Gendredge Pty Ltd v Programmed Total Marine Services Pty Ltd

[2014] WASC 133

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   GENDREDGE PTY LTD -v- PROGRAMMED TOTAL MARINE SERVICES PTY LTD [2014] WASC 133

CORAM:   ACTING MASTER GETHING

HEARD:   24 MARCH 2014

DELIVERED          :   14 APRIL 2014

FILE NO/S:   COR 228 of 2013

BETWEEN:   GENDREDGE PTY LTD (ABN 64 096 217 971)

Plaintiff

AND

PROGRAMMED TOTAL MARINE SERVICES PTY LTD (ABN 35 009 231 476)
Defendant

Catchwords:

Statutory demand - Genuine dispute

Legislation:

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

Result:

Statutory demand dated 30 October 2013 varied

Category:    B

Representation:

Counsel:

Plaintiff:     Ms R J Lee

Defendant:     Mr S C M Wong

Solicitors:

Plaintiff:     Young & Young Barristers & Solicitors

Defendant:     Corrs Chambers Westgarth

Case(s) referred to in judgment(s):

Apex Gold Pty Ltd v Atlas Copco Australia Pty Ltd [2011] WASC 49

Central City Pty Ltd v Montevento Holdings Pty Ltd [2011] WASCA 5

CMA Assets Pty Ltd (Formerly known as CMA Contracting Pty Ltd) v John Holland Pty Ltd [No 4] [2013] WASC 77

Createx Pty Ltd v Design Signs Pty Ltd [2009] WASCA 85

David Grant & Co Pty Ltd v Westpac Banking Corp [1995] HCA 43; (1995) 184 CLR 265

Energy Equity Corporation Ltd v Sinedie Pty Ltd [2001] WASCA 419; (2001) 166 FLR 179

Field v Commissioner for Railways for NSW [1957] HCA 92; (1957) 99 CLR 285

Financial Solutions Australasia Pty Ltd v Predella Pty Ltd [2002] WASCA 51; (2002) 26 WAR 306

Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452

Nouvelle Homes t/as Wilson & Hart v Hatch [2009] WASC 63

Old Papa's Franchise Systems Pty Ltd v Camisa Nominees Pty Ltd [2003] WASCA 11

Rodgers v Rodgers [1964] HCA 25; (1964) 114 CLR 608

Shilkin v Taylor [2011] WASCA 255

1. ACTING MASTER GETHING:  Between July and September 2012 Gendredge Pty Ltd (the plaintiff) and Programmed Total Marine Services Pty Ltd (PTMS) (the defendant) were involved in negotiations in connection with the provision of services for a ship to be used on a Chevron project involving the commission of the DOMGAS domestic gas pipeline near Onslow in the north of Western Australia.  The ship is described as 'a Landing Craft Motor Vessel ‑ LCT Teras ‑ Bandicoot', which I will refer to as the 'LCT'.  Gendredge was to provide the ship through a related Singapore company, Gendredge Singapore Pty Ltd, entering into a bareboat dry charter with the head contractor, Sapura/Clough Joint Venture (SCJV), to supply the LCT along with dredging equipment and related services.  The principal contract between Gendredge and PTMS was to be one by which PTMS was to supply labour and support services to Gendredge to operate the LCT.  The principal contract was never entered into.

2. The central issue for present purposes is whether Gendredge entered into any agreement pursuant to which it agreed to pay PTMS for services it provided to commission the LCT in Singapore while the two parties were still negotiating the principal contract.

3. PTMS asserts that there was a series of agreements pursuant to which it supplied marine crew and support services to Gendredge between July and September 2012.  It invoiced Gendredge for an amount of $93,910.32.  This amount has not been paid.  Accordingly, on 30 October 2013 PTMS served a statutory demand on Gendredge for this amount.

4. Gendredge asserts that while there was to be a commercial relationship between the parties, 'the potential for a deal' came to an end on or about 4 or 9 September 2012 when it became apparent that the LCT was not able to be supplied in time to meet the requirements of the SCJV, with the effect that the order from the SCJV was cancelled.  In response to the issue of the statutory demand, on 18 November 2013 it commenced proceedings in this Court seeking to set aside the statutory demand.

What issues arise for determination?

1. Gendredge accepts that the statutory demand was in the proper form.  Its application to set aside the statutory demand was made within 21 days of service of the statutory demand as required by Corporations Act 2001 (Cth) (CA) s 459G, and otherwise complies with the formal requirements of that section.

2. The jurisdiction to set aside or adjust a statutory demand in CA s 459H arises where the Court is satisfied of either or both of the following:

   (a)that there is a genuine dispute between the company and the respondent about the existence or amount of a debt to which the demand relates;

   (b)that the company has an offsetting claim.

