EFF Ltd v Mygid Pty Ltd
[2004] WASC 174
EFF LTD -v- MYGID PTY LTD [2004] WASC 174
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2004] WASC 174 | |
| Case No: | COR:46/2004 | 27 APRIL & 8 JUNE 2004 | |
| Coram: | MASTER NEWNES | 12/08/04 | |
| 26 | Judgment Part: | 1 of 1 | |
| Result: | Application dismissed | ||
| B | |||
| PDF Version |
| Parties: | EFF LTD (ACN 077 014 594) MYGID PTY LTD (ACN 009 108 356) |
Catchwords: | Corporations Application to set aside statutory demand Application by plaintiff to file further affidavits in support of application Relevant principles Whether agreement to work towards paying debt early was enforceable Whether genuine dispute Turns on own facts |
Legislation: | Corporations Act 2001 (Cth), s 459G, s 459H |
Case References: | Argyll Park Thoroughbreds Pty Ltd v Glen Pacific Pty Ltd (1993) 11 ACSR 1 Bailes v Modern Amusements Pty Ltd [1964] VR 436 Chasemore v Turner (1874) LR10QB 500 Energy Equity Corp Ltd v Sinedie Pty Ltd (2001) 166 FLR 179 Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 Fettes v Robertson [1921] WN 136 Financial Solutions Australasia Pty Ltd v Predella Pty Ltd [2002] WASCA 51 G Scammell & Nephew Ltd v HC & JG Ouston [1941] AC 251 Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452 Hammond v Smith (1864) 33 Beav 452 Head v Kelk (1962) 63 SR (NSW) 1363 Karimbla Construction v Alliance Group Building [2003] NSWSC 617 Ledingham v Bermejo Estancia Co Ltd [1947] 1 All ER 749 Life Insurance Co of Australia Ltd v Phillips (1925) 36 CLR 60 Meadowfield Pty Ltd v Gold Coast Holdings Pty Ltd (In liq) [2001] WASCA 360 Pan Foods Company Importers & Distributors Pty Ltd v ANZ Banking Group Ltd (2000) ALR 579 Process Machinery Australia Pty Ltd (t/as DCL Engineering) v ACN 057 260 590 [2002] NSWSC 45 Re Combined Security Systems & Designs Pty Ltd; Hawthorne v Harris, unreported; FCA (Drummond J); 28 February 1995 Re Morris Catering (Australia) Pty Ltd (1993) 11 ACSR 601 Reale Bros Pty Ltd v Reale [2003] NSWSC 666 SMEC International Pty Ltd v CEMS Engineering Inc (2001) 38 ACSR 595 SMEC International Pty Ltd v CEMS Engineering Inc [2001] NSWSC 459 Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452 Turner Corporation (WA) Pty Ltd v Blackburne & Dixon Pty Ltd [1999] WASCA 294 Universal Greening Pty Ltd v Sabine (1999) 17 ACLC 880 Waters v Thanet (1842) 2 QB 757 Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37 Coghlan v S H Lock (Australia) Ltd (1987) 8 NSWLR 88 Commonwealth v Verwayen (1990) 170 CLR 394 Iezzi Constructions Pty Ltd v Watkins Pacific (Qld) Pty Ltd [1995] 2 Qd R 350 J & J Products v Ken Gray and Co, unreported; FCt SCt of WA; Library No 960219; 24 April 1996 Land & National Development Corp Pty Ltd v Tatebrook Pty Ltd [1999] NSWSC 649 Magenta Nominees Pty Ltd v Bonini [1999] WASC 88 Mibor Investments Pty Ltd v Commonwealth Bank of Australia (1993) 11 ACLC 1062 Placer Development Ltd v Commonwealth (1969) 121 CLR 353 Scanhill Pty Ltd v Century 21 Australasia Pty Ltd (1993) 47 FCR 451 Spencer Constructions Pty Ltd v G&M Aldridge Pty Ltd (1997) 76 FCR 452 Thorby v Goldberg (1964) 112 CLR 597 Treiguts v Tweedley [1959] VR 544 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
MYGID PTY LTD (ACN 009 108 356)
Defendant
Catchwords:
Corporations - Application to set aside statutory demand - Application by plaintiff to file further affidavits in support of application - Relevant principles - Whether agreement to work towards paying debt early was enforceable - Whether genuine dispute - Turns on own facts
Legislation:
Corporations Act 2001 (Cth), s 459G, s 459H
Result:
Application dismissed
(Page 2)
Category: B
Representation:
Counsel:
Plaintiff : Mr T Galic
Defendant : Mr J C Vaughan
Solicitors:
Plaintiff : Galic & Co
Defendant : Christensen Vaughan
Case(s) referred to in judgment(s):
Argyll Park Thoroughbreds Pty Ltd v Glen Pacific Pty Ltd (1993) 11 ACSR 1
Bailes v Modern Amusements Pty Ltd [1964] VR 436
Chasemore v Turner (1874) LR10QB 500
Energy Equity Corp Ltd v Sinedie Pty Ltd (2001) 166 FLR 179
Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785
Fettes v Robertson [1921] WN 136
Financial Solutions Australasia Pty Ltd v Predella Pty Ltd [2002] WASCA 51
G Scammell & Nephew Ltd v HC & JG Ouston [1941] AC 251
Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452
Hammond v Smith (1864) 33 Beav 452
Head v Kelk (1962) 63 SR (NSW) 1363
Karimbla Construction v Alliance Group Building [2003] NSWSC 617
Ledingham v Bermejo Estancia Co Ltd [1947] 1 All ER 749
Life Insurance Co of Australia Ltd v Phillips (1925) 36 CLR 60
Meadowfield Pty Ltd v Gold Coast Holdings Pty Ltd (In liq) [2001] WASCA 360
Pan Foods Company Importers & Distributors Pty Ltd v ANZ Banking Group Ltd (2000) ALR 579
Process Machinery Australia Pty Ltd (t/as DCL Engineering) v ACN 057 260 590 [2002] NSWSC 45
Re Combined Security Systems & Designs Pty Ltd; Hawthorne v Harris, unreported; FCA (Drummond J); 28 February 1995
Re Morris Catering (Australia) Pty Ltd (1993) 11 ACSR 601
(Page 3)
Reale Bros Pty Ltd v Reale [2003] NSWSC 666
SMEC International Pty Ltd v CEMS Engineering Inc (2001) 38 ACSR 595
SMEC International Pty Ltd v CEMS Engineering Inc [2001] NSWSC 459
Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452
Turner Corporation (WA) Pty Ltd v Blackburne & Dixon Pty Ltd [1999] WASCA 294
Universal Greening Pty Ltd v Sabine (1999) 17 ACLC 880
Waters v Thanet (1842) 2 QB 757
Case(s) also cited:
Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37
Coghlan v S H Lock (Australia) Ltd (1987) 8 NSWLR 88
Commonwealth v Verwayen (1990) 170 CLR 394
Iezzi Constructions Pty Ltd v Watkins Pacific (Qld) Pty Ltd [1995] 2 Qd R 350
J & J Products v Ken Gray and Co, unreported; FCt SCt of WA; Library No 960219; 24 April 1996
Land & National Development Corp Pty Ltd v Tatebrook Pty Ltd [1999] NSWSC 649
Magenta Nominees Pty Ltd v Bonini [1999] WASC 88
Mibor Investments Pty Ltd v Commonwealth Bank of Australia (1993) 11 ACLC 1062
Placer Development Ltd v Commonwealth (1969) 121 CLR 353
Scanhill Pty Ltd v Century 21 Australasia Pty Ltd (1993) 47 FCR 451
Spencer Constructions Pty Ltd v G&M Aldridge Pty Ltd (1997) 76 FCR 452
Thorby v Goldberg (1964) 112 CLR 597
Treiguts v Tweedley [1959] VR 544
(Page 4)
1 MASTER NEWNES: This is an application by the plaintiff to set aside a statutory demand served on it by the defendant. The statutory demand, which is dated 12 February 2004, required payment of an amount of $500,000, said to be a debt owing by the plaintiff to the defendant under an agreement made on 18 April 2002.
