Commercial & General Law (SA) Pty Ltd v Permanent Custodians Limited (No 2) - [2012] SASC 216

SUPREME COURT OF SOUTH AUSTRALIA
(Appeal from a Master: Civil)
COMMERCIAL & GENERAL LAW (SA) PTY LTD v PERMANENT CUSTODIANS LIMITED (No 2)
[2012] SASC 216
Reasons for Decision of The Honourable Justice Nicholson
14 December 2012
CORPORATIONS - WINDING UP - WINDING UP IN INSOLVENCY - STATUTORY DEMAND - APPLICATION TO SET ASIDE DEMAND - PROCEDURAL REQUIREMENTS - POWER TO EXTEND TIME TO APPLY
CORPORATIONS - WINDING UP - WINDING UP IN INSOLVENCY - STATUTORY DEMAND - APPLICATION TO SET ASIDE DEMAND - GENUINE DISPUTE AS TO INDEBTEDNESS - OFFSETTING AND OTHER LIKE CLAIMS - GENERALLY
CORPORATIONS - WINDING UP - WINDING UP IN INSOLVENCY - STATUTORY DEMAND - APPLICATION TO SET ASIDE DEMAND - FOR DEFECT OR SOME OTHER REASON - SOME OTHER REASON
This is an appeal from a Master refusing the appellant’s application to set aside a statutory demand. The Master granted an extension of time for compliance with the demand. The appellant filed a notice of appeal within the time period fixed for filing an appeal, but after expiration of the extension for compliance. No further application or order for extension of time for compliance was made. The respondent subsequently sought an order that the appeal be summarily dismissed on the basis that the appeal was incompetent. On the merits, the appellant argued that the demand should be set aside based on an offsetting claim or for “some other reason”. The court heard submissions on both the competency and merits of the appeal issues.
Whether the period for compliance with the statutory demand had come to an end - and if so, whether the court has the power to further extend the period for compliance after and notwithstanding that the period had come to an end - whether the appellant has an offsetting claim against the respondent or there is “some other reason” the statutory demand should be set aside.
Held: Appeal dismissed. The period for compliance with the statutory demand has expired. The legislatively prescribed consequences resulting from the appellant’s non-compliance with the statutory demand have attached and remain so and any application for a further extension would lack utility. The appeal cannot succeed and must be dismissed for this reason alone. The appeal would also fail on the merits.
Corporations Act 2001 (Cth) s9, s420A, s459C, s459F, s459G, s459H, s459J, ; Supreme Court Civil Rules 2006 6R 17(1), 6R 295(1)(g), referred to.
Buckland Products Pty Ltd v Deputy Commissioner of Taxation [2003] VSCA 85; Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Ltd (2008) 232 CLR 314, applied.
Hardel Pty Ltd v Burrell & Family Pty Ltd (2009) 103 SASR 408; [2009] SASC 77, distinguished.
Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Ltd (2007) 212 FLR 56; [2006] VSC 306; Hartley Poynton Ltd v Ali (2005) 11 VR 568; Livestock Traders International Pty Ltd v Bui and Anor (1996) 22 ACSR 51; G & J Gears Australia Pty Ltd v Brobo Group Pty Ltd (2006) 229 ALR 638; David Grant & Co Pty Ltd (receiver appointed) v Westpac Banking Corporation (1995) 184 CLR 265; Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485; Jem Developments Pty Ltd and Anor v Hansen Yuncken Pty Ltd [2006] NSWSC 1378; In the matter of Kay Investment Holdings Pty Ltd [2011] NSWSC 1033; Kay Investment Holdings Pty Ltd v North East Developments Pty Ltd (in liq) (2011) 35 ACSR 610; [2011] NSWSC 1121; In the Matter of Ozone Manufacturing Pty Ltd [2011] NSWSC 1197; Cameron v Cole (1944) 68 CLR 571; Ozone Manufacturing Pty Ltd v Deputy Commissioner of Taxation (2006) 94 SASR 269; Jesseron Holdings Pty Ltd v Middle East Trading Consultants Pty Ltd (No 2) (1994) 122 ALR 717; Genesis Management Services Pty Ltd v Soniclean Pty Ltd [2005] SASC 224; D & S Group of Companies Pty Ltd v O’Connor Investments Pty Ltd & Ors (1997) 195 LSJS 213; John Shearer Ltd & Anor v Gehl Co (1995) 134 ALR 1; 185L6 Pty Ltd v Strata Corp 07176 Inc [2011] SASC 164; Bentham Management Pty Ltd v Union Finance Pty Ltd (2007) 247 LSJS 103; [2007] SASC 42; Jovanovic & Ors v Commonwealth Bank of Australia (2004) 87 SASR 570; GE Capital Australia v Davis (2002) 180 FLR 250; [2002] NSWSC 1146; China & South Sea Bank Ltd v Tan Soon Gin [1990] 1 AC 536; Westpac Banking Corporation Ltd v Kingsland (& Ors) (1991) 26 NSWLR 700; Omlow Pty Ltd v Delahuntey [1995] 2 Qd R 389; Commonwealth Bank of Australia v Hadfield (2001) 53 NSWLR 614; Ultimate Property Group Pty Ltd v Lord (2004) 60 NSWLR 646; Fortson v Commonwealth Bank of Australia (2008) 100 SASR 162; Coroneo v Australia Provincial Assurance Association Ltd (1935) 35 SR (NSW) 391; D Young Pty Ltd v Commercial & General Acceptance Ltd (1982) NSW ConvR 55-097; Accordent Pty Ltd v RMBL Investments Ltd (2009) 105 SASR 62, considered.

COMMERCIAL & GENERAL LAW (SA) PTY LTD v PERMANENT CUSTODIANS LIMITED (No 2)
[2012] SASC 216
Appeal from a Master
NICHOLSON J.

Introduction

This matter concerns an appeal from a decision of a Master of this court refusing an application, brought pursuant to ss459G, 459H and 459J of the Corporations Act 2001, to have a statutory demand set aside.
The appellant (plaintiff in the action to set aside) in its application, raised each of the grounds upon which a statutory demand might be set aside as provided for in s459H and s459J. However, its submissions focused only on the assertions that the plaintiff company has an “offsetting claim”[1] and that there is “some other reason” why the demand should be set aside.[2] Nothing has been put to suggest that there is a genuine dispute about the existence or amount of the debt to which the demand relates[3] or that there is a defect in the demand such that substantial injustice would be caused if the demand were not to be set aside.[4]
[1] Section 459H(1)(b).