3. The onus is on Gendredge as the recipient of the demand to establish a genuine dispute or offsetting claim:  Central City Pty Ltd v Montevento Holdings Pty Ltd [2011] WASCA 5 [15] (Murphy JA with whom Buss JA agreed [1]).

4. On the basis of what was argued before me, five issues arise for determination:

   •Is Gendredge entitled to rely on a second affidavit not served within 21 days of service of the statutory demand?

   •Is there a genuine dispute about the existence of an agreement by which Gendredge was to pay PTMS for services provided prior to the entry into of the principal contract?

   •Is an email from Gendredge to PTMS of 14 November 2013 a 'without prejudice' communication or may it be relied on in these proceedings?

   •What amount of the debt is not in dispute?

   •What final orders are appropriate?

5. In its written submissions, Gendredge asserted that there was 'some other reason' to set aside the statutory demand pursuant to CA s 459J(1)(b).  However, at the hearing before me counsel for Gendredge conceded that this submission was coextensive with the submission that there was a genuine dispute.  There were no facts suggesting that, if there was no genuine dispute, there was 'some other reason' to set aside the statutory demand.

6. In its written submissions, Gendredge also asserted that PTMS should be restrained from reliance on the statutory demand on the ground that it had abused this process.  The court retains the residual jurisdiction to restrain reliance on the statutory demand procedure on the ground of abuse of process:  David Grant & Co Pty Ltd v Westpac Banking Corp[1995] HCA 43; (1995) 184 CLR 265, 279 (Gummow J, with whom Brenna CJ, Dawson, Gaudron & McHugh JJ agreed); Createx Pty Ltd v Design Signs Pty Ltd[2009] WASCA 85 [49] (Martin CJ, Owen JA [61], Miller JA [62] agreeing). Again, at the hearing before me, counsel for Gendredge conceded that this submission was coextensive with the submission that there was a genuine dispute.

Is Gendredge entitled to rely on Mr Ynema's affidavit sworn 28 November 2013?

1. The affidavit in support of the application required by CA s 459G(3)(a) was sworn by Henry Ynema and dated 17 November 2013. Mr Ynema is a director of both Gendredge and Gendredge Singapore. Gendredge filed a second affidavit in support of the application, again sworn by Mr Ynema, this time on 28 November 2013. In this second affidavit, Mr Ynema annexes a copy of the ASIC search for Gendredge and the affidavit of Kathyrn Hall sworn 30 October 2013 served with the statutory demand. Ms Hall is the General Manager Finance for PTMS.

2. PTMS also placed Ms Hall's affidavit before the court, annexing it to an affidavit of David Yates sworn 19 March 2014.  Mr Yates is a principal of PTMS's lawyers.

3. There was some confusion at the hearing before me as to whether or not PTMS would read Mr Yates' affidavit.  Initially I was informed that it did not intend to read the affidavit.  However, part way through the hearing counsel sought, and was granted, leave to read it.  So, in the end, both parties put Ms Hall's affidavit before the court.

4. PTMS asserted that Mr Ynema's second affidavit was inadmissible as it raised new grounds for setting aside the statutory demand.  Counsel for PTMS also asserted that the submissions made on behalf raised new grounds which were not in Mr Ynema's first affidavit.

5. An affidavit filed outside the 21 day period in which an application under CA s 459G is required to be made, and which raises a new ground for setting aside a statutory demand, cannot be relied upon in an application to set aside the statutory demand. The later affidavit may expand on the grounds set out in an earlier affidavit which was filed within time and which satisfied the jurisdictional threshold: Apex Gold Pty Ltd v Atlas Copco Australia Pty Ltd [2011] WASC 49 [21] (Pritchard J); Financial Solutions Australasia Pty Ltd v Predella Pty Ltd [2002] WASCA 51; (2002) 26 WAR 306 [17] ‑ [38] (Parker J, Scott & Anderson JJ agreeing); Energy Equity Corporation Ltd v Sinedie Pty Ltd [2001] WASCA 419; (2001) 166 FLR 179 [29] (Wallwork J, Steytler J & Olsson AUJ agreeing); Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452, 459 ‑ 460 (Sundberg J).

6. In his first affidavit, Mr Ynema deposes to having read Ms Hall's affidavit and having sent the emails referred to in it ([3], [5]). His second affidavit annexes it. Given this connection, I do not consider that the second affidavit is objectionable in its entirety.