2 The plaintiff seeks to set aside the statutory demand on the basis that there is a genuine dispute as to whether the amount claimed is due and payable to the defendant.
3 In an affidavit sworn 2 April 2004 Mr Marcus, a director of the defendant, says that in early 2002 he was approached to invest in the plaintiff by one of the directors, Mr Joachim Diedler. Mr Marcus says the plaintiff was described to him as a paulownia plantation manager, and, in particular, he was told that Environmental Forest Farm Management Ltd ("EFFM"), a wholly owned subsidiary of the plaintiff, was the plantation manager for the Kiri Park Paulownia Plantation. He was informed that some of the trees at Kiri Park were managed for growers under a managed investment scheme and approximately 40,000 trees - covering approximately 60 hectares - for Powton Land Holdings Ltd ("PLH"). The plaintiff owned approximately 63 per cent of the issued shares in PLH and growers in the Kiri Park Plantation owned the balance. PLH also owned the land that comprised Kiri Park. It leased part of the land to EFFM, which, in turn, subleased it to growers under the managed investment scheme.
4 Mr Marcus says the defendant, which is controlled by Mr Marcus and his wife, decided to invest in the plaintiff. He says that the plaintiff and the defendant entered into a written agreement dated 18 April 2002, entitled "Convertible Note Agreement", under which the defendant lent the sum of $500,000 to the plaintiff. The money was repayable on a date four years from the date of the advance and was secured by a charge dated 18 April 2002 (the "Charge") over EFFM's shares in PLH.
5 According to Mr Marcus, by December 2002 the defendant was dissatisfied with the manner in which the plaintiff was performing its obligations under the Convertible Note Agreement. Between that time and December 2003 there were various meetings between Mr Marcus and representatives of the plaintiff in an endeavour to resolve their differences. It is unnecessary for present purposes to go into the detail of that. Suffice it to say that on 9 December 2003 the defendant served on the plaintiff a default notice dated 8 December 2003. The default notice specified 11 defaults which the defendant alleged had occurred under the
(Page 5)
- Convertible Note Agreement and, pursuant to cl 7 of that agreement, it required the plaintiff to remedy those defaults within 60 days of service of the default notice, that is by 9 February 2004.
6 The plaintiff responded by letter dated 16 December 2003 in which, among other things, it denied that it was in default under the Convertible Note Agreement in any respect.
7 According to Mr Chesson, a director of the plaintiff, he then had a telephone conversation with Mr Marcus on or about 22 December 2003. The terms of the alleged conversation are material to this application and, as set out in the affidavit of Mr Chesson, are as follows:
"I said words to the effect of 'There are no breaches of the convertible note agreement and you know it'. Marcus on behalf of the defendant said to me words to the effect of 'Whether there are any breaches or not is not the matter of concern and I'm not going to argue about that. I just want you to pay my money back'. Marcus further said to me words to the effect of 'I am not going to pursue the matter if you tell me that you will definitely pay me. I want the money back for other purposes'. I said words to the effect that the plaintiff was happy to work towards trying to pay back the $500,000 by 30 June 2004 if it could. Marcus said 'Okay, fine then', or words to that effect. Marcus said words to the effect that he didn't want to take up the shares now anyway and that he just wanted his money back. I then had a long discussion with him in which we discussed the progress of the business of the tree plantation operated by the plaintiff and its related companies. In closing the conversation Marcus said to me words to the effect of "I will discontinue that Default Notice'."
8 Mr Chesson says that he then sent an email to his fellow directors regarding the conversation with Mr Marcus. The copy of the email attached to Mr Chesson's affidavit is addressed to three other officers of the plaintiff and to the plaintiff's lawyer. In the e-mail Mr Chesson says that he told Mr Marcus the plaintiff did not have to repay the loan at this stage, but the plaintiff was sticking to the plan of paying it back by 30 June 2004 and was hopeful that that could be achieved. He goes on in the e-mail to say that Mr Marcus said he was not going to push the issue of default under the Convertible Note Agreement any further. The e-mail is dated 22 December 2003.
(Page 6)
9 Mr Marcus says in his affidavit that he has no recollection of any such conversation and says that, for various reasons which he sets out, he believes it did not take place. Mr Marcus says he has never had any telephone conversation with Mr Chesson in which he waived the plaintiff's default under the Convertible Note Agreement. He says he would not have agreed to do so in the absence of a binding written commercial resolution of the matter. The defendant disputes the authenticity of the e-mail. The defendant obtained an order requiring the production of the original e-mail, but the plaintiff has filed an affidavit of Mr Chesson in which he says the e-mail has been deleted from the plaintiff's computer system and is no longer available and none of the recipients has kept a copy of it.