[2] Section 459J(1)(b).
[3] Section 459H(1)(a).
[4] Section 459J(1)(a).
The salient facts, at least for the purpose of this appeal, are either uncontested or can be assumed. They can be distilled to the following.
(i)The statutory demand served by the respondent (defendant to the action to set aside) is for an amount of $50,776.51 being the total of two costs allocaturs issued in this court in other proceedings between the parties.
(ii)Y H Epworth Pty Ltd is the registered proprietor and mortgagor of land in the central business district of Adelaide on which is erected a building known as the “Epworth Building” (“the land”).
(iii)The respondent holds a registered first mortgage over the land which secures a principal amount in the order of $7.7 million.
(iv)A second registered mortgage is held by Orio Finance Company Pty Ltd (Orio) which secures an amount outstanding as at July 2009, as asserted by the appellant, in the order of $1.82 million.
(v)The appellant provided legal services to Y H Epworth Pty Ltd and related parties for which it rendered accounts. According to the appellant, the sum of $418,700.00 remains due to it in this respect.
(vi)In March of 2008, Y H Epworth Pty Ltd granted to the appellant an unregistered mortgage over the land as security for unpaid outstanding legal fees. As events have developed, the appellant’s unregistered mortgage ranks third in priority after the mortgages granted in favour of the respondent and Orio.
(vii)In January 2009 the respondent obtained a valuation of the land which was for an amount of $11 million.
(viii)The respondent entered into possession of the land in or about July 2010 pursuant to the terms of its mortgage and since then has managed the land and collected rents.
The essence of the appellant’s complaint against the respondent is that it has badly managed its possession of the land and its power of sale, in breach of duty to the appellant. As such, the value of the appellant’s third ranking security has been compromised to such an extent that the appellant is no longer able to recover from any realised value of its security all of the legal fees due to it by Y H Epworth Pty Ltd. To the extent that the appellant’s “entitlement” to recover $418,700.00 from any realised value of its security has been reduced by at least the amount of the demand, due to the fault of the respondent, it has, so the appellant asserts, an offsetting claim such that the respondent’s statutory demand should be set aside.
The Master rejected a series of contentions put by the appellant in support of this central complaint and, on 28 August 2012, refused the appellant’s application for the statutory demand to be set aside. On that same day, on the application of the appellant, the Master granted “an extension of time to comply with the statutory demand for a period of 14 days from this day pursuant to s459F of the Corporations Act.”[5] That 14 day period has now expired. The notice of appeal from the Master’s decision was filed on 16 September 2012, within the 21 day period fixed by this court’s rules for the filing of a notice of appeal but after the expiration of the 14 day extension granted by the Master. No order of this court has been made further extending the time for compliance with the statutory demand.
[5] Record of outcome in action no. 744 of 2012 for 28 August 2012.
Competency of the appeal
The appeal was listed for a hearing to take place before me on 21 November 2012. However, on 10 October 2012 the respondent filed an interlocutory application seeking an order that the notice of appeal filed on 18 September 2012 be summarily dismissed on the basis that the appeal is incompetent.[6] Written outlines of argument were filed on behalf of each party and the respondent’s interlocutory application was argued at some length before another Judge of this court on 31 October 2012. Ultimately, no determination was made; the respondent’s interlocutory application was referred for further argument before and determination by me at the same time as I were to hear the substantive appeal. In determining the competency issue I have had the advantage of the written outlines provided by the parties on this topic, the transcript of the argument on 31 October 2012 and supplementary submissions by both parties at the hearing of the substantive appeal.
[6] The respondent’s application was brought pursuant to the Supreme Court Civil Rules 6R 295(1)(g) which provides “the Court may summarily dismiss the appeal if it is obvious that it cannot succeed”.
The respondent’s point is a relatively straight forward one. Section 459F(1) provides,
If, as at the end of the period for compliance with a statutory demand, the demand is still in effect and the company has not complied with it the company is taken to fail to comply with the demand at the end of that period.
In this event certain consequences for the company will follow by force of statute. The court must presume that such a company is insolvent in the circumstances and for the purpose envisaged by s459C(2)(a) of the Corporations Act.
It is common ground that unless and until the respondent’s statutory demand were to be set aside it remains “still in effect” and that the appellant has not complied with it. As such, two questions arise. First, on the facts of this case, has the period for compliance with the statutory demand come to an end (and if so, when)? And second, if the period for compliance has come to an end does the court have power (and if so, should it exercise that power) to further extend the period for compliance after and notwithstanding that the period has come to an end?
I will deal with the second question first. The issue has been dealt with, conclusively, by the High Court in Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Ltd.[7]
[7] (2008) 232 CLR 314.
The relevant chronology in Aussie Vic Plant Hire was materially the same as in the present case. On 20 June 2006 a Master of the Victorian Supreme Court dismissed the appellant’s application to set aside a statutory demand but ordered that the time for compliance with the demand be extended for a further 14 days. The appellant was entitled to appeal as of right to a single Judge of the trial division of the Supreme Court and gave notice of appeal. Thus far, the facts were, effectively, on all fours with those in the present matter. However, after the extended period fixed by the Master for compliance with the statutory demand had expired but before the appeal to a single Judge had come on for hearing, the appellant applied for an order further extending the time for compliance. Whelan J dismissed both the application for further extension and also the appeal. His Honour held,[8]
I think I am bound by the decision in Buckland Products[9] to find that this appeal must fail. The point is not whether an extension of time can or should be granted, the point is that the consequence provided for by s459F(1) has already attached (to use the words of Phillips JA) and no order which I make can or should purport to undo that.
Even if an extension of time nunc pro tunc could be granted consistently with the legislation, it seems to me that the Court should not take that course. Orders made nunc pro tunc are appropriate where they are needed to overcome procedural irregularities and difficulties. They are not appropriate where their consequence is to alter the substantive rights of parties. In this respect, I refer to Hartley Poynton Ltd v Ali.[10]It seems to me that such orders are not appropriate in an attempt to render undone something which has already been done. If I were to attempt to do so, it seems to me I would be acting directly contrary to the approach which was taken by the Court of Appeal in Buckland Products.
[8] [2006] VSC 306 at [9] and [10].
[9] [2003] VSCA 85.
[10] (2005) 11 VR 568 at 606.