7. Rather, the manner in which to give effect to the principles in [15] is to only allow Gendredge to challenge the statutory demand on the factual basis and grounds set out in Mr Ynema's first affidavit, and to only allow Gendredge to rely on his second affidavit to expand on those grounds, but not to add new ones.

Is there a genuine dispute about the existence of an agreement by which Gendredge was to pay PTMS for services provided prior to the entry into of the principal contract?

Scope of the statutory demand

1. The debt claimed by PTMS is recorded in eight unpaid invoices which are said to be for preparatory works relating to the supply of marine crew and support services to Gendredge for the months of July to September 2012, as follows:

Amount owing pursuant to invoice SINV005426 for travel charges incurred during the month of July 2012.	$1,974.13
Amount owing pursuant to invoice SINV005568 for labor charges for crew on standby during the month of August 2012.	$37,437.40
Amount owing pursuant to invoice SINV005569 for parking and taxi expenses incurred during the month of July 2012.	$276.30
Amount owing pursuant to invoice SINV004776 for travel charges incurred during the month of August 2012.	$21,081.15
Amount owing pursuant to invoice SINV005876 for parking, taxi and meal expenses incurred during the months of August and September 2012.	$4,917.10
Amount owing pursuant to invoice SINV005866 for travel charges incurred during the month of September 2012.	$4,394.69
Amount owing pursuant to invoice SINV005917 for expenses incurred for Mr C Pedersen during the month of September 2012.	$749.90
Amount owing pursuant to invoice SINV005838 for labor charges for crew during the months of August and September 2012.	$23,079.65
Total	$93,910.32

Mr Ynema's first affidavit

1. Mr Ynema accepts that he wrote the emails from Gendredge that were sent in relation to the proposed provision of services by PTMS to Gendredge in connection with the assistance in the preparation, documents, certification and compliance fit out of the LCT.

2. Mr Ynema accepts that employees of PTMS participated in and attended meetings along with Gendredge Singapore and representatives of SCJV to achieve a position whereby the LCT would be in compliance for Australian conditions to enable it to be available for charter to the SCJV and Chevron for the DOMGAS works.  After completion of the compliance process in Singapore the LCT was to sail from Singapore to Dampier.  He says that PTMS were aware of, and party to, all the negotiations with the SCJV that required the LCT to be available to sail from Singapore on 4 September 2012.  After 4 September 2012, the charter supply offer from SCJV would lapse.

3. The critical part of his affidavit is the following sentence [12]:  'There was at no time any discussion or agreement with PTMS regarding losses incurred or the recovery of costs should the timeline for delivery of the LCT not be met and the order with SCJV be cancelled'.

4. Mr Ynema goes on to state that the LCT was not in a condition to sail away from the shipyard in Singapore on 4 September 2012.  An extension to 9 September 2012 was granted by the SCJV.  On 9 September 2012, the LCT was still not in a condition to sail away and the charter supply offer from the SCJV lapsed.

5. Mr Ynema also states that, to the best of his knowledge and belief, his business partner, Adam Neo, paid accommodation expenses for PTMS personnel for the period of time that employees of PTMS were located in Singapore.

6. Mr Ynema outlines the history of the negotiations with PTMS and the SCJV from July 2012.  He states that Gendredge, PTMS and the SCJV were under the assumption that the LCT would be delivered by the Singaporean vendor 'in a condition of compliance, of class and fit for purpose for sail away from Singapore'.  The July discussions included an agreement that the Australian crew to be provided by PTMS would be on board the LCT for the sail away from Singapore.

7. The LCT was delivered to the yard used by Gendredge Singapore on 21 July 2012.  Mr Ynema and Mr Neo inspected the vessel on 23 July 2012 to plan the scope of work required to make the LCT compliant for the DOMGAS project.

8. On or about 25 July 2012 a Technical Superintendent employed by PTMS, Dennis Bawden, arrived in Singapore. Mr Bawden was sent by Mr Crowther to inspect and report on the LCT and, particularly, on the condition of the vessel.  A lengthy meeting was held on that day, including with representatives from the SCJV and Mr Bawden, to discuss the works required to achieve compliance and other issues with the LCT.

9. Mr Ynema then attended meetings on 1 and 2 August 2012 with PTMS at its offices in Fremantle, with Arthur Crowther and Mr Bawden. Mr Crowther is PTMS' Major Projects Manager. He states that at that time it was becoming apparent that Gendredge Singapore would not have the appropriate licences to operate the LCT and that it would require PTMS to use its 'licence to operate a vessel', to operate the LCT. PTMS was to put in place the procedures and operating conditions for the LCT to be compliant with both Singaporean and Australian maritime law. Specifically he states that 'PTMS undertook to deal with the procedures and operating requirements to enable the vessel to reach a point where it was ready to sail' [52]. Gendredge Singapore 'undertook the day to day operations of refit on the vessel ‑ carrying out work on the LCT to ensure that there was appropriate bedding, accommodation, leisure spaces and also undertook operations in connection with the sewerage and power requirements of the vessel' [53]. He goes on the state [54]:

   Following that meeting on the 2 August 2012, it was my understanding PTMS were to prepare the vessel's documents for sailing and GENDREDGE SINGAPORE was to provide the vessel in working order to enable PTMS to essentially operate the vessel from Singapore to the Australian mainland and to the worksite location.