10 On 30 January 2004, the defendant's solicitors wrote to the plaintiff's solicitors responding in detail to the plaintiff's letter of 16 December 2003. In that letter the defendant's solicitors, among other things, said:
"The default notice dated 8/12/2003 has not lapsed. Nor has it been withdrawn. Nor has EFF remedied the default. My client's rights in respect of the Default Notice are reserved."
11 The plaintiff did not reply to that letter. On 10 February 2004, a notice of demand was sent by the defendant to the plaintiff in which the defendant demanded payment of the sum of $500,000 under the Convertible Note Agreement. Payment was not made and, on 12 February 2000, the statutory demand was served on the plaintiff.
12 There are three bases upon which the plaintiff says there is a genuine dispute as to the plaintiff's liability to repay the money as demanded: first, the plaintiff says that by an agreement made on 22 December 2003 between Mr Chesson on behalf of the plaintiff and Mr Marcus on behalf of the defendant, the defendant agreed not to pursue the alleged defaults in consideration of the plaintiff working towards trying to repay the $500,000 by 30 June 2004; secondly, that by reason of the promise in that conversation not to enforce the default notice, the defendant is estopped from relying on the notice; and thirdly, the plaintiff denies that it was in default under the Convertible Note Agreement at all.
13 The question of what is sufficient to constitute a genuine dispute for the purposes of s 459H of the Corporations Act has been considered in a number of cases. It is now established that a genuine dispute requires "a plausible contention requiring further investigation", but beyond that the Court does not assess the merits: Eyota Pty Ltd v Hanave Pty Ltd (1994)
(Page 7)
- 12 ACSR 785, per McLelland CJ in Eq, at 787; Financial Solutions Australasia Pty Ltd v Predella Pty Ltd [2002] WASCA 51, at 22; SMEC International Pty Ltd v CEMS Engineering Inc (2001) 38 ACSR 595 at 600; Reale Bros Pty Ltd v Reale [2003] NSWSC 666 per Young CJ in Eq, at 38.
14 In Re Morris Catering (Australia) Pty Ltd (1993) 11 ACSR 601 Thomas J said, at 605:
"It is often possible to discern the spurious, and to identify mere bluster or assertion. But beyond a perception of genuineness (or lack of it) the court has no function."
15 In Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452 the Full Federal Court referred to that passage and (at 464) concluded that:
"… a genuine dispute requires that:
• the dispute be bona fide and truly exist in fact;
• the grounds for alleging the existence of a dispute are real and not hypothetical, illusory or misconceived."
16 In Turner Corporation (WA) Pty Ltd v Blackburne & Dixon Pty Ltd [1999] WASCA 294, Owen J, with whom Pidgeon and Wallwork JJ agreed, said at [27]:
"From the relevant authorities on the issue of what amounts to a 'genuine dispute' under s 459H there can be discerned an emphasis on two overriding considerations. First, that in determining whether there is a genuine dispute a court is required to undertake an investigation that raises much the same sort of considerations as the 'serious question to be tried' criterion which arises in an application for an interlocutory injunction or for the extension or removal of a caveat: Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACLC 669 per McLelland J at 671. Further, to reach a finding that there is a genuine dispute the applicant must satisfy the court that:
(a) the dispute is bona fide and truly exists in fact; and
(b) the grounds alleging the existence of a dispute are real and not spurious, hypothetical, illusory or misconceived: Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd
(Page 8)
- (1997) 15 ACLC 1001 per Northrop, Merkel and Goldberg JJ.
- This formulation has been adopted in a number of recent decisions: see Goldspar Australia v KWA Design Group (1999) 17 ACLC 456per Austin J at 462 and Universal Greening Pty Ltd v Sabine & Anor (1999) 17 ACLC 880 per Kenny J at 885. In the interests of consistency in the various courts that have to apply the Corporations Law, I think this is the approach to be preferred."
17 However, that approach does not mean the Court has to accept uncritically as giving rise to a genuine dispute every statement in an affidavit, however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself. Nor does the Court have to accept statements not having sufficient prima facie plausibility to merit further investigation as to truth or accept a patently feeble legal argument or an assertion of facts unsupported by evidence: Eyota Pty Ltd v Hanave Pty Ltd (supra) at 787.
18 Turning to the alleged oral agreement of 22 December 2004, the defendant says, first, that Mr Chesson's evidence is inherently incredible and inconsistent with the contemporaneous documents and should not be accepted. I would not, however, be prepared to make a finding of fact at this stage as to the credibility of Mr Chesson's evidence on the matter. I do not consider that such a determination can properly be made on the affidavit evidence before me.
19 I accept, however, the defendant's submission that was allegedly agreed is not sufficient to constitute a legally enforceable agreement.
20 The plaintiff's contention is that there was a concluded, binding agreement reached in the telephone conversation of 22 December 2002. The plaintiff's case was not put on the basis of waiver and, as the defendant's counsel observed, that is presumably because the Convertible Note Agreement expressly requires that any waiver be in writing
21 The defendant submitted in relation to the alleged oral agreement, first, that there was simply no concluded agreement and, secondly, the consideration the plaintiff was said to have given for the defendant's promise to waive the default was illusory. The defendant argued that a promise, the performance of which is at the sole discretion of a promisor, is in law illusory consideration and is incapable of resulting in an
(Page 9)
- enforceable agreement. The promise in this case was, moreover, a promise that was so vague it would be impossible to enforce.
22 Whilst it is trite law that the Courts will strive to give legal effect to a bargain, particularly a commercial bargain made between business people, if it is possible to do so, it is also accepted that there are occasions when the bargain is not one to which the Court can attach a legal obligation sufficiently definite to be enforceable.
23 In Life Insurance Co of Australia Ltd v Phillips (1925) 36 CLR 60, Isaacs J at 80 -81 said:
"It is essential to a contract that by its terms express or implied there is created an obligation sufficiently definite to be measurable by the court."
24 In G Scammell & Nephew Ltd v HC & JG Ouston [1941] AC 251, at 268 - 269, Lord Wright said:
"The object of the court is to do justice between the parties, and the court will do its best, if satisfied that there was an ascertainable and determinate intention to contract, to give effect to that intention, looking at substance and not mere form. It will not be deterred by mere difficulties of interpretation … . [but] it is a necessary requirement that an agreement in order to be binding must be sufficiently definite to enable the court to give it a practical meaning. Its terms must be so definite, or capable of being made definite without further agreement of the parties, that the promises and performances to be rendered by each part are reasonably certain."