The matter went on appeal to the Victorian Court of Appeal. Because submissions were to be made to the Court of Appeal that it should depart from its earlier decision in Buckland Products Pty Ltd v Deputy Commissioner of Taxation[11] a bench of five heard the appeal. On the issue presently under consideration the court divided; Maxwell P and Neave JA held that the time for compliance with the statutory demand could be extended after it had expired, whereas Nettle, Ashley and Chernov JA (albeit for different reasons) held that there was no power in a court to extend the period for compliance once it had expired. The matter went on further appeal to the High Court; the appeal from the Victorian Court of Appeal was dismissed and, ultimately, the decision and reasoning of Whelan J was affirmed.[12] The position on this issue as described in Buckland Products remains good law.
If the company was wishing to appeal [a refusal to set aside a statutory demand] it could do so, but unless the appeal was heard and determined before the expiry of the period for compliance otherwise fixed, an extension of the time for compliance had to be obtained. Without it, there could be no point in the continued prosecution of the appeal, for, the period of compliance having ended before the appeal was heard and determined, the consequence prescribed by s459F(1) attached, with all that followed under the statute. … Once that consequence attached, it remained attached… .[13]
[11] [2003] VSCA 85.
[12] A single majority judgment to this effect was given by Gleeson CJ, Hayne, Crennan and Kiefel JJ with Kirby J dissenting.
[13] [2003] VSCA 85 at [9] per Phillips JA (as his Honour then was) with whom Chernov and Eames JJA agreed.
I am bound by the decision of the High Court in Aussie Vic Plant Hire and it would serve little purpose to explore here the reasoning of the majority in reaching its conclusion. The second question identified above must be determined unfavourably to the appellant. In other words, if on the facts of the present case the period for compliance with the statutory demand has expired, any application for a further extension would be doomed to fail.
I turn now to the first question identified above, that is, when, on the facts of this case, has or will the period for compliance with the statutory demand come to an end? The answer to this question lies in the terms of s459F and the authorities which have considered it. Section 459F provides as follows.
When company taken to fail to comply with statutory demand
(1)If, as at the end of the period for compliance with a statutory demand, the demand is still in effect and the company has not complied with it, the company is taken to fail to comply with the demand at the end of that period.
(2)The period for compliance with a statutory demand is:
(a) if the company applies in accordance with section 459G for an order setting aside the demand:
(i)if, on hearing the application under section 459G, or on an application by the company under this paragraph, the Court makes an order that extends the period for compliance with the demand—the period specified in the order, or in the last such order, as the case requires, as the period for such compliance; or
(ii)otherwise—the period beginning on the day when the demand is served and ending 7 days after the application under section 459G is finally determined or otherwise disposed of; or
(b) otherwise—21 days after the demand is served.
In a case where, as here, the company in receipt of a statutory demand applies, in accordance with s459G, for an order setting aside the demand, s459F(2)(a) provides for two alternatives.
If the Master’s order on 28 August 2012, extending the time for compliance for a period of 14 days from 28 August 2012, was, in fact and law, an order embraced by s459F(2)(a)(i) that “extends the period for compliance with the demand” then, the period for compliance in this matter expired on or about 11 September 2012.
However, if for some reason the Master’s order extending time is not such as to attract the operation of s459F(2)(a)(i) then the alternative provided for in s459F(2)(a)(ii) applies, that is, there is an automatic extension of the period for compliance until 7 days after the appellant’s application under s459G “is finally determined or otherwise disposed of”.
The use of the word “otherwise” at the commencement of paragraph (ii) requires that this paragraph (ii) alternative will only operate in the absence of an order, extending the period for compliance, that is embraced by paragraph (i).[14] In my view, the Master’s order on 28 August 2012 extending the period was such an order. As a result, the alternative in paragraph (ii) simply does not arise for consideration.
[14] Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Ltd (2007) 212 FLR 56 (VSCA) at [24] (Maxwell P and Neave JA); Livestock Traders International Pty Ltd v Bui and Anor (1996) 22 ACSR 51 at 53; G & J Gears Australia Pty Ltd v Brobo Group Pty Ltd (2006) 229 ALR 638 at [47].
However, the appellant maintains that the period for compliance is to be determined in accordance with paragraph (ii), that is, it is to come to an end 7 days after the appellant’s s459G application “is finally determined or otherwise dealt with”. The appellant maintains that paragraph (ii) is the true default position once an application under s459G is made and that, before paragraph (i) is to be given any effect, there must be an order in place extending the period for compliance beyond that otherwise provided for by paragraph (ii). I reject that submission. It does not accord with the terms of s459F and is not supported by previous authority that has considered the effect of the word “otherwise”.[15] Nevertheless, I will assume for the sake of the argument that paragraph (i) does not apply in this case, leaving paragraph (ii) to operate in accordance with its terms.
[15] See fn 14 above.

Subject to an argument based on a recent decision of the Full Court in this State to which I will turn shortly, the proper construction and mode of application of paragraph (ii) has until now been definitively determined by the Victorian Court of Appeal in Buckland Products. In that case, an application to set aside a statutory demand brought pursuant to and in accordance with the requirements of s459G, was dismissed by a Senior Master of the Victorian Supreme Court. There was no order extending the period for compliance pursuant to paragraph (i) in place and, as such, the period for compliance expired 7 days after the date on which the s459G application had been “finally determined or otherwise disposed of”, in accordance with paragraph (ii).
The appellant lodged a notice of appeal against the orders of the Senior Master. As the Court of Appeal[16] pointed out, an application to extend the period for compliance “could have been made readily enough had there been grounds, but the [appellant] made no application”. The appeal, whilst lodged in time in accordance with the Rules, did not come on for hearing before Warren J (as her Honour then was) until more than 7 days after the judgment of the Senior Master dismissing the appellant’s application.
[16] Phillips JA at [4], with whom Chernov and Eames JJA agreed.
Her Honour dismissed the appeal on the ground that “the time for compliance with the subject statutory demand has run and no extension may now be granted… the appeal is misconceived”. An argument was put to Warren J that the application made under s459G could not be said to have been “finally determined”[17] within the meaning of s459F(2)(a)(ii) until any appeal from the Senior Master to her Honour (and presumably any further appeal thereafter) had been finally determined. Warren J rejected this argument and the Court of Appeal unanimously agreed.