10. Mr Ynema states that he and a Mr Del Rosso of PTMS agreed that Gendredge Singapore would pay PTMS the sum of $20,000 for necessary preparation work to use PTMS's 'licence to operate a vessel' for the LCT.  Mr Del Rosso is PTMS's Executive General Manager.  Mr Ynema also states that to assist PTMS with compliance with the 4 September 2012 deadline for sail away of the LCT, Gendredge, among other things, supplied Singapore accommodation for the PTMS team to complete the documentation, and installed laptops and a server on the LCT for the use of PTMS.

11. Mr Ynema concludes:

    67.The invoices rendered by PTMS to GENDREDGE relate to labour and services apparently incurred by PTMS in the period July ‑ September 2012 inclusive.

    68.Neither GENDREDGE or GENDREDGE SINGAPORE is liable for payment of these invoices for the reasons set out in this affidavit.

    69.PTMS did not complete the work that they agreed to undertake within the time frame allotted for the completion of this work to enable the LCT to sail away from Singapore on 4 September 2012.

    70.As a consequence of the failure of PTMS to fulfil their obligations in a timely manner as agreed in the meeting of 2 August 2012, GENDREDGE and GENDREDGE SINGAPORE has incurred significant losses and damages which have yet to be fully quantified.

12. Counsel for Gendredge submitted that there were two relevant contracts between Gendredge and PTMS.  The first was a contract by which PTMS was to supply labour and support services to Gendredge to operate the LCT (which I have referred to as the principal contract).  This contract was never entered into as the LCT was not in a condition to sail away by 9 September 2012, and therefore Gendredge was not able to take up the offer by the SCJV.

13. The second was a contract by which PTMS was to use its 'licence to operate a vessel' for the LCT.  The contract price was $20,000.  This contract was never completed as the LCT was not in a condition to sail away by 9 September 2012.  In any event, there is no claim for moneys due under this contract in the statutory demand.

14. Although Mr Ynema appears to raise an offsetting claim at the end of his affidavit (see [29] above), this was not pressed by counsel for Gendredge. This concession is rightly made, as there is simply insufficient evidence and particularity to allow this claim to be considered as an offsetting claim for the purposes of CA s 459H.

Ms Hall's affidavit

1. Ms Hall deposes that on or about 23 July 2012 PTMS and Gendredge entered into an agreement 'for preparatory works relating to the supply of marine crew and support services for a Singaporean‑flagged landing craft shipping vessel known as the "LCT Bandicoot"' (that is, the LCT as I have defined it).  I will refer to this agreement as the PTMS Agreement.

2. She says that the terms of the PTMS Agreement were recorded in emails between Mr Ynema and Mr Crowther between 20 July 2012 and 23 July 2012, which she annexes.

3. Under the PTMS Agreement, on 24 July 2012 Mr Bawden travelled to Singapore to inspect the LCT. She says that Mr Bawden remained in Singapore until 7 September 2012. However, Mr Ynema's evidence is that he attended a meeting with Mr Bawden in Fremantle on 1 August 2012 [42].

4. The emails relied on by Ms Hall, and annexed to her affidavit, relate only to Mr Bawden.  They record an agreement that:

   (a)Mr Bawden would travel to Singapore to inspect the LCT;

   (b)there would be no charge for the first two days inspection;

   (c)if he 'remained to assist' there would be a change for his services of $750 per day;

   (d)Gendredge would pay for Mr Bawden's economy flights, taxi fares and meals;

   (e)Gendredge would arrange and pay for Mr Bawden's accommodation.

5. As I have noted, Mr Ynema accepts that he sent the emails attached to Ms Hall's affidavit [5]. At the hearing before me, counsel for Gendredge conceded that there was no dispute in relation to the invoices claimed to the extent that they are referrable to Mr Bawden's initial trip to Singapore pursuant to this agreement.

6. Ms Hall goes on to state that on 30 July 2012 Mr Ynema sent an email to Mr Del Rosso requesting further services from an engineer and an officer.  She refers to an email of 30 July 2012 and states that the request was made under PTMS Agreement.  However, all the email train contains is a request by Mr Ynema for an 'engineer and an officer' and a response by Mr Del Rosso that someone called Omar would 'commence the process and arrange CVs'.