25 In Chasemore v Turner (1874) LR10QB 500 a promise to pay "as soon as we can get our affairs arranged" was held sufficient consideration to give rise to an enforceable agreement: see also Waters v Thanet (1842) 2 QB 757 and Hammond v Smith (1864) 33 Beav 452. In Fettes v Robertson [1921] WN 136 a promise by the defendant to pay a debt "when he could" was held enforceable.
26 In Ledingham v Bermejo Estancia Co Ltd [1947] 1 All ER 749 the defendant company was in financial difficulties and the plaintiff, in order to induce it to carry on, agreed to waive payment of interest on a loan "until such time as the company is in the position to pay the interest". It was held that that meant until the company was in the position to pay the interest out of income, it being at that time in a position to pay out of
(Page 10)
- capital if its assets were sold. It was held that there was an enforceable agreement under which, in consideration of carrying on, the defendant was not liable to pay interest until it was in a position to pay it out of income.
27 In Head v Kelk (1962) 63 SR (NSW) 1363, the borrower agreed to repay the loan "when [he] was financially able to do so and not before". It was argued that that did not constitute consideration and the agreement was so vague and uncertain as to be unenforceable. That was rejected by the Full Court of the Supreme Court of New South Wales, which held that there was an enforceable contract on those terms.
28 The following year a similar issue came before the Supreme Court of Victoria in Bailes v Modern Amusements Pty Ltd [1964] VR 436. That case concerned an agreement between a company and a shareholder that a loan made by the shareholder would be repaid by the company when the company considered it was in the position to repay it. It was held the term was not enforceable; either it was illusory or it was not sufficiently certain to be enforceable because it conferred on the company a discretion to determine whether, and to what extent (if at all), the moneys were to be repaid, so as to cut down to an illusory obligation what would otherwise have been an obligation to repay on demand.
29 In Argyll Park Thoroughbreds Pty Ltd v Glen Pacific Pty Ltd (1993) 11 ACSR 1, a covenant that loans were only repayable when the directors of the borrower felt the company was in a position to make repayment was held void as being illusory. In that case, Drummond J suggested that the true distinction between Head v Kelk and Bailes Modern Amusements was that if the question whether the agreed time for repayment has arisen can be determined objectively, then the term will be valid, but if the agreed time for repayment operates in a subjective way by leaving it to the borrower to determine when, if ever, he will repay the term, then it will be void as illusory: see also Re Combined Security Systems & Designs Pty Ltd; Hawthorne v Harris, unreported; FCA (Drummond J); 28 February 1995.
30 The question arose in the context of an application to set aside a statutory demand in Universal Greening Pty Ltd v Sabine (1999) 17 ACLC 880 where the applicant sought to set aside a statutory demand on the basis, among others, that there was a genuine dispute about the amount or existence of the debt. The company contended that the loans in question were repayable when the company, either through cash flow or the promise of further capital, could afford to repay them. Kenny J
(Page 11)
- concluded that such a term was void for uncertainty. Her Honour referred to Bailes and Argyll and said that a term to the effect alleged would leave it to the borrower to decide when, if at all, the occasion for repayment might arise. Her Honour went on:
"As Scholl J observed in Bailes at 438, a term of this kind would 'prompt in the mind of the reader a whole serious of questions as to what the parties intended'. First, who was to determine when the company could afford to repay? Secondly, what is meant by 'afford to make repayment'? How long was the stipulation to operate? Did it mean out of capital or out of income and could the board determine that the company was not in a position to pay because to do so would inhibit plans to expand its operations?"
32 In my view, the same reasoning applies with at least equal force in the present case. The term alleged by the plaintiff is, if anything, more uncertain than those with which the Court was concerned in Bailes, Argyll and Universal Greening. There is here not even a promise to pay on 30 June 2004 if the plaintiff could, but rather a promise to "work towards trying to repay" the money on 30 June 2004 "if the plaintiff could". In my view, the term alleged is too vague to be given any definite meaning and accordingly is not enforceable. There is accordingly no basis for a contention that there was a binding agreement the defendant would not seek to rely on the alleged defaults.
33 The second ground relied upon by the plaintiff was that the defendant was estopped from relying on the default notice by reason of its promise in the telephone conversation not to enforce it. Counsel for the plaintiff argued that the defendant could not resile from that promise without giving the plaintiff reasonable notice that it intended to do so. It was contended that it was to be inferred that the plaintiff had relied on the promise to its detriment by not responding to the notice and letting it go unanswered. Counsel acknowledged that there was no evidence on behalf of the plaintiff that, after 22 December 2003, it had in fact omitted to respond to the default notice in reliance on the alleged promise. The defendant had, of course, already sent a detailed response on 16 December 2003, denying each one of the alleged defaults. I should also say that there was no evidence that the plaintiff had in any other way acted, or omitted to act, in reliance on the alleged promise and specifically there
(Page 12)
- was no evidence that, since 22 December 2002, the plaintiff had worked toward repaying the money by 30 June 2004.
34 I do not accept the submission that the alleged reliance is to be inferred. If there had been such reliance, it should have been a simple matter for the plaintiff to have adduced direct evidence to that effect. It has not done so, nor has it sought to do so. In any event, I do not consider there is any basis in the evidence for such an inference to be drawn. The plaintiff's affidavits are silent on the matter and in fact the first mention of such reliance occurred in argument on this application. The fact that it was not raised earlier was not explained and, on the face of it, is inexplicable in light of the events leading up to and subsequent to the service of the notice of demand and statutory demand.
35 The defendant's solicitors wrote to the plaintiff's solicitors on the afternoon of 22 December 2003, the day of the alleged conversation. In that letter the defendant's solicitors referred to a letter of 16 December 2003 from the plaintiff's solicitors, in which the plaintiff denied it was in default, and said that they would be responding to that letter in full in the New Year. After dealing with other matters the defendant's solicitors concluded, "[M]y client's rights in respect of your client's defaults under the Convertible Note are reserved."
36 By letter dated 30 January 2003, the defendant's solicitors wrote to the plaintiff's solicitors responding in detail to the letter of 16 December 2003. They canvassed each of the defaults relied upon by the defendant and rejected the plaintiff's response to each one. They then said, "[t]he default notice dated 8/12/2003 has not lapsed. Nor has it been withdrawn. Nor has EFF remedied the default. My client's rights in respect of the Default Notice are reserved."
