Austral Softwoods Tumbarumba P/L v Tasman KB P/L; Harmoni P/L v Tasman KB P/L

Austral Softwoods Tumbarumba P/L and Harmoni P/L, as plaintiffs, brought an action against Tasman KB P/L, as the defendant, to recover monies owed under loans. The dispute was heard by the Federal Court of Australia. The plaintiffs sought to recover money from the defendant under statutory demands. The defendant, in turn, applied to set aside the statutory demands, arguing that the plaintiffs had made representations that payment of the loans would be assured by cash flows generated from associated take or pay contracts. The court had to decide whether the defendant’s application to set aside the statutory demands was justified based on the alleged representations and whether an offsetting claim was available to the defendant.

The court found that the defendant had made out a plausible contention that required further investigation, specifically regarding the alleged representations about the fulfilment of the associated take or pay contracts. The court held that while the plaintiffs and the borrower were not identical entities, the contention that the defendant would be assured of payment from the cash flow generated by the associated contracts was sufficient to justify setting aside the statutory demands. The court also noted that an offsetting claim was not available to the defendant where different parties within the corporate groups were the supplier and the borrower, unless it derived from the representations made. Additionally, the mere possibility of intra-group dividends or loans was not sufficient to set aside the statutory demands.

The Federal Court of Australia set aside the statutory demands issued by the plaintiffs against the defendant. The court found that the defendant had made out a plausible contention that required further investigation, and therefore, the statutory demands were set aside. The court did not consider the possibility of intra-group dividends or loans to be sufficient grounds for setting aside the statutory demands. Consequently, the plaintiffs’ claims were dismissed.