[17] The appellant in the present case submitted that Buckland Products is of no assistance as to the meaning of “or otherwise disposed of”. However, paragraph (ii) uses the phrase “finally determined or otherwise disposed of”. As such, the period for compliance will come to an end when the first of those “events” occur. Once an application is “finally determined” there is no scope for the period for compliance to continue until “otherwise disposed of”.
Phillips JA reiterated the well accepted proposition[18] that even where an appeal is to be heard de novo the fact that a primary judgment might be set aside on appeal does not mean that it is not a final and conclusive judgment. It remains final and conclusive unless and until it is set aside. His Honour went on to consider the argument that the determination of the Senior Master was not “finally determined” within the meaning of s459F(2)(a)(ii) whilst it remained amenable to appeal.[19]
The concept that the determination of the Master is not final so long as it remains amenable to appeal, even an appeal as of right, introduces a significant qualification on what otherwise appears to me to be a fixed and certain regime prescribed by s459F and s459G. (As to the later, see especially David Grant & Co Pty Ltd (receiver appointed) v Westpac Banking Corporation.[20]) It would mean that a company, by exercising rights to appeal first to a Judge and then from the Judge to the Court of Appeal might delay the characterisation of the Master’s order as a final determination for more than a year and, at the end of the day, what then? If both appeals fail, the Master’s order is then to be seen, at long last, as having been a final determination, but as at what date does that character attach? [Counsel] found it difficult to give an answer that was wholly satisfactory and that is not surprising. For the regime prescribed by s459F is relatively simple and straightforward and it does not admit of the construction of “finally determined” that [counsel] was urging.
Application under s459G to set aside the statutory demand was “finally determined” within the meaning of s459F(2)(a)(ii) when the Master’s order was made… and the fact that that order was liable to appeal was nothing to the point. If the company was wishing to appeal, it could do so, but unless the appeal was heard and determined before the expiry of the period for compliance otherwise fixed, an extension of the time for compliance had to be obtained. Without it, there could be no point in the continued prosecution of the appeal, for, the period of compliance having ended before the appeal was heard and determined, a consequence prescribed by s459F(1) attached, with all that followed under the statute. There can be no occasion, in my opinion, for adopting a construction of s459F(2)(a)(ii) that would require that the consequence prescribed by sub-section (1) having once attached, should then be undone because of the exercise of some right of appeal. Once that consequence attached, it remained attached…
[18] At [7].
[19] At [8]-[9].
[20] (1995) 184 CLR 265.
The decision in Buckland Products is a unanimous decision of an intermediate Court of Appeal and whilst, strictly, not binding on me, is highly persuasive. Further, it is a decision concerning the construction of a much relied upon section in an important piece of legislation that operates uniformly across the country. In these circumstances, one should strive to maintain a uniform approach to questions of construction. I ought not depart from Buckland Products unless persuaded that it is plainly wrong.[21] In any event, with respect, I agree with it.
[21] Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485.
A contrary approach had been taken in some of the earlier cases. A number were referred to by Austin J in Jem Developments Pty Ltd and Anor v Hansen Yuncken Pty Ltd.[22] However, in my view, Buckland Products quelled the controversy and the line of cases represented by that decision is to be preferred.
[22] [2006] NSWSC 1378 at [13]-[15].
The appellant drew attention to the quite recent New South Wales Supreme Court authority of Kay Investment Holdings Pty Ltd v North East Developments Pty Ltd (in liq).[23]In that case the plaintiff’s s459G application to set aside a statutory demand was first listed for hearing on 7 June 2011. On that occasion there was (through inadvertence unbeknown to the court) no appearance by the plaintiff and the application was dismissed. On 15 July 2011 the plaintiff brought an application to set aside the orders dismissing its application to have the statutory demand set aside on the basis of procedural unfairness. In the meantime the defendant had filed a winding up application invoking a presumed insolvency said to have arisen in accordance with s459F(2)(a)(ii) 7 days after the dismissal of the plaintiff’s application on 14 June 2011. The plaintiff’s application to set aside the orders dismissing its s459G application was successful before White J[24] and, in time, the s459G application itself succeeded before Ward J[25] and the statutory demand was set aside.
[23] [2011] NSWSC 1033 (White J) and (2011) 35 ACSR 610; [2011] NSWSC 1121 (Ward J, as her Honour then was).
[24] [2011] NSWSC 1033.
[25] (2011) 35 ACSR 610; [2011] NSWSC 1121.
The approach of White J, on this point, was referred to with approval by Ward J and referred to, without discussion but without any apparent animadversion, by Barrett J in the later decision of In the Matter of Ozone Manufacturing Pty Ltd.[26]
[26] [2011] NSWSC 1197.
Buckland Products and Jem Developments were referred to in the reasons of both White J and Ward J with ostensible approval or, at least, without disapproval. However, White J was of the opinion that Buckland Products did not stand in the way, on the facts before him, of giving effect to the well established fundamental principle of justice, as described by Rich J in Cameron v Cole.[27]
It is a fundamental principle of natural justice, applicable to all courts whether superior or inferior, that a person against whom a claim or charge is made must be given a reasonable opportunity of appearing and presenting his case. If this principle be not observed, the person affected is entitled, ex debito justitiae, to have any determination which affects him set aside … The setting aside of the invalid determination lays the ghost of the simulacrum of a trial, and leaves the field open for a real trial.
[27] (1944) 68 CLR 571 at 589.
In effect, White J decided the application before him in the following way.
(i)The plaintiff was entitled ex debito justitiae to have the orders of 7 June 2007 set aside.
(ii)The effect of this was that the plaintiff’s application pursuant to s459G was resurrected and remained on foot.
(iii)Ordinarily, whilst an application in accordance with s459G remains on foot a presumption of insolvency will not arise until it is “finally determined” (s459F(2)(a)(ii)).
(iv)However, the difficulty in the situation before White J was how to analyse the situation where presumed insolvency had occurred at a time when the original order to set aside was in force and before White J had set that order aside ex debito justitiae.
(v)His Honour resolved this issue by directing, in reliance on the power available to him under the rules of court and consistently with the practice often adopted, that his order setting aside the orders of 7 June 2012 was to operate with retrospective effect, that is, as at 7 June 2012.
(vi)In these circumstances:
It could not then be said that the application under s459G had been finally determined or otherwise disposed of.
. . . .
The effect of the order setting aside the orders of 7 June 2011 in my opinion will be that the presumption of insolvency had not arisen when the originating process for winding-up was filed, even though as at 1 July 2011 it could properly be said, as matters then obtained, that the presumption of insolvency had arisen. That, however, is a necessary consequence of making the order with retrospective effect.[28]
[28] [2011] NSWSC 1033 at [27] and [29].