37 There was no response on behalf of the plaintiff to the defendant's solicitors' letters of 22 December 2003 or 30 January 2004. Nor in any of the communications after the notice of demand and the statutory demand were served, including the Response Notice, did the plaintiff ever contend that it relied on the alleged promise or that it had changed course in any way after 22 December 2003. Indeed, the alleged telephone conversation of 22 December 2003 was itself first raised in a letter from the plaintiff's solicitor of 3 March 2004. In that letter, the plaintiff's solicitor, after setting out the substance of the alleged conversation, simply said that "[t]here seems [sic] to be respectable arguments in favour of the view that … it was agreed between our respective clients, alternatively your client gave assurances not to take an [sic] action to recover the amount of the
(Page 13)
- advance before June 30th this year." They also referred to an argument that the defendant had waived any breach.
38 On the evidence there is, in my view, no basis for the alleged estoppel and accordingly no genuine dispute on that ground.
39 It is, therefore, necessary to turn to the other ground relied upon by the plaintiff, namely that there is a genuine dispute as to whether the plaintiff was in default under the Convertible Note Agreement. Although, as I have said, the defendant relied upon a total of 11 alleged defaults in the notice of demand and default notice, on this application the defendant relied on only eight of those defaults and did not press the other three.
40 In his affidavit sworn 3 March 2004 and filed in support of the application to set aside the statutory demand, Mr Chesson, on behalf of the plaintiff, denies that the plaintiff was, or is, in default. Mr Chesson refers to a "Response Notice", dated 20 February 2004, which was prepared by Mr Chesson on behalf of the plaintiff and which he says was served on the defendant's solicitors in response to the allegations of default in the notice of demand. A copy of the Response Notice is annexed to Mr Chesson's affidavit. The Response Notice, as the name suggests, sets out the plaintiff's response to each of the alleged defaults.
41 Mr Chesson goes on in his affidavit specifically to deny two alleged defaults and says that "for the reasons deposed to herein (and as summarised in [the Response Notice]) I verily believe that" there is no debt presently due and payable by the plaintiff to the defendant and there has been no breach by the plaintiff of the Convertible Note Agreement or the Charge.
42 In the course of the hearing on 27 April 2004 it was submitted on behalf of the defendant that none of the contentions contained in the Response Notice was verified by affidavit and they were therefore inadmissible. The plaintiff's counsel contended that they had been adequately verified in Mr Chesson's affidavit in support of the application, but he sought leave to file a further affidavit specifically directed to verifying the matters contained in the Response Notice. That was opposed by the defendant's counsel who contended that either the matters were already sufficiently verified, in which case a further affidavit was unnecessary, or they were not verified in which case by any further affidavit the plaintiff would be seeking to rely on new grounds. The latter was not permissible and counsel referred to Energy Equity Corp Ltd v Sinedie Pty Ltd (2001) 166 FLR 179.
(Page 14)
43 I invited the parties to provide written submissions on the plaintiff's application to file a further affidavit to verify the matters set out in the Response Notice. The defendant's submissions were filed on 29 April 2004 and the plaintiff's replying submissions on 6 May 2004. In the result, I concluded that for the following reasons the plaintiff should be permitted to file a further affidavit.
44 Section 459G of the Corporations Law requires that any application to set aside a statutory demand must be made within 21 days after service of the demand and an affidavit "supporting the application" must be filed and served within that time.
45 What is sufficient to constitute such an affidavit was considered in Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452 where, at 459, Sundberg J said:
"The affidavit must in my view disclose facts showing there is a genuine dispute between the parties. A mere assertion that there is a genuine dispute is not enough. Nor is a bare claim that the debt is disputed sufficient. It follows from the fact that the affidavit need not go into evidence, which is the customary function of an affidavit, that it may read like a pleading.
An affidavit which exhibits an exchange of correspondence between the parties or between their solicitors from which it appears that a claim is made and rejected for reasons given can qualify as a supporting affidavit. And an affidavit verifying the pleadings in an action may qualify it.
… It was said that the affidavit must, as a minimum, contain a statement of the material facts on which the applicant intends to rely to show a genuine dispute - it might read more like a pleading than a story. That accords with what I consider to be the minimum requirement."
46 The Full Court of this Court applied those comments in Meadowfield Pty Ltd v Gold Coast Holdings Pty Ltd (In liq) [2001] WASCA 360.
47 In Energy Equity Corporation Ltd v Sinedie Pty Ltd (supra) the question was whether the plaintiff could seek to establish that it had an offsetting claim in negligence in relation to a contract when all that was relevantly said in the affidavit was that there were "a string of offsetting
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- claims". Wallwork J (with whom Steytler J and Olsson AUJ agreed) said at [185]:
"In my view it now seems to be accepted that an affidavit filed outside the 21 day period which raises a new ground or grounds to set aside a statutory demand (as opposed to an affidavit which expands on grounds in an earlier affidavit which has satisfied the threshold test) cannot be used in an application of this nature." [emphasis added]
"The real point is that the application and affidavit filed and served within the 21 day period must fairly alert the claimant to the nature of the case the company will seek to make in resisting the statutory demand. The content of the application and affidavit must convey, even if it be by necessary inference, a clear delineation of the area of controversy so that it is identifiable with one or more of the grounds made available by s 459H and s 459J. That process of delineation may not be extended after the end of the 21 day period, although it is open to the plaintiff to supplement the initial affidavit by way of additional evidence relevant to the area of controversy identified within the period."
49 It does not seem to me that there is anything in those observations which is inconsistent with the approach taken in the decisions of the Full Court to which I have referred.
50 It also appears now well established that an affidavit which exhibits an exchange of correspondence between the parties or their solicitors, from which it appears that the claim is made and rejected for reasons stated, can qualify as a supporting affidavit: Graywinter (supra), SMEC International Pty Ltd v CEMS Engineering Inc [2001] NSWSC 459; Karimbla Construction v Alliance Group Building [2003] NSWSC 617.
51 In SMEC, the affidavit in support of the application was sworn by the plaintiff's solicitor who annexed correspondence between his firm and the defendant's solicitors in which, for reasons given in the correspondence, the plaintiff denied any liability to the defendant in respect of the debt which was the subject of the statutory demand. Austin J held that the affidavit met the requirements of s 459G. His Honour noted that the cases accept that a plaintiff is entitled to rely on
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- affidavits filed outside the 21-day period provided the application has been validly instituted. He went on:
"[That] proposition must imply that later affidavits can expand and supplement the factual grounds upon which the plaintiff will rely at the hearing, subject perhaps to the qualification that the initial supporting affidavit must indicate the general nature of the plaintiff's case …".
