account. All four payments were made on the same terms as the first temporary loan. The total of $900,000 was the sum in respect of which the statutory demand was made. The Commercial Loan never was granted.
The case presented to the learned Master on behalf of Fleuris was based on three propositions. First, it was said, the five amounts comprising the $900,000 were paid pursuant to the framework agreement. Secondly, it was said, the parties intended that Fleuris repay each of those amounts from the Commercial Loan. Thirdly, it was said, the Commercial Loan was not granted because ACH did not provide the Standby Letter of Credit, as it was obliged to do. Counsel for Fleuris argued that in the circumstances ACH was estopped from demanding payment of the $900,000 or any part of it or, in the alternative, that ACH had engaged in misleading or deceptive conduct in representing that it would provide the Standby Letter of Credit and, because it relied on the representation, Fleuris had a right of action under the Trade Practices Act.
On behalf of ACH it was submitted that each of the five amounts was repayable on demand, that demand was made and that no repayment was received. Further it was said that the Commercial Loan was not granted because Fleuris had failed to provide the guarantees and indemnities for the Standby Letter of Credit.
In his reasons for decision, having observed that the evidence does not establish conclusively which of the parties was responsible for the failure of the Commercial Loan to materialize, the learned Master went on to say,
"In all the circumstances of this case I am satisfied that there is a genuine dispute. In my view, it is not entirely clear that the five separate advances totalling $900,000 stand apart from the framework agreement. It is at least arguable that repayment of these advances, once they had been used to subscribe for shares, was dependent upon (ACH) complying with the requirement in the framework agreement that it provide the (Standby Letter of Credit). On the evidence there is clearly a dispute as to the who was responsible for the failure to provide the (Standby Letter of Credit). Whether this gives rise to a claim in contract, whether an estoppel is raised or whether there is a claim under the Trade Practices Act is not a matter which I have to decide, but I am of the view that there is a serious question to be tried."
In relation to each of the five temporary loans the document setting out its terms clearly shows that the money was lent pursuant to a separate agreement, that each amount was repayable on demand and that, if no demand were made, it would be repaid from the proceeds of the Commercial Loan. The reference in the document to the Commercial Loan cannot reasonably be interpreted as implying a condition that repayment of the money lent depended upon grant of the Commercial Loan or upon the doing of anything by ACH to bring about such grant. The Commercial Loan was an agreed source of repayment, but it was no more than that. It follows that Fleuris cannot claim any support for its case in contract.
As to the questions of estoppel and misleading or deceptive conduct the situation is much the same. Clearly both parties intended that the Commercial Loan should be made available to Fleuris and that, at the option of ACH, part or all of its proceeds might be applied to discharge each of the temporary loans. Of course, if demand had been made in respect of the first four loans, and they were repaid from the proceeds of the Commercial Loan, the last loan (of $100,000) could not have been repaid from those proceeds. But there is nothing in any of the documents resembling a promise, an undertaking or any form of representation by ACH to the effect that demand for repayment of any of the temporary loans would depend upon grant of the Commercial Loan.
This aspect of the case for Fleuris seems to be based on the statement, in par 18.4 of the affidavit of its director Richard Anthony Lukin, that Fleuris relied on the assurance given by Ho Swee Huat, a director of ACH, that ACH "would arrange the Standby Letter of Credit" and that Fleuris "has at all time assumed that, as a result of those representations, (ACH) would not seek to make demand for repayment of the Advance unless and until the Standby Letter of Credit had been provided." The evidence shows no reasonable basis for the making of that assumption by Fleuris.
Because the liability of Fleuris to repay the temporary loans did not depend upon the doing of anything by ACH to bring about the grant of the Commercial Loan, it is not necessary to decide whether ACH was at fault in not procuring the Standby Letter of Credit. As it happens, as the learned Master observed, the evidence does not establish conclusively which of the parties was responsible for the failure of the Commercial Loan to materialize.
At best the case for Fleuris is founded on "a mere assertion" which is insufficient to establish that there is a genuine dispute between the parties (see John Holland Construction and Engineering Pty Ltd v Kilpatrick Green Pty Ltd (1994) 12 ACLC 716 at 718 per Young J). In those circumstances I conclude that the appeal should be allowed and the decision of the learned Master reversed.