7. Ms Hall states that from 6 August 2012 a Mr Heath, a Chief Engineering Officer at PTMS, began to provide services to Gendredge 'by travelling from Australia to Singapore, attending to training and remaining on standby to conduct further work for [Gendredge] until 26 August 2012'.  She also states that a Mr Barwell, a Master at PTMS, began to provide services to Gendredge by remaining on standby to conduct work for Gendredge.

1. Ms Hall states that the rates applicable to the services provided by Mr Heath and Mr Barwell pursuant to the PTMS Agreement at that time were agreed between Gendredge and PTMS on or about 18 August 2012 and equated to a standby rate of 50% of the rate detailed in the '18 August 2012 rates'.

2. The reference to '18 August 2012 rates' appears to be a reference to an email exchange between Mr Crowther and Mr Ynema on 18 August 2012, which is annexed to Ms Hall's affidavit.  Ms Hall accurately summarises the email from PTMS annexed as providing an indication of the full costs likely to be incurred in mobilising the crew to service the LCT and attaching full rates of crew members to be provided by Gendredge.  Ms Hall then states that these rates were for the PTMS Agreement.  However, the emails do not justify this second conclusion.  This is for four reasons:

   (a)the email from PTMS refers to the costs as being 'indications' and a 'summary of potential costs';

   (b)the email from PTMS also refers to the costs being 'subject to change depending on any agreement entered into by SapuraClough or Gendredge';

   (c)the content of the email refers to mobilisation of the crew to join the LCT, and not work to prepare the LCT for sailing; and

   (d)the response by Mr Ynema is not capable of being read as containing an acceptance that the terms set out in the email were costs Gendredge agreed to pay for work to prepare the LCT for sailing.

3. The provision of services by Mr Heath and Mr Barwell is not within the terms of the agreement which I have identified at [36]. Gendredge's position is that there was no agreement for the provision of services prior to the entry into of the principal contract. I am of the view that there is a genuine dispute in relation to the invoices to the extent that they relate to services provided by Mr Heath and Mr Barwell.

4. Ms Hall then states that Mr Ynema continued to request services from PTMS on the basis of the PTMS Agreement varied by the rates set out in the 18 August 2012 email.  This conclusion is not supported by the contents of the 18 August 2012 emails or the other evidence before me.

5. Ms Hall then states that the terms of the PTMS Agreement varied by the rates set out in the 18 August 2012 email were subsequently incorporated into a revised proposal document and standard terms and conditions dated 23 August 2012.  This document is also attached.  However, the 23 August 2012 proposal again does not refer to work to prepare the LCT for sailing.  Rather, the proposal states to be 'in relation to the provision of Marine crew for a Singaporean Flagged LCT Bandicoot which will mobilize in Singapore for operations in the Onslow (WA) area during September, October 2012'.  That is, the proposal was for the mobilisation of the LCT pursuant to what I have referred to as the principal contract.  As I have set out above, Mr Ynema's evidence is to the effect that the LCT was never mobilised.  Moreover, there is no evidence before me of the 23 August 2012 proposal being accepted by Gendredge.

6. Ms Hall then refers to an email exchange between Mr Ynema and Mr Crowther on 26 August 2012. She says that these emails contain an agreement to the deployment of an additional engineer, Mr Bawden and the Chief Engineer. She deposes that the email contains an acceptance by Mr Ynema that Gendredge 'was responsible for costs involving pre sign off of the final SapuraClough Joint Venture' [13]. However, that is not quite what the email states which is: 'We are responsible for costs involved pre sign off following slip approval'. Mr Ynema sent an email to Mr Crowther on 4 September 2012 in which he stated that the LCT was still on the slip. Put slightly differently, there is no evidence before me that 'slip approval' ever occurred.

7. Significantly for present purposes, the 26 August 2012 emails are silent about who was to pay for the PTMS staff who were to go to Singapore.

8. Ms Hall also refers to emails of 28 August 2012, which she attaches.  In these Mr Crowther refers to the fact that training for the Bandicoot (LCT) crew was suspended and that they flew home.  The 28 August 2012 emails are silent about who was to pay for the PTMS staff who were to go to Singapore.

9. Ms Hall annexes to her affidavit a purchase order from Gendredge to PTMS.  This refers to 'Assistance doc's, certs and fittout LCT'.  Counsel for Gendredge states that this is a reference to the agreement for PTMS to provide its licence to operate a vessel for use with the LCT (see [27] ‑ [28] above).  However, if that was the case, one would have expected the price to be $20,000, and not left blank.  On the other hand, neither does the description refer to mobilisation of the crew.