White J made no order with respect to the s459G application itself. By setting aside the order of 7 June 2012 dismissing that application, his Honour cleared the way to enable Ward J to determine the plaintiff’s application to set aside the statutory demand at a time when, in accordance with s459F(2)(a)(ii), the period for compliance had not come to an end. At no time did either White J or Ward J purport to order an extension of the relevant period for compliance at a time when the period had already come to an end.
The circumstances before the New South Wales Supreme Court were very different from the present circumstances and from those in Buckland Products. The reasoning in Kay Investment Holdings does not operate as a rejection of that in Buckland Products but rather as an adoption of that reasoning and a circumnavigation of it.
In my view, Kay Investment Holdings, if correctly decided (about which I have formed no view) is quite distinguishable from the Buckland Products type of case on the facts. To the extent that the reasoning in Kay Investment Holdings might be seen as departing from that in Buckland Products and Aussie Vic Plant Hire (and I am not satisfied that it does) any such departure cannot assist the appellant in the present case.
The appellant has submitted that the position established in Buckland Products no longer applies in South Australia following the decision of the Full Court in Hardel Pty Ltd v Burrell & Family Pty Ltd.[29]
[29] (2009) 103 SASR 408; [2009] SASC 77, Kourakis J, as he then was, with whom Nyland and David JJ agreed.
In Hardel, the question before the Full Court was whether an appeal to a single Judge against a decision of a Master dismissing the appellant’s application to set aside a statutory demand was competent. Supreme Court Civil Rules 6R 17(1) provides that an appeal lies, as of right, from a final judgment of a Master to the Full Court. Subject to exceptions, appeals from interlocutory judgments of a Master ordinarily lie to a single Judge of the court.
Hardel stands for the proposition that an order dismissing an application to set aside a statutory demand is not a final judgment within the meaning of SCR 6R 17 but is an interlocutory judgment. The appeal was held to be competent.
The appellant relies on Hardel for the argument that, notwithstanding the line of authority represented by Buckland Products, the decision of the Master in this case dismissing the appellant’s application to set aside the statutory demand, being an interlocutory decision, is no longer, at least in this State, to be characterised as a final determination within s459F(2)(a)(ii).
The argument is rejected. The Full Court in Hardel was asked to construe the particular wording of Rule 17 in the context of the case flow management structures prescribed by the Rules as a whole and for the purpose of the question before it – what is the appropriate repository for the right of appeal under consideration. The Victorian Court of Appeal in Buckland Products was engaged in the task of construing different language[30] within the context of different legislation having an Australia wide operation and for an entirely different purpose. Furthermore, whilst the Full Court in Hardel settled an apparent controversy as far as this State is concerned, the notion that a decision dismissing an application to set aside a statutory demand is interlocutory is not novel. All five members of the Victorian Court of Appeal in Aussie Vic Plant Hire[31] held as much and the High Court was not asked to re-consider the question.
[30] “Finally determined” as opposed to “final judgment”.
[31] (2007) 212 FLR 56.
I am unable to accept that the Court of Appeal in Buckland Products would not have been alive to the well trodden path distinguishing final from interlocutory decisions. There had already been an appeal as of right to a single Judge from a Senior Master suggesting that the Senior Master’s decision had been treated as interlocutory. As such, for the appellant’s argument to have any credence it must be assumed that the Court of Appeal simply overlooked such relevance as this distinction might have to the question of statutory construction before it. I also find this to be extremely unlikely. In my view, the issue was not expressly addressed in Buckland Products because it was not seen to be a consideration material to the question before the court. The well established line of authority represented by Buckland Products, consistently applied across the country, is not to be overturned in this State by a sidewind in reliance on the decision in Hardel.
According to s459F, the period for compliance would have expired 7 days after the final determination of the appellant’s application on 28 August 2012 (paragraph (ii)) but for the extension for 14 days ordered by the Master (paragraph (i)). The legislatively prescribed consequences resulting from the appellant’s non-compliance with the statutory demand prior to on or about 11 September 2012 have attached and remain so. The application to set the demand aside now lacks utility. The appeal cannot succeed, is incompetent and must be dismissed for this reason alone.
The appeal – merits
In case I am wrong in finding the appeal to be incompetent and out of deference to the extensive written and oral submissions put by both parties, I will briefly express my views on the merits of the appeal itself.
The appellant has alleged that after the respondent entered into possession of the land, the appellant’s equity
… diminished due to the respondent’s failure to act in good faith through its lack of and/or poor management of the land and the respondent’s failure to take all reasonable steps to market the land and achieve a reasonable sale having regard to existing circumstances.[32]
The allegations, in this respect, are set out in more detail in the first[33] affidavit of Stephen Patrick McNamara[34] sworn 24 May 2012 and in a District Court Civil Rules 6R 33 notice before action (exhibit SPM8 to that affidavit). However, the appellant’s allegations of an offsetting claim reach no greater particularity than as set out in paragraphs [39] and [40] of the first affidavit.
39[T]he defendant:
39.1has mismanaged the land including the Epworth Building, and did not publicly offer the building for sale until or about November 2011, being two years after it entered into possession.
39.2has poorly marketed the land including the Epworth Building such that it has not received any offers to purchase the land including the Epworth Building in or about the valuation amount [$11 million].
39.3poorly managed the Epworth Building, such that the rental return has been reduced which in turn has impacted on the equity available to be secured by the mortgage.
40 As a result of the mismanagement and poor sales and marketing of the land including the Epworth Building the value of the plaintiff’s security has diminished to nothing thereby causing the plaintiff loss and damage in excess of the debt [$418,700].
[32] Paragraph [10] of the appellant’s summary of argument.
[33] The appellant filed two supplementary affidavits, sworn by Mr McNamara 25 and 29 June 2012. However, neither add anything of significance to the matters about to be considered. The affidavit sworn on 29 June 2012 expands upon the information said to have been obtained by Mr McNamara concerning the purported offer discussed below which is no longer relied upon by the appellant.
[34] A director of and legal representative for the appellant.