Leave to appeal

Before hearing argument we expressed our view that, if leave to appeal were necessary, this would be an appropriate case in which to grant it. At our invitation counsel then dealt with the merits of the case. In the belief that it might save some confusion in the future when a decision of a Master on a similar application is challenged I shall set out now the reasons why I believe that leave to appeal is not required.
Section 60(1)(f) of the Supreme Court Act 1935 provides that, save in cases which are not presently relevant, no appeal shall lie to the Full Court "without the leave of the Judge or the Master or of the Full Court, from any interlocutory order or interlocutory judgment made or given by a Judge or a Master". The question whether an order or a judgment is of a final or an interlocutory character is the source of some difficulty. As Lord Kilbrandon commented in Tampion v Anderson (1973) 3 ALR 414 at 416, "the difficulty seems to arise out of attempts to frame a definition of 'final' (or of 'interlocutory') which will enable a judgment to be recognized for what it is by appealing to some formula universally applicable in any contingency in which the classification falls to be made." In Salter Rex & Co v Ghosh [1971] 2 QB 597 at 601 Lord Denning MR had said:
"This question of 'final' or 'interlocutory' is so uncertain that the only thing for practitioners to do is to look up the practice books and see what is being decided on the point. Most orders have now been the subject of decision."
As Lord Kilbrandon commented, "This advice, even if it be distressing to the scientific lawyer, may nevertheless be the most helpful in any actual case."
In Hall v Nominal Defendant (1966) 117 CLR 423 at 443 Windeyer J expressed the view that the most satisfactory test was "to look at the consequences of the order itself and to ask does it finally determine the rights of the parties in a principal cause pending between them." His Honour added that "It is never enough to ask simply does the order finally determine the actual application or matter out of which it arises; because, subject to the possibility of an appeal, every order does that, unless it be an order that is expressly declared to be subject to variation." His Honour also observed that an order in favour of one party to an application may finally determine the dispute between them whereas an order to the opposite effect would not: for example, an order setting aside a jury's verdict and ordering a new trial is clearly interlocutory, whereas an order refusing a new trial is final.

It is clear that the Court should have regard to the legal rather than the practical effect of the order or judgment. As Gibbs CJ explained in Carr v Finance Corporation of Australia Ltd (1981) 147 CLR 246 at 248,
"If this were not so, the question of whether a judgment is final or interlocutory would be even more uncertain than it is at present. In some cases it would be necessary for the Court, for the purpose of determining the practical effect of an order refusing to set aside a default judgment, to embark on a detailed inquiry as to the facts of the matter and the course of the proceedings already taken - an inquiry quite inappropriate when the only issue is whether a right of appeal exists."
Because the Corporations Law does not deal with the question as to whether or not leave to appeal is required and because the individual Australian States have different restrictions on appeals, there has not been a uniform approach to the question. For example, in Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290 Hayne J took the view that, as no order can be made under s 459G which finally determines the rights of parties, an application pursuant to that section is an interlocutory proceeding. That case was referred to in A-Pak Plastics Pty Ltd v Merhone Pty Ltd (1995) 13 ACLC 896, when the Court of Appeal of New South Wales held that such an application is final and not interlocutory. At 899 Sheller JA said:
"His Honour was not concerned directly with the question of whether an order made was final or interlocutory. Although his Honour did not draw the distinction it may be that for some purposes, such as the admissibility of evidence, a Judge hearing proceedings to set aside a statutory demand should treat them as if they were interlocutory, even though the judgment determining the proceedings is final."
In the same case at 897 Sheller JA had said:
"Compliance with a statutory demand ends any possibility that a creditor may use that statutory demand in proceedings to wind the debtor company up in insolvency. Non compliance provides the creditor with a means, though not the only means, of proving a ground for having a company wound up in insolvency. Accordingly if there is no genuine debt it is important to have the demand set aside before winding up proceedings get under way. This is the context in which applications under s 459G are made."
Bearing in mind that the only proceedings on foot between the parties were those seeking to set aside the statutory demand, Sheller JA treated the question of whether the statutory demand should be set aside as the lis. His Honour concluded, and the other members of the Court agreed with him, that the claimant had an appeal as of right. Incidentally, later in 1995 an amendment to s 101(2) of the Supreme Court Act 1970 (NSW) reversed the decision by providing that an appeal shall not lie to the Court of Appeal, except by leave of that Court, from a judgment or order of the court on an application under s 459G.
In Turner Equity Pty Ltd v Melvista Park Pty Ltd, unreported; FCt SCt of WA; Library No 960538; 5 September 1996, when considering an appeal from the refusal of an Acting Master to set aside a statutory demand under the Corporations Law Malcolm CJ expressed the view that the orders made by the Acting Master "finally disposed of the subject matter of this litigation, namely, the status of the statutory demand."
In my opinion the appropriate course is to treat the order made by the learned Master in these proceedings as final in that it did finally determine the rights of the parties in the only matter at issue before them. Leave to appeal, therefore, was not required.