10. Finally, Ms Hall attaches the invoices, which I have summarised above [18].

Is there a genuine dispute?

1. The principles which the court must apply in determining whether to set aside a statutory demand on the basis of a genuine dispute were conveniently summarised by Murphy JA, with whom Buss JA agreed, in Central City [9] ‑ [14]:

   9The expression 'genuine dispute', within the meaning of s 459H(1)(a) of the Act, connotes a plausible contention requiring investigation: Createc Pty Ltd v Design Signs Pty Ltd [2009] WASCA 85 [44]. The demand will be set aside if there is a bona fide disputed issue of fact or law, which is not based on spurious, hypothetical, illusory or misconceived grounds: Createc v Design Signs [45]; Asian Century Holdings Inc v Fleuris Pty Ltd [2000] WASCA 59 [35]. Once such a dispute is raised, it is not necessary for a company to satisfy the court as to where the merits of the dispute lie: Turner Corporation (WA) Pty Ltd v Blackburne & Dixon Pty Ltd [1999] WASCA 294 [30]. The court will not attempt to weigh or examine the merits of any dispute: Createc v Design Signs [46]; Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] Vic Rp 61; [1994] 2 VR 290, 295.

   10Any claim by the company in dispute of the debt must be one which is 'genuinely believed [by the company] to exist':  John Holland Construction & Engineering Pty Ltd v Kilpatrick Green Pty Ltd (1994) 14 ACSR 250, 253.

   11This does not mean that the court must 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:  Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, 787; Createc v Design Signs [4].  Nor does it require the acceptance of a 'patently feeble legal argument' or 'matters of fact unsupported by evidence':  Eyota v Hanave (787); Jarpab Pty Ltd v Winter t/as Boldon Haulage (1994) 14 ACSR 255, 261.

   12In that context, Lockhart J said, in Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37, 39:

   'The notion of a "genuine dispute" … suggests to me that the Court must be satisfied that there is a dispute that is not plainly vexatious or frivolous.  It must be satisfied that there is a claim that may have some substance.  On the other hand the Court must be careful, because if all an applicant has to do is to assert both a claim and some basis for it, without more, it would mean in almost every case that the court would set aside statutory demands where application is made to that effect.  Plainly that is not what the legislature intended by introducing this new regime.'

   13Similarly, in Rohalo Pharmaceutical Pty Ltd v R P Scherer SpA & Pharmagel SpA (1994) 15 ACSR 347, 353, Lindgren J said:

   'Paragraph (a) of subs 459H (1) and the definition of "admitted amount" in subs 459H (5) both refer to the existence of a "genuine dispute", and the definition of "offsetting claim" in subs 459H (5) refers to the existence of a "genuine claim". Plainly, the intention is to refer to something more than the mere "raising" of a dispute and the mere "making" of a claim. The provisions assume that the dispute and offsetting claim have an "objective" existence the genuineness of which is capable of being assessed. The word "genuine" is included to sound a note of warning that the propounding of spurious disputes and claims is to be expected but must be excluded from consideration.'

   14The dispute must exist at the time of the hearing of the application to set aside a statutory demand, and not at some other time:  Mibor Investments Pty Ltd v Commonwealth Bank of Australia (293). Likewise, the amount of any offsetting claim is to be considered as at the time the court is determining an application under s 459G, not as at the date of demand: Equuscorp Pty Ltd v Perpetual Trustees WA Ltd(1997) 25 ACSR 675, 697.

2. The PTMS Agreement referred to by Ms Hall is not supported by the emails she refers to.  Whilst it is clear that staff from PTMS did work in Singapore in relation to the LCT, with one exception I am not able to discern an agreement pursuant to which that work was done.  The exception is for the services provided by Mr Bawden in July 2012 pursuant to the agreement I identified above [36]).

3. PTMS submitted that in describing the offsetting claim in his first affidavit, Mr Ynema accepts that PTMS agreed to undertake work for Gendredge as agreed in a meeting on 2 August 2012 (see the passages quoted above [29]).  However, Mr Ynema appears to refer here to the agreement by which PTMS was to 'prepare the vessel's documents for sailing' (see [54] of his affidavit, quoted above [27]) for which Gendredge was to pay $20,000 (an amount not claimed in the statutory demand).  There is at least a 'plausible contention requiring investigation' on this point:  Central City [9]; Createc [44].

