Everlight Resources Ltd v Barnett

Case [2018] QSC 244

SUPREME COURT OF QUEENSLAND

CITATION:

Everlight Resources Ltd v Barnett & Ors [2018] QSC 244

PARTIES:

EVERLIGHT RESOURCES LTD ACN 609 289 750

(applicant)

v
ROGER JOHN BARNETT AND ROSLYN JUNE BARNETT AS TRUSTEES FOR ROGER BARNETT SUPERANNUATION FUND
(respondent)

EVERLIGHT RESOURCES LTD ACN 609 289 750

(applicant)

v
SPURGIN SHARES PTY LTD ACN 605 087 312 AS TRUSTEE FOR THE SPURGIN SHARES TRUST
(respondent)

EVERLIGHT RESOURCES LTD ACN 609 289 750

(applicant)

v
PGP (QLD) PTY LTD ACN 101 499 209 AS TRUSTEE FOR THE PGP TRUST NO. 2

(respondent)

FILE NO/S:

BS Nos 10285/18
            10289/18
            10291/18

DIVISION:

Trial

PROCEEDING:

Applications

ORIGINATING COURT:

Supreme Court of Queensland

DELIVERED ON:

31 October 2018

DELIVERED AT:

Brisbane

HEARING DATES:

11 October 2018

19 October 2018

JUDGE:

Dalton J

ORDER:

CATCHWORDS:  

Draft Orders to be filed

CORPORATIONS — WINDING UP — WINDING UP IN INSOLVENCY — STATUTORY DEMAND — APPLICATION TO SET ASIDE DEMAND — GENUINE DISPUTE AS TO INDEBTEDNESS — OTHER PARTICULAR CASES — where the Applicant Company applied to set aside three statutory demands of its creditors — where the demands were based on a promise to repay monies pursuant to convertible notes — where the Applicant company alleges that the creditors assigned their rights to the debts and could not call for payment — whether there is a genuine dispute between the Applicant Company and the creditors about the existence of the debt to which the demand relates
EQUITY — EQUITABLE ASSIGNMENTS — WHAT AMOUNTS TO AN EQUITABLE ASSIGNMENT — GENERALLY —  whether there has been a valid equitable assignment of the debt the subject of the statutory demands to the note trustee
EQUITY — TRUSTS AND TRUSTEE S — APPOINTMENT, REMOVAL AND ESTATE OF TRUSTEES — RETIREMENT AND REMOVAL — RETIREMENT — where an Applicant Creditor seeks to be removed from the proceeding and to substitute a related company as trustee — where the Application was resisted on the basis that the debt the subject of the statutory demand was assigned to the trustee noteholder — whether s 15 of the Trusts Act 1973 (Qld) applies

Corporations Act 2001 (Cth), s 459G, s 459H(1)(a)
Property Law Act1974 (Qld), s 199
Trusts Act 1973 (Qld), s 15

Booth v Federal Commissioner of Taxation (1987) 164 CLR 159; [1987] HCA 61, cited
Creata (Aust) Pty Ltd v Faull [2017] NSWCA 300, applied
Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (in liq) [2015] VSCA 330, cited
Manks v Whitely [1912] 1 Ch 735, cited
McVeigh v National Australia Bank Limited (2000) 278 ALR 429, cited
Norman v Federal Commissioner of Taxation (1963) 109 CLR 9; [1963] HCA 21, cited

COUNSEL:

PP McQuade QC with MA Taylor for the applicant on 11 October 2018.
M A Taylor for the applicant on 19 October 2018.

B W Wacker for the respondents

SOLICITORS:

Ramsden Lawyers for the applicant

Frigo Adamson for the respondents

  1. This is an application by Everlight Resources Ltd (the company) to…

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AGLC
Everlight Resources Ltd v Barnett [2018] QSC 244
Case
[2018] QSC 244
Decision Date

CaseChat Overview and Summary

In the case of Everlight Resources Ltd v Barnett, the applicant company sought to set aside three statutory demands issued by its creditors. The demands were predicated on a promise to repay monies under convertible notes. The applicant company argued that the creditors had assigned their rights to the debts and, therefore, could not call for payment. The central issue before the court was whether a genuine dispute existed between the applicant company and the creditors regarding the existence of the debt to which the demand related.

The court examined the criteria for a genuine dispute under section 459H(1)(a) of the Corporations Act. The court noted that the applicant is required to establish a genuine dispute or offsetting claim, which must be bona fide, truly exist in fact, and have real and sufficient objective existence and prima facie plausibility. The court must not engage in an in-depth examination of the merits of the alleged dispute but must determine if the dispute is genuine enough to merit further investigation. The applicant did not need to fully evidence its claim but needed to provide enough factual particularity to exclude the merely fanciful or futile.

In this case, the court found that the applicant company had demonstrated a plausible contention requiring investigation regarding the assignment of the debts to the note trustee. The applicant's argument that the creditors had assigned their rights to the debts and could not call for payment was considered genuine. Therefore, the court granted the application to set aside the statutory demands.

Draft orders to be filed.