53 The other question was whether such supplementary evidence should be permitted to be adduced at such a late stage, the plaintiff having had almost six weeks' notice of the date of the substantive hearing and the application being made after the defendant's counsel had completed his submissions.
54 In the normal course, I would have considered the application to be too late, but in this case there was no clear intimation by the defendant that it took any point about the admissibility of the matters relied upon by the plaintiff in its supporting affidavit to establish a genuine dispute. The defendant's outline of submissions appeared to deal with the plaintiff's case on the substantive merits. I accept that the plaintiff's counsel came to the hearing on the basis that no point was taken about admissibility, but rather that the battlelines had been drawn at the adequacy of the material in the Response Notice to establish that there was in fact a genuine dispute. The plaintiff's solicitors might be open to some criticism for not having given the matter greater attention earlier, but I did not consider that the matter should be determined on that basis. While it is plainly important that proceedings be finally disposed of as expeditiously as the nature of the case allows, that must be weighed, in a case such as the present, against the injustice of potentially shutting out a company with a genuine dispute from challenging a statutory demand.
55 I considered that, in the circumstances, the plaintiff should be given an opportunity to put into admissible form the matters upon which it
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- relied, if indeed it had not done so in the existing affidavit, and on that basis I allowed the plaintiff to file and serve a further affidavit. A further affidavit of Mr Chesson was filed on 15 June 2004. It evoked three further affidavits on behalf of the defendant, filed on 25 June 2004.
56 It is in the light of that material I turn to consider the question of whether there is a genuine dispute.
57 The Convertible Note Agreement relevantly provided, by cl 6, that the plaintiff was in default under that agreement if it was in breach of any term of the Convertible Note Agreement or the Charge.
58 The defaults relied upon by the defendant are as follows:
(1) the plaintiff did not, as required by clause 5(4) of the Charge, deposit with the defendant all deeds, share certificates and documents of title relating to the PLH shares charged by the plaintiff immediately upon execution of the Charge or as soon thereafter as the plaintiff received them;
(2) the plaintiff did not, as required by clause 5(5) of the Charge, deliver to the defendant when requested to do so, registrable transfers of the PLH shares the subject of the Charge, executed by the plaintiff with the name of the transferee and date left blank;
- (3) the plaintiff did not, as required by clause 5(6) of the Charge, deliver to the defendant information and documents requested by the defendant (by letter of 7 November 2003) as to the business, property and financial condition of the plaintiff and, in particular, did not as requested provide the plaintiff's financial statements for the year ended 30 June 2003, the year-to-date financial statements for the plaintiff to 30 October 2003, quarterly reports and copies of minutes of the meetings of directors of the plaintiff for the three months prior to 7 November 2003;
(4) the plaintiff, contrary to clause 6(2) of the Charge, knowingly permitted or caused something to be done, namely, the rights issued by PLH under the prospectus dated 16 July 2003, that in the reasonable opinion of the defendant could mean that the charged property and the
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- Charge is or is likely to become materially lessened in value or prejudicially affected;
(5) the plaintiff, contrary to clause 16(1)(3) of the Charge, did not pay the defendant's costs in connection with the contemplated or actual enforcement and preservation of its rights under the Charge in the amount of $8816.50 as required by the defendant's costs invoice G0019 dated 31 July 2002;
(6) contrary to clause 6(b)(ii) of the Convertible Note Agreement, more than 20% of the total amount of all lease payments due and payable to PLH in respect of the lease or sublease of real property owned by it were in default;
(7) the plaintiff, contrary to clause 8(a) of the Convertible Note Agreement, failed to pay the defendant's costs in connection with the exercise and preservation of its rights under the Convertible Note Agreement and the Charge in the amount of $8,816.50 as demanded in the defendant's invoice G0019 dated 31 July 2003; and
(8) the plaintiff failed, contrary to clause 9(a)(xiv) of the Convertible Note Agreement, to give to the defendant the quarterly report concerning the financial position of PLH for each of the quarters ending 31 December 2002, 31 March 2003, 30 June 2003 and 30 September 2003.
60 Mr Marcus says in his affidavit of 2 April 2004 that the plaintiff has never deposited with the defendant any deeds, share certificates and documents of title to the PLH shares and in relation to par (2) above that the plaintiff has failed to deliver to the defendant the registrable transfer of the PLH shares.
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61 In his affidavit sworn 15 June 2004, Mr Chesson, on behalf of the plaintiff, says in response that he is informed by Mr Joachim Diedler, a former director of the plaintiff, and believes that all the required documents referred to in par (1) have been deposited and are no longer in the possession of the plaintiff. Similarly, in relation to par (2) above Mr Chesson says that he is informed by Mr Diedler and believes that the required transfer was deposited with the defendant.
62 Mr Diedler, however, has sworn an affidavit of 21 June 2004 on behalf of the defendant in which he says that he does not know whether or not the plaintiff has given those documents to the defendant and he denies the statements attributed to him by Mr Chesson. Mr Diedler says he told Mr Chesson that he did not know.
63 In relation to the claim in par (3) above, cl 6.6 of the Charge provides that the plaintiff will promptly give to the defendant any information and documents which the defendant requests from time to time in connection with the Charge or the business, property or financial condition of the plaintiff.
64 By letter dated 7 November 2003, the defendant requested that the plaintiff provide it with the plaintiff's financial statements for the financial year ended 30 June 2003, the year to date financial statements for the plaintiff to 30 October 2003, quarterly reports for the last three completed quarters and copies of the minutes of directors' meetings for the previous three months. Mr Marcus says that the plaintiff has never delivered that material to the defendant.
65 Mr Chesson says that the financial records of the plaintiff have been supplied to the defendant "as and when they have been available". In the Response Notice of 20 February 2004, Mr Chesson says that the financial accounts of the plaintiff for the financial year ended 30 June 2003 were in the process of being audited but "are now available" and that the plaintiff expected they would be distributed "in the next few days." In his affidavit of 15 June 2004, Mr Chesson reiterates that the financial accounts for the financial year ended 30 June 2003 were in the process of being audited when requested by the defendant and were not available, and says they have since been provided to the defendant.