Initially, the appellant alleged that, in or about November 2010, the respondent received an unconditional offer for the purchase of the land for $10.2 million but that whilst a contract for sale and purchase was prepared and presented, the offer was not accepted by the respondent. Mr McNamara deposed to the existence of this unconditional offer on an information[35] and belief basis. However, affidavit evidence adduced on behalf of the respondent was to the contrary. The appellant accepted, before the Master, that it was not in a position to contradict the respondent’s evidence. Both before the Master and on this appeal, the appellant withdrew the assertion that an unconditional offer to purchase the land for $10.2 million was available to the respondent in November 2010 but refused.
[35] The information was said to have been obtained from a Mr Psevdos who is said to be the “principal” of the second mortgagee.
Mr McNamara also asserted, again on an information and belief basis, that “the rental return for the land has diminished significantly since the date of possession and that the land was not offered publicly for sale until November 2011” and that “the [respondent] was not actively marketing the land and had run the actual rental return for the Epworth Building down”.
Other than these allegations, of a hearsay nature, the appellant has provided little, if any, by way of particulars of the respondent’s conduct said to constitute a breach or breaches of duty during the respondent’s management of and whilst in possession of the land. The appellant has not provided any particulars of the extent to which any such breach of duty has caused the appellant loss. The appellant’s allegations do not rise above the assertions that:
(i)the respondent has, in an unparticularised manner, failed to observe the standard of behaviour required of a mortgagee in possession;
(ii)this behaviour has caused a reduction in the capital value of the land, to an unparticularised extent;
(iii)this behaviour has caused a reduction in the rental return, to an unparticularised extent;
(iv)it should be inferred that, either in some presently inchoate way or in the event that the land were to be sold and an accounting undertaken by the respondent, the appellant’s equity (as third mortgagee) is now worth something less than the total amount of the debt due to it of $418,700; and
(v)the court need not trouble itself with an absence of particularisation in the above respects because on any analysis there is an offsetting claim, as defined in s459H(5), namely “a genuine claim that the [appellant] has against the respondent by way of… cross-demand…” which if successful is likely to reduce the value of the appellant’s equity by an amount greater than the debt the subject of the statutory demand ($50,776.51).

Section 459H permits the court to either set aside or reduce the amount of a statutory demand in circumstances where the company has an offsetting claim. An offsetting claim is defined[36] as:
A genuine claim that the company has against the respondent by way of counter-claim set off or cross-demand (even if it does not arise out of the same transaction or circumstances as a debt to which the demand related).
The appellant asserts and relies upon a cross-demand rather than a set off or a counter-claim. An offsetting claim, including a cross-demand, must sound in money; it must be for a liquidated or unliquidated money demand.[37] Whilst the court need not actually quantify the amount of any cross-demand it does need to be satisfied that it constitutes at least a sufficient offset.[38] In some cases it may be sufficiently arguable that the asserted offsetting claim exceeds the demand such that there is no need to further quantify it. However, if this is not sufficiently arguable the onus remains on the plaintiff or applicant to satisfy the court that it has a genuine offsetting claim for a particular amount.[39]
[36] Sub-section 459H(5).
[37] Ozone Manufacturing Pty Ltd v Deputy Commissioner of Taxation (2006) 94 SASR 269 at [45].
[38] Jesseron Holdings Pty Ltd v Middle East Trading Consultants Pty Ltd (No 2) (1994) 122 ALR 717.
[39] Genesis Management Services Pty Ltd v Soniclean Pty Ltd [2005] SASC 224 at [52].
Section 459H(2)-(4) imposes an obligation on a court that comes to consider whether or not to set aside a statutory demand on the basis of an offsetting claim, including a cross-demand as in the present case.
The court must calculate the substantiated amount of the demand in accordance with the formula:
admitted total [minus] offsetting total. (Emphasis supplied.)
The notions “admitted total” and “offsetting total” are defined in the sub-section. In effect, the court must perform a calculation and, as a result of the calculation, either set aside the statutory demand (if the substantiated amount is less than the statutory minimum for a statutory demand) or vary the demand where the substantiated amount is as least as great at the statutory minimum (but less than the statutory demand as served). For this purpose, the definition of “offsetting total” is:
(a)     if the court is satisfied that the company has only one offsetting claim – the amount of that claim; or
(b)     if the court is satisfied that the company has two or more offsetting claims – the      total of the amounts of those claims; or
(c)     otherwise – a nil amount.
In the present case it would seem that the appellant alleges one offsetting claim and, as such, before the obligatory application of s459H(2)-(4) can be undertaken the court will need to form a view as to “the amount of that claim”. It is here, that, in my view, the appellant faces its first difficulty. Even if I were to accept that there is sufficient in the affidavit material to establish the presence of an offsetting claim in the sense of a duty or duties owed and a breach or breaches of those duties committed by the respondent,[40] I struggle to see how the required formula in s459H(2) can be applied on the evidence that is before the court. The appellant maintains that all that the court has to accept is that it has a genuine claim, worthy of investigation, that the value of its equity of redemption has been reduced by an amount in excess of $50,776.51.[41] Even so, there is nothing in the affidavit evidence that could permit even a broad brush appreciation of the value of such a cross-demand. It is difficult to see how I can properly infer anything about the extent or value of any such cross-demand.
[40] The respondent challenges the appellant’s case at all levels including the questions of duty and of breach.
[41] Strictly, the reduction need only be to the extent of $50,776.51 less the amount of the statutory minimum required for an effective statutory demand.
The problem that confronts the appellant here is not dissimilar to that which confronted the plaintiff in D & S Group of Companies Pty Ltd v O’Connor Investments Pty Ltd & Ors.[42] In that case the plaintiff relied on, inter alia, the following allegations.
There was an agreement between the [plaintiff] interests and the defendant that the property from deer that the defendant ran upon the property would be divided equally, two years after the purchase of the property by the [plaintiff] interests. The deer in question were purchased in 1990. No payment has been made to the [plaintiff] interests in respect of the deer in question. At present, the land is being used for deer shooting. No money has been received for that undertaking.
I am aware that timber has been sold from the property by the defendant at the rate of $70 per tonne. That timber is situated adjacent to the Gawler River. Half of that timber belongs to the [plaintiff] interests. There was a substantial amount of timber taken. No payment has been made in respect to that timber.
In considering this aspect of the plaintiff’s application to have a statutory demand set aside, Perry J said this.