4. Counsel for Gendredge submitted that the position is simply as set out by Mr Ynema, that there 'was at no time any discussion or agreement with PTMS regarding losses incurred or the recovery of costs should the timeline for delivery of the LCT not be met and the order with SCJV be cancelled' [12]. The genuine dispute raised by Gendredge is simply that there was no agreement between it and PTMS so as to give rise to a liability to pay the invoices rendered by PTMS for services provided preparatory to the entry into of the principal contract for the provision of services for the operation of the LCT.

5. This conclusion is not inherently improbable.  Rather, this is another 'plausible contention requiring investigation':  Central City [9]; Createc [44]. The evidence of Mr Ynema is that everyone involved proceeded on the assumption that the LCT would be ready to sail by the deadline imposed by the SCJV. The picture painted by Mr Ynema in his affidavit is of staff of both Gendredge and PTMS working together in order to get the LCT in a condition to sail away so as to allow Gendredge Singapore to enter into the charter agreement with the SCJV, and Gendredge and PTMS to enter into the principal contract, a longer term arrangement that would be commercially beneficial to both of them.

6. PTMS submitted that Gendredge bears the evidentiary and legal onus, and that PTMS does not have to prove the agreements.  However, Gendredge does not submit an alternate version of the agreement in relation to the debt the subject of the statutory demand.  It submits that there was no agreement.  It thus only has to establish a genuine dispute that there was no agreement justifying the invoices.

7. In both its written and oral submissions, PTMS asserted that it was taken by surprise by the argument of Gendredge that there was no agreement, and that it has been 'prejudiced because it has been denied the opportunity to address any factual disputes in responsive affidavits' (Submissions 2.2).  From my reading of the file, the assertion that there was no relevant agreement is plainly evident from Mr Ynema's first affidavit.  Mr Ynema's evidence does not dispute Ms Hall's so much as place the facts in their fuller context.  Further, it was open for PTMS to have expanded on the evidence in Ms Hall's affidavit when it filed Mr Yates' affidavit on 19 March 2014.  I do not consider PTMS to have suffered any prejudice or procedural unfairness.

8. Given my comments above [15], in order to give effect to the so called Graywinter principle, I need to ensure that Gendredge is only permitted to challenge the statutory demand on the factual basis and grounds set out in Mr Ynema's first affidavit, and to only allow Gendredge to rely on his second affidavit to expand on those grounds, but not to add new ones. As I have noted, the key sentence in Mr Ynema's first affidavit is that there 'was at no time any discussion or agreement with PTMS regarding losses incurred or the recovery of costs should the timeline for delivery of the LCT not be met and the order with SCJV be cancelled' [12]. The submissions made by counsel for Gendredge elaborate on this statement. Counsel for PTMS was critical of the brevity of the statement. However, it is difficult to provide elaborate detail about a negative; the statement is brief, because it simply states that nothing was said. To the extent that Gendredge referred to the material in Ms Hall's affidavit in submissions, it was to explain why the emails did not undermine, or were not inconsistent with, the position initially stated by Mr Ynema that there 'was at no time any discussion or agreement with PTMS regarding losses incurred or the recovery of costs should the timeline for delivery of the LCT not be met and the order with SCJV be cancelled'.

9. I do not consider that the use made of Ms Hall's affidavit by, nor the submissions made by, Gendredge breached the Graywinter principle.

10. On the evidence before me, with one exception, I am satisfied that there is a genuine dispute in relation to the statutory demand dated 30 October 2013. The genuine dispute is that there was no agreement between Gendredge and PTMS so as to give rise to a liability to pay the invoices rendered by PTMS for services provided preparatory to the entry into of the principal contract for the provision of services for the operation of the LCT. The exception is the agreement in relation to the provision of services by Mr Bawden set out above [36]. Before turning to quantify the amount of the invoices comprising the statutory demand relating to this agreement, I need to consider whether the contents of an email from Gendredge to PTMS of 14 November 2013, if admissible, would change this conclusion.

Is an email from Gendredge to PTMS of 14 November 2013 a 'without prejudice' communication or may it be relied on in these proceedings?

1. On 11 March 2014 PTMS filed a second affidavit in relation to the application. This affidavit was sworn on 10 March 2014 by Mr Crowther.  In it, Mr Crowther states that on 14 November 2013 at 6.42 pm he received an email from Mr Ynema, which he annexes.

2. PTMS asserts that the email contains a statement by Mr Ynema which is 'at odds' with Gendredge's contention that there was no contract between it and PTMS.