66 In his responsive affidavit of 25 June 2004, Mr Marcus annexes a letter dated 18 June 2004 from his solicitors referring to the assertion that the accounts have since been provided and asking for information by 4 pm on 22 June 2004 as to when, how and by whom they were provided. The
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- plaintiff's solicitors replied by letter dated 23 June 2004 in which they said the information had been on the internet for some time, that they were getting further instructions on the matter and that they would respond the followed day. Mr Marcus says that, at the date of his affidavit, nothing further had been heard from them.
67 An affidavit of an employee of the defendant's solicitors has also been filed annexing a copy of the financial statements of the plaintiff for the financial year ended 30 June 2003 obtained on a search of the records of the ASIC. The accounts were certified on 20 January 2004 by the company secretary of the plaintiff on the form 388 attached to the accounts and lodged on behalf of the plaintiff. The form is date stamped as having been received by the ASIC on 21 January 2004. The directors' declaration in the accounts was signed by Mr Chesson on behalf of the directors on 20 January 2004 and the auditors signed their certification on the same day.
68 In relation to the claim in par (4) above, cl 6(2) of the Charge relevantly provides that the plaintiff shall not do anything or knowingly permit or cause anything to be done which could mean in the reasonable opinion of the defendant that that the charged property or the Charge is or is likely to become materially lessened in value or prejudicially affected.
69 Mr Marcus says that, in mid-July 2003, PLH issued a prospectus dated 18 July 2003 for a rights issue. It provided for a three for one non-renounceable rights issue of up to 48,810 shares in PLH at $10 per share. The issue was thus intended to raise $4,881,000. It was not underwritten. Some 30,000 shares were to be issued to the plaintiff in settlement of some, undisclosed, liability of PLH to the plaintiff.
70 Mr Marcus says that, on behalf of the defendant, he considered the effect of the rights issue would be that the PLH shares held by the plaintiff and subject to the Charge were likely to become materially lessened in value or prejudicially affected. That is because of the dilution of the proportion of the shareholding subject to the Charge. Prior to the rights issue there were 10,000 PLH shares that were subject to the Charge and 6,270 that were not, with the consequence that 61.5 per cent of the issued shares in PLH were subject to the Charge. After the rights issue there would be both the 30,000 shares issued to the plaintiff and the balance of some 18,810 shares resulting from the rights issue which would not be subject to the Charge, with the result that the proportion of the issued shares in PLH subject to the Charge would fall to 15.4 per cent. Mr Marcus considered that the effect of the rights issue would be that on
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- any realisation of the shares subject to the Charge the defendant would have lost the value of the premium for control that it had previously held.
71 Mr Marcus says he spoke to Mr Chesson in late July or early August 2003 and Mr Chesson undertook that any shares the plaintiff obtained under the rights issue would become subject to the Charge. Mr Marcus says that on 9 September 2003 he had a meeting with Mr Chesson at the plaintiff's offices. In the course of that meeting, Mr Chesson confirmed that he undertaken to make the shares issued to the plaintiff subject to the Charge and said he would take it to the next director's meeting of the plaintiff and have it "signed off".
72 According to Mr Marcus, although the plaintiff has taken up its entitlement under the rights issue, the Charge has not been varied to make those additional shares subject to the Charge, with the consequence that the shares secured, and the Charge itself, have become materially lessened in value and prejudicially affected.
73 Mr Chesson says that the rights issue by PLH was a decision of the board of PLH and the plaintiff, as chargor under the Charge, did not "cause or permit" the decision to be made within the meaning of cl 6(2) of the Charge. Mr Chesson says that in any event the rights issue did not and was not likely to materially lessen or prejudice the value of the Charge.
74 As to par (5) above, cl 16(1)(3) of the Charge provides that the plaintiff shall pay or reimburse the defendant on demand for the reasonable costs and expenses of the defendant in connection with the contemplated or actual enforcement or preservation of its rights under the charge. The defendant says it incurred costs in connection with the contemplated or actual enforcement and preservation of its rights under the Charge in the amount of $8816.50 and demanded payment by delivery to the plaintiff of by the defendant's invoice G0019 dated 31 July 2002
75 Mr Chesson denies that the plaintiff has delivered an invoice for the sum of $8816.50 in respect of the costs of enforcement and preservation of the defendant's rights under the Charge. There is annexed to Mr Chesson's affidavit of 3 March 2004 an invoice G0019, dated 30 September 2003, for interest and bank charges in the sum of $3467.83. There are also annexed bank documents showing that that amount was paid to the defendant in October 2003. The invoice upon which the defendant relies, however, is dated 31 July 2003 and is for "external consultants and internal costs/administration" in the sum of $8816.50. It is also numbered G0019.
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76 The defendant submitted that in the plaintiff's letter of 16 December 2003 the plaintiff had admitted receiving the invoice dated 31 July 2003. In that letter, the plaintiff says it received the defendant's letter dated 9 December 2003 and invoices G0022 and G0023. The plaintiff goes on:
"We will not be paying your claim according to your invoice G0022 for external consultants and internal costs/administration. Such costs are unwarranted and unjustified."
77 The invoice annexed to Mr Marcus's affidavit and on which the defendant relies, however, is invoice G0019, not G0022. There are, as I have said, two different invoices numbered G0019. One dated 31 July 2003 in the sum of $8816.50 for "costs incurred by and including default period" and one dated 30 September 2003 for a September interest payment. The latter has been paid.
78 In respect of the claim referred to in par (6) above, cl 6(b)(ii) of the Convertible Note Agreement provides that the plaintiff shall at the option of the defendant be immediately in default if more than 20 per cent of the total amount of all lease payments due and payable to PLH in respect of the lease or sublease of land owned by PLH are in default. Clause 6 further provides that a determination by the defendant that any such event has occurred is in the absence of proof to the contrary final and binding on the plaintiff.
79 Mr Marcus says he does not have personal knowledge of an actual default under that provision but that he has determined, in accordance with cl 6, that the event has occurred as the defendant has not been provided with the quarterly reports of the financial position of PLH as required by cl 9(a)(xiv) of the Convertible Note Agreement.
80 Mr Chesson says that no lease payments due by the plaintiff to PLH are in default.
81 The claim in par (7) above, relating to a default under the Convertible Note Agreement in respect in payment for costs of enforcement of $8816.50, is denied by Mr Chesson on the grounds referred to in relation to par (5) above, where the same facts are relied upon as constituting a default under the charge.
82 In relation to the final claim, referred to in par (8) above, cl 9(a)(xiv) of the Convertible Note Agreement provides that where (as here) PLH has appointed a trustee for debenture holders which requires PLH to give the
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- trustee a quarterly report concerning the financial position of PLH, the plaintiff shall ensure that PLH must, on giving each such report to the trustee, forthwith also give to the defendant a copy of that report.