The difficulty for [the plaintiff] is that, even if the assertions in paragraphs 5 and 6 of the affidavit of Mr Savvas [as set out above] were to be taken at face value, there is simply no detail offered as to the amounts which [the plaintiff] might, by reference to those paragraphs… be entitled to offset. In order for the court to be satisfied of an offsetting claim within the meaning of s459H, it must be able to be satisfied as to the total of that claim so that the calculation of the substantiated amount may be effected in accordance with s459H(2).
Indeed, even where (unlike the assertion here) the assertion is advanced in specific money terms, it may not be sufficient to satisfy the section if it is asserted as a claim for damages in general terms. See John Shearer Ltd & Anor v Gehl Co (1995) 134 ALR 1 per von Doussa, Hill and Tamberlin JJ at [12].
Another difficulty in the way of Shearer is that there is nothing in the material before the court which can be said to amount to more than a mere allegation that damage of the kind specified has been suffered. While it must be accepted that it is not contemplated that, in an action to set aside a statutory demand, evidence needs to be adduced of the kind that would need to be adduced at a trial of the issues of the parties, it is simply not enough for Shearer to assert damage in the most general terms without more, particularly in a case where damages of the requisite amount, that is to say damages that are at least equal to or exceed the debt of the creditor, are not self-evident.
In applying those comments to the material brought forward by [the plaintiff] in support of its application, including Mr Savvas’s affidavit, there is nothing which could amount to proof of an offsetting claim sufficient to support dismissal of the statutory notices.
[42] (1997) 195 LSJS 213.
I appreciate that the appellant’s claim in the present matter, if successful, would lead to a remedy by way of an accounting by the respondent,[43] rather than or, at least, in addition to any claim for damages. Nevertheless, in my view, the observations of both Perry J in D & S Group and the Full Federal Court in John Shearer, as set out above, remain pertinent. As in those matters, there is here, simply no detail offered as to the amount which the plaintiff might by reference to its alleged claims be entitled to offset. This is not a case where it is sufficiently arguable that the asserted offsetting claim will exceed the demand such that there is no need to further quantify it.[44] As such the obligatory exercise required by s459H cannot be undertaken.
[43] In favour of the mortgagor/registered proprietor and any person, such as a subsequent mortgagee, claiming through the mortgagor.
[44] Genesis Management Services, above.
The problem for the plaintiff, just identified, is really an aspect of a more general concern. The test for whether a sufficient offsetting claim exists is the same as that for when a “genuine dispute” with respect to the existence and/or quantum of the statutory demand itself is alleged. The offsetting claim must be bona fide with grounds in support that are not spurious, hypothetical, illusory or misconceived.[45] In some cases, the question has been seen as analogous to that on an interlocutory injunction, that is, as to whether there is a serious question to be tried or a prima facie case.[46] Something more than mere assertion but less than the admissible proof that would be needed at trial is required.[47]
[45] Ozone Manufacturing Pty Ltd v Deputy Commissioner of Taxation (2006) 94 SASR 269.
[46] 185L6 Pty Ltd v Strata Corp 07176 Inc [2011] SASC 164 at [43].
[47] Bentham Management Pty Ltd v Union Finance Pty Ltd (2007) 247 LSJS 103; [2007] SASC 42 at [14].
It is not possible, this far removed from the facts concerning the respondent’s occupation of and management of the land, to form a view whether or not the appellant’s allegations are spurious or illusory. However, the general and unparticularised hearsay set out in Mr McNamara’s affidavits and relied upon as the foundation for the alleged offsetting claim, does not rise above the hypothetical or as the Master found “a matter of pure conjecture”. The evidence relied on is no more than assertion and does not establish “a plausible contention requiring investigation”.[48]
[48] Bentham at [14].
Furthermore, the respondent maintains and the Master found that the appellant’s alleged offsetting claim was misconceived as a matter of law. I agree.
The appellant relied upon the cause of action provided for by s420A of the Corporations Act. That section is in the following terms.
420A Controller's duty of care in exercising power of sale
(1)     In exercising a power of sale in respect of property of a corporation, a controller     must take all reasonable care to sell the property for:
(a)     if, when it is sold, it has a market value - not less than that market value; or
(b)     otherwise - the best price that is reasonably obtainable, having regard to the             circumstances existing when the property is sold.
(2)     ...
The definition of “controller” in s9 of the Corporations Act includes anyone who is in possession of or who has control of property for the purpose of enforcing a security interest.
The learned Master in his reasons[49] reviewed some of the authorities dealing with the nature of and the application of the duty imposed by S420A. His Honour concluded that s420A does not provide a subsequent mortgagee with a right to claim damages or compensation from a first mortgagee alleged to have improperly exercised or to have failed to exercise a power of sale.[50] In Jovanovic & Ors v Commonwealth Bank of Australia[51] Besanko J cited, with approval, the conclusions of Bryson J in GE Capital Australia v Davis[52] including the following.
My view is that the requirement imposed on the controller by s420(1) takes the place of, or it may be operates cumulatively to the obligation otherwise existing with the general law of a controller exercising power of sale in respect of a property of a corporation. In so doing the section enhances the duty of the controller and the protections afforded to the corporation. This is achieved, and the apparent legislative intention is fulfilled without altering the remedies available to the corporation for breach of obligation in exercising the power of sale, and without altering the means available for obtaining remedies. Where real property subject to a mortgage has been sold and the mortgagor succeeds in establishing that there has been a sacrifice of the mortgagor’s interest in the exercise of the power of sale the mortgagor’s remedy is to be credited compensation when accounts are taken of the mortgaged debt. Section 420A(1) alters this scheme by insetting a more stringent rule, but does not otherwise change the scheme.
. . . .
In my view there is nothing to indicate that it was the intention of the legislature that s420A(1) should confer any right or remedy on guarantors or other persons who involve themselves contractually in consequences of the exercise of the power of sale, but the guarantor is entitled to rely on the availability to the mortgagor of a remedy, … The guarantor is entitled to have an equitable remedy on the basis that the mortgage accounts are taken on whatever may be the principle truly applicable in taking mortgage accounts. (Emphasis supplied.)
[49] Paragraphs [23]-[29].
[50] Jovanovic & Ors v Commonwealth Bank of Australia (2004) 87 SASR 570; GE Capital Australia v Davis (2002) 180 FLR 250; [2002] NSWSC 1146.
[51] (2004) 87 SASR 570 at [116].
[52] (2002) 180 FLR 250; [2002] NSWSC 1146.
