Creata (Aust) Pty Ltd v Faull

Creata (Aust) Pty Ltd appealed to the Court of Appeal of New South Wales against a decision of a single judge who had refused to set aside a statutory demand. The application to set aside the statutory demand was based on an argument concerning the correct construction of a deed, which Creata contended gave rise to a genuine dispute about the existence of the debt.

The Court of Appeal was required to determine whether the primary judge had erred in refusing to set aside the statutory demand. Specifically, the court had to consider whether there was a "genuine dispute" about the debt, or whether the alleged dispute was a "recent invention" designed to avoid compliance with the statutory demand. This involved assessing whether the construction of the deed raised a question of rational controversy and whether evidence of a statement by a third party indicated a possibility of a defence to a debt recovery claim.

The Court of Appeal reasoned that where a question of construction of a deed has an element of rational controversy, and where there is evidence suggesting a plausible defence to a debt recovery claim, a court should exercise restraint in determining the ultimate cogency of that evidence. The court found that there was sufficient material before it to demonstrate a plausible case of a genuine dispute. Consequently, leave to appeal was granted, the orders of the primary judge were set aside, and the statutory demand was ordered to be set aside.