83 Mr Marcus says that the defendant has never been given the quarterly reports referred to in cl 9(a)(xiv) of Convertible Note Agreement for the quarters ended 31 December 2002, 31 March 2003, 30 June 2003 and 30 September 2003, although he has been informed by the trustee for the debenture holders that it has received them. Mr Marcus also notes that a search at the ASIC shows that quarterly reports for the last three quarters referred to have been lodged.
84 Mr Chesson says he has been informed by Mr Diedler and believes that the defendant "was provided with all financial information prior to me becoming a director of the Plaintiff." Mr Chesson says the Plaintiff is intending to provide to the Defendant all quarterly reports concerning the financial position of PLH that are available to the Plaintiff.
85 In his affidavit of 21 June 2004, Mr Diedler says that he does not know whether the defendant was provided with the financial information referred to and he denies making the statement alleged by Mr Chesson.
86 The question then is whether there is a genuine dispute as to the events of default relied upon by the defendant. It was submitted on behalf of the defendant, and I did not understand it to be contested by the plaintiff, that it is necessary for the defendant to show only that the plaintiff is in default in respect of any one of the grounds relied upon to make the full amount owing under the Convertible Note Agreement due and payable. The plaintiff also did not take issue with the contention that in each case, if the facts relied upon by the defendant were made out, the plaintiff was in default. The issue on this application was whether there was a genuine dispute as to the facts.
87 As to ground (1), I do not consider there is a genuine dispute as to whether the plaintiff provided the defendant with all deeds, share certificates and documents of title relating to the PLH shares charged by the plaintiff. Mr Marcus on behalf of the defendant says that the plaintiff has not provided them. Mr Chesson does not say of his own knowledge that the plaintiff has done so and he does not refer to any records of the plaintiff or other evidence that would suggest that it has; he simply says he was told by Mr Diedler that it had. Mr Diedler, however, says he does not know whether they have ever been provided and says he did not tell Mr Chesson that they had. Whatever may have been said by Mr Diedler
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- to Mr Chesson, on the evidence I do not consider there is a genuine dispute as to the plaintiff's failure to provide the documents.
88 The position is in all essential respects the same in relation to ground (2) and I similarly conclude that there is no genuine dispute.
89 In relation to ground (3), it was not in dispute that, as at 9 February 2004, the plaintiff had not provided the defendant with, at least, the plaintiff's financial statements for the financial year ended 30 June 2003. Mr Chesson says they were not available as they were being audited, but that they have since been provided. The assertion that since 9 February 2004 they have been provided to the defendant (an assertion which is disputed by the defendant) is not to the point. The fact is they were not provided within the time required. Moreover, the assertion that, as at 9 February 2004, the accounts were still not available is contradicted by the copy of the accounts produced in evidence by the defendant, in which the directors' declaration was signed by Mr Chesson on 20 January 2004 and the auditor's certification was signed by the auditors on the same date. The ASIC records show that a copy of the audited accounts was lodged at ASIC on 21 January 2004. I therefore consider there is no genuine dispute that the plaintiff was in default under cl 5(6) of the Charge.
90 Having concluded that the plaintiff was in default in respect of the accounts it is, I think, strictly speaking unnecessary to deal with the position in respect of the balance of the documents requested by the defendant. It is, however, the case that the plaintiff does not say the other material has been provided as required under cl 5(6) of the Charge. Mr Chesson simply says that "the financial records of the Plaintiff have been supplied to the Defendant as and when they have been available." Moreover, such a bald, even dismissive, denial in those terms would be insufficient, in my view, to make out a genuine dispute as to those other documents.
91 I consider there is a genuine dispute in relation to ground (4). The plaintiff says it did not cause or permit the rights issue to occur. That was a decision of the PLH board. The defendant argues that the plaintiff permitted or caused it to occur because the plaintiff held more than 50 per cent of the issued shares in PLH and the two companies had three common directors. In my view, however, there is a legitimate issue as to whether or not, within the meaning of cl 6(2) of the Charge, it can therefore be said that the plaintiff caused or permitted the decision to be made, and that gives rise to a genuine dispute.
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92 I also consider there is a genuine dispute as to the alleged failure of the plaintiff to pay the invoice for enforcement costs, as relied upon in pars (5) and (7) above. I consider there is a genuine dispute as to the claim in par (6) above.
93 As to ground (8), cl 9(a)(xiv) of the Convertible Note Agreement requires the plaintiff to "ensure that PLH must … give[s] to the [defendant] a copy of [each quarterly report]." It was submitted on behalf of the plaintiff that the default notice was defective because it required the plaintiff to give a copy of the outstanding reports to the defendant, rather than to ensure that PLH did so. The Defendant argued that the default notice was required to be only a notice "describing the nature" of the default and that it was sufficient. Counsel referred to Pan Foods Company Importers & Distributors Pty Ltd v ANZ Banking Group Ltd (2000) ALR 579, at [24] for the proposition that such requirements should be construed practically so as to give effect to their presumed commercial purposes and so as not to defeat the achievement of such purposes by an excessively narrow and artificially restricted construction. Counsel argued that it was clear from the evidence that the plaintiff was in no doubt as to what was required. In the Response Notice the plaintiff said that it had used its best endeavours to have PLH provide copies of the quarterly reports to the defendant in that it had requested PLH to do so.
94 I consider there is a genuine dispute as to whether the plaintiff is in breach of its obligations under cl 9(a)(xiv). The issue of whether the plaintiff had met its obligations by requesting PLH to provide the reports or whether it was required to go further and, in particular, if PLH failed to do so to itself provide them to the defendant - as the default notice appeared to contemplate - is sufficient to give rise to a genuine dispute.
95 As I have said, any default under the Charge or the Convertible Note Agreement entitled the defendant to demand, as it did, that the plaintiff remedy the default within 60 days and, if the plaintiff did not do so in respect of any default, the defendant was entitled to demand, as it did, the repayment of the amount of $500,000 advanced under the Convertible Note Agreement.
96 In my view, there is not a genuine dispute as to three of the defaults relied upon by the defendant in the default notice and notice of demand, with the result that upon service of the notice of demand the sum of $500,000 became due and payable by the plaintiff to the defendant. I would therefore dismiss the plaintiff's application to set aside the statutory demand.
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