I agree with the conclusion reached by the Master. In my view, the observations of Bryson J apply equally to a subsequent mortgagee; such a person, in the event of a breach of duty by a first mortgagee in exercising its power of sale, is entitled to stand in the shoes of the mortgagor and to be “credited compensation when accounts are taken of the mortgaged debt.” In the present case even if the appellant had a factual basis for a claim against the respondent for failure to exercise its power of sale appropriately it would have no independent claim for damages or compensation but only to benefit from the accounting which ultimately would have to take place.
I agree with the submissions of the respondent and the Master’s finding that reliance on s420A is premature in any event. By its terms that section can have no operation unless and until there has been a sale. It regulates the manner and exercise of the power of sale. It focuses upon the price achieved when a property is, in fact, sold. Furthermore, there is no duty owed by a mortgagee to a guarantor to exercise a power of sale at any particular time.[53] In my view, a subsequent mortgagee can be in no better position. There can be no default in the exercise of a power of sale if there is no obligation to undertake a sale at any given time.[54] If a surety or subsequent mortgagee is concerned that the value of the property, the subject of the security, is being allowed to run down that party can either await a crystallisation of the value of the property following exercise of the power of sale and then benefit from the ensuing accounting exercise or it can pay out the mortgagee, obtain the mortgage security and exercise the power of sale itself.[55] In Omlow Pty Ltd v Delahuntey[56] Davies and Pincus JJA after noting that a mortgagee does not owe a duty to the mortgagor or sureties to exercise any of its remedies, continued:
The law appears to have put into a special category a mere omission on the part of a creditor to exercise rights under a mortgage or other security, even if doing so causes the security to be “lost or diminished” to use the expression of Dixon J in Williams v Frayne… It appears that the guarantor cannot then complain, even if the result is that the creditor’s indolence forseeably causes the guarantor grievous loss. The point is, we think, too well established to be reconsidered in an intermediate appellant court.
[53] China & South Sea Bank Ltd v Tan Soon Gin [1990] 1 AC 536 at 545 (PC; Lord Templemen delivering the opinion).
[54] Westpac Banking Corporation Ltd v Kingsland (& Ors) (1991) 26 NSWLR 700 at 706.
[55] Westpac Banking Corporation Ltd v Kingsland (& Ors) (1991) 26 NSWLR 700 at 705. [CHECK].
[56] [1995] 2 Qd R 389 at 394.
The appellant also relied upon “a general law and equitable duty” owed by the respondent to the appellant. However, a mortgagee exercising a power of sale does not owe a common law duty of care to the mortgagor or any other party.[57] Further, neither the general equitable duty owed by a mortgagee in possession to the mortgagor and others claiming through the mortgagor nor s420A of the Corporations Act operates so as to allow a claim for damages or compensation. The remedy is to adjust the accounting between the parties.[58]
[57] Jovanovic & Ors v Commonwealth Bank of Australia (2004) 87 SASR 570 at [92]-[114] (Besanko J with whom Mullighan J agreed).
[58] Westpac Banking Corporation Ltd v Kingsland (& Ors) (1991) 26 NSWLR 700 at 706; Commonwealth Bank of Australia v Hadfield (2001) 53 NSWLR 614 at [48]; GE Capital Australia v Davies (2002) 180 FLR 250 at [53]-[54], [56]; Ultimate Property Group Pty Ltd v Lord (2004) 60 NSWLR 646 at [107]; Jovanovic v Commonwealth Bank of Australia (2004) 87 SASR 570 at [114]; Fortson v Commonwealth Bank of Australia (2008) 100 SASR 162 at [11] per Debelle J, with whom Doyle CJ and Bleby J agreed.
As a consequence, the appellant, at this stage of its relationship with the respondent, has no claim against the respondent which sounds in money. Any obligation in the respondent to account, at least insofar as the capital value of the property the subject of the security is concerned, does not arise until the property has been sold[59] unless the circumstances are such that the mortgage debt should have been paid in full from some other source.
[59] Coroneo v Australia Provincial Assurance Association Ltd (1935) 35 SR (NSW) 391; D Young Pty Ltd v Commercial & General Acceptance Ltd (1982) NSW ConvR 55-097 at 56,573, 56,575.
In this latter respect, the appellant argued to the effect that whether or not the respondent had a duty to account with respect to its alleged wrongful failure to exercise the power of sale, it had a duty to account with respect to the rents received whilst in possession of the land. This may be correct in time. However, whilst in possession of the land and before exercising any power of sale, the first mortgagee is entitled to receive the rents and to apply them not just to interest due on its mortgage debt but (and to the extent that there is any surplus) also to reduction of the principal amount of approximately $7.7 million. Even so, there would be an obligation to apply any money received, whether of an income or of a capital nature, to interest and principal due and owing to the second mortgagee (Orio) before the appellant, as third mortgagee, could claim any entitlement. The notion that the appellant is entitled, now, to require the respondent to account to it for rent received or rent improperly foregone is without foundation.
The appellant has no claim against the respondent which, at present, sounds in money. As such an essential requirement for an offsetting claim, within s459H, has not been met.
The appellant, in addition, contended that the statutory demand should be set aside under s459J(1)(b), that is, “there is some other reason why the demand should be set aside”. Section 459J(1)(b) confers a broad power.[60] In its written outline, the appellant has submitted that because it has initiated proceedings in the District Court for loss caused by the respondent’s breach of duty, a substantial injustice would occur should the District Court uphold the claim but with the statutory demand not having been set aside.
[60] Accordent Pty Ltd v RMBL Investments Ltd (2009) 105 SASR 62.
Again, I disagree. The appellant’s application to have the statutory demand set aside has been rejected because (and leaving aside, for the present, the competency of the appeal issue) the appellant has failed to satisfy the relatively undemanding test for the establishment of an offsetting claim. In those circumstances, it would serve only to undermine the statutory scheme for dealing with statutory demands for a court then to say that, notwithstanding this, the statutory demand should be set aside simply because the appellant has foreshadowed[61] pursuing the same “offsetting claim” in the District Court. I agree with the conclusion of the Master on this topic. The appellant’s anticipated claim in the District Court does not reach the very low standard required of a plausible contention requiring investigation. I am not satisfied that the appellant has demonstrated that there is “some other reason” why the demand should be set aside.
[61] It is not correct for the appellant to assert that it has initiated proceedings; a 6R 33 notice is only a pre-action notice to a prospective defendant giving notice that the issuer proposes to commence proceedings.
Conclusion

The appeal is dismissed. I will hear the parties on the question of costs.