Orders

Orders of the court

Draft Orders to be filed

CORPORATIONS — WINDING UP — WINDING UP IN INSOLVENCY — STATUTORY DEMAND — APPLICATION TO SET ASIDE DEMAND — GENUINE DISPUTE AS TO INDEBTEDNESS — OTHER PARTICULAR CASES — where the Applicant Company applied to set aside three statutory demands of its creditors — where the demands were based on a promise to repay monies pursuant to convertible notes — where the Applicant company alleges that the creditors assigned their rights to the debts and could not call for payment — whether there is a genuine dispute between the Applicant Company and the creditors about the existence of the debt to which the demand relates

EQUITY — EQUITABLE ASSIGNMENTS — WHAT AMOUNTS TO AN EQUITABLE ASSIGNMENT — GENERALLY — whether there has been a valid equitable assignment of the debt the subject of the statutory demands to the note trustee

EQUITY — TRUSTS AND TRUSTEE S — APPOINTMENT, REMOVAL AND ESTATE OF TRUSTEES — RETIREMENT AND REMOVAL — RETIREMENT — where an Applicant Creditor seeks to be removed from the proceeding and to substitute a related company as trustee — where the Application was resisted on the basis that the debt the subject of the statutory demand was assigned to the trustee noteholder — whether s 15 of the Trusts Act 1973 (Qld) applies

Corporations Act 2001 (Cth), s 459G, s 459H(1)(a)

Property Law Act 1974 (Qld), s 199

Trusts Act 1973 (Qld), s 15

Booth v Federal Commissioner of Taxation (1987) 164 CLR 159; [1987] HCA 61, cited

Creata (Aust) Pty Ltd v Faull [2017] NSWCA 300, applied

Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (in liq) [2015] VSCA 330, cited

Manks v Whitely [1912] 1 Ch 735, cited

McVeigh v National Australia Bank Limited (2000) 278 ALR 429, cited

Norman v Federal Commissioner of Taxation (1963) 109 CLR 9; [1963] HCA 21, cited

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

On 19 August 2016 the company, PGP and a Mr Justin Lee Broad entered into an agreement whereby Mr Broad was substituted for PGP as the note trustee. By October 2016 the Lithium Brine Project had run into trouble. On 7 October 2016 the company’s board wrote to the convertible noteholders. They were told that in July 2016 the company’s sole shareholder had exercised his rights to remove the company’s two directors on the grounds that they were not expeditiously executing the business plan of the company and had appointed two new directors who he believed would do so. It was said that the company was involved in litigation against one of the removed directors in the New York Supreme Court to recover funds following that director’s “gross misconduct”. Section 459H Corporations Act: Genuine Dispute The company primarily relied upon s 459H(1)(a) of the Corporations Act (the Act) to set aside the statutory demands. It argued that there was “a genuine dispute between the company and the respondent about the existence … of [the] debt to which the demand relates”, in each case before the Court. The approach of the Courts in cases where the question is the existence or non-existence of a genuine dispute is well known. In Creata (Aust) Pty Ltd v Faull[1] the New South Wales Court of Appeal restated the test from Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (in liq)[2] as follows:“The terms of s 459H of the Corporations Act and the authorities make clear that, on an application to set aside a statutory demand, the applicant is required only to establish a genuine dispute or offsetting claim. The applicant is required to evidence the assertions relevant to the alleged dispute or offsetting claim only to the extent necessary for that primary task. It is not necessary for the applicant to advance a fully evidenced claim. Therefore, the task faced by an applicant is by no means at all a difficult or demanding one.In determining such an application, it is not necessary or appropriate for a court to engage in an in-depth examination or determination of the merits of the alleged dispute. This is because an application alleging a genuine dispute or offsetting claim is akin to one for an interlocutory injunction and requires the applicant to establish that there is a ‘plausible contention requiring investigation’ of the existence of either a dispute as to the debt or an offsetting claim. It is therefore not helpful to perceive that one party is more likely than the other to succeed or that the eventual state of the account between the parties is more likely to be one result than another. Further, the determination of the ‘ultimate question’ of the existence of the debt at a substantive hearing should not be compromised.The court is required to determine whether the dispute or offsetting claim is ‘genuine’. It has been said that the criterion of a ‘genuine’ dispute requires that the dispute be bona fide and truly exist in fact and that the grounds for alleging the existence of a dispute be real and not spurious, hypothetical, illusory or misconceived. It has also been observed that the dispute or offsetting claim should have a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion. It must also have sufficient factual particularity to exclude the merely fanciful or futile. A rigorous curial approach is essential to the effective operation of the statutory scheme.The court is not required to accept uncritically 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, it may be, as it may not have sufficient prima facie plausibility to merit further investigation as to its truth. The court is also not required to accept uncritically a patently feeble legal argument or an assertion of facts unsupported by evidence, although this should not be read as suggesting that the applicant must formally or comprehensively evidence the basis of its dispute or off-setting claim. Except in such extreme cases, the court should not embark upon an inquiry as to the credit of a witness or a deponent whose evidence is relied on by the applicant to set aside a statutory demand.”[1] [2017] NSWCA 300, [17].[2] [2015] VSCA 330, [47]-[50].