3. Gendredge asserts that the email was a without prejudice communication and objects to its use.

4. 'The privilege protecting without prejudice communications excludes from evidence admissions by words or by conduct made by parties in the course of negotiations to settle disputes which are the subject of litigation, or which will become the subject of litigation if the dispute is not resolved':  CMA Assets Pty Ltd (Formerly known as CMA Contracting Pty Ltd) v John Holland Pty Ltd [No 4] [2013] WASC 77 [8] (Allanson J); Field v Commissioner for Railways for NSW [1957] HCA 92; (1957) 99 CLR 285, 291 ‑ 292 (Dixon CJ, Webb, Kitto & Taylor JJ); Shilkin v Taylor [2011] WASCA 255 [61] (Newnes JA, with whom Pullin JA [1] & Buss JA [2] agreed). The purpose of the privilege is to enable parties engaged in an attempt to compromise litigation to communicate with one another freely and without the embarrassment which the liability of their communications to be put in evidence subsequently might impose upon them: Field (291); Shilkin [61]; Nouvelle Homes t/as Wilson & Hart v Hatch [2009] WASC 63 [10] (McKechnie J). 'Neither party can use the readiness of the other as an implied admission': Field (291).

5. The email is not marked or expressed to be without prejudice.  However, this is 'of no consequence', the test being whether the communication was part of a genuine attempt to settle a dispute:  Rodgers v Rodgers [1964] HCA 25; (1964) 114 CLR 608, 614 (Judgment of the Court); Old Papa's Franchise Systems Pty Ltd v Camisa Nominees Pty Ltd [2003] WASCA 11 [91] ‑ [95] (McLure J, Murray J [1] & Parker J [2] agreeing).

6. In my view, the email is properly characterised as falling within the without prejudice privilege.  Having formed that view, I propose to be circumspect in disclosing its contents so as to respect their privileged nature.  Within that constraint, my reasons for forming this view are:

   (a)the email was sent on 14 November 2013, in between when the statutory demand was served (30 October 2013) and when the present application was commenced (18 November 2013);

   (b)in the first line it contains the comment 'I respect there is legal proceedings afoot and if inappropriate to discuss or compromised I understand'; and

   (c)it contains two proposals as to how to deal with the dispute between PTMS and Gendredge on an interim basis in the context of the litigation being pursued by Gendredge in Singapore in relation to the LCT not being ready for use by Gendredge; and

   (d)disclosure of settlement discussions such as those contained in the email would be contrary to the purpose of the privilege which I have set out above, in that it would deter parties to disputes from having frank and informal conversations exploring potential avenues for the efficient resolution of the dispute.

7. In any event, if I am wrong about this characterisation, even if admissible, the contents of the email would not have caused me to have formed a different view to the one I have set out above [59].

What amount of the debt is not in dispute?

1. I am satisfied that there is a genuine dispute between PTMS and Gendredge about the amount of the debt. By CA s 459H there is a process for dealing with the situation in which the substantiated amount is less than the amount of the debt. Specifically, by CA s 459H(5)(b), I am to determine so much of the amount of the debt as I am satisfied is not the subject of a dispute.

2. I gave the parties leave to file supplementary submissions identifying the items from the invoices which related to the costs incurred by Mr Bawden.

3. As set out above [36], the agreement for Mr Bawden was that:

   (a)Mr Bawden would travel to Singapore to inspect the LCT;

   (b)there would be no charge for the first two days inspection;

   (c)if he 'remained to assist' there would be a change for his services of $750 per day;

   (d)Gendredge would pay for Mr Bawden's economy flights, taxi fares and meals; and

   (e)Gendredge would arrange and pay for Mr Bawden's accommodation.

4. Mr Bawden left Perth on 24 July 2012.  He was back in Perth by 1 August 2012.  I am satisfied that the following amounts are referrable to this agreement:

Amount	Expense type	Evidence
$1,974.13	Airfares	Invoices SINV005426, Hall affidavit pp 56 ‑ 57
$276.30	Parking and Taxis	Invoice SINV005569, Hall affidavit pp 59 ‑ 60
$2,250.43

1. PTMS has claimed the costs for Mr Bawden for subsequent trips. For the reasons set out above, I am satisfied that there is a genuine dispute in relation to these costs.

2. Accordingly, I find that the substantiated amount of the debt is $2,250.43.

What final orders are appropriate?

1. The statutory minimum for a statutory demand is $2,000: CA s 9. By CA s 459H(4), as the substantiated amount is at least as great as the statutory minimum, then the Court  may make an order varying the demand and declaring the demand to have had effect, as so varied, as from when the demand was served on the company.

1. Accordingly, the appropriate final orders are:

   1.The amount the subject of the statutory demand dated 30 October 2013 be adjusted to $2,250.43.

   2.The time for complying with the demand be extended to 22 April 2014.

2. I will hear from counsel as to costs.