In the matter of Rothwell One Pty Ltd

Case •

[2025] NSWSC 53

•

17 February 2025

No judgment structure available for this case.

Supreme Court


New South Wales

Medium Neutral Citation: In the matter of Rothwell One Pty Ltd [2025] NSWSC 53
Hearing dates: 7 February 2025
Date of orders: 17 February 2025
Decision date: 17 February 2025
Jurisdiction:Equity - Corporations List
Before: Nixon J
Decision:

(1) The Originating Process filed 23 September 2024 is dismissed.

(2) The Plaintiff pay the Defendant’s costs of the proceeding.

Catchwords:

CORPORATIONS — Winding up — Statutory demand — Application to set aside — Whether there is a genuine dispute about the existence or amount of the debt

Legislation Cited:

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

Cases Cited:

Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd (2013) 85 NSWLR 601; [2013] NSWCA 344

CGI Information Systems v APRA Consulting Pty Ltd [2003] NSWSC 728

Ligon 158 Pty Ltd v Huber [2016] NSWCA 330

Panel Tech Industries (Australia) Pty Ltd v Australian Skyreach Equipment Pty Ltd (No 2) [2003] NSWSC 896

Re Wollongong Coal Ltd [2015] NSWSC 1680

Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452; [1997] FCA 681

Category:Principal judgment
Parties: Rothwell One Pty Ltd (Plaintiff)
ASEJ Business Solutions Pty Ltd (Defendant)
Representation:

Counsel:
J Tsang (Plaintiff)
T Cleary (Defendant)

Solicitors:
Ma & Company Solicitors (Plaintiff)
Matthews Folbigg Lawyers (Defendant)
File Number(s): 2024/352492
Publication restriction: Nil

JUDGMENT

  1. By Originating Process filed 23 September 2024, the Plaintiff, Rothwell One Pty Ltd, applies to set aside a creditor’s statutory demand dated 27 August 2024 (the Statutory Demand), which was issued by the Defendant, ASEJ Business Solutions Pty Ltd.

  2. The Statutory Demand claimed that Rothwell One owed ASEJ a debt of $435,479.48. This debt was said to be due under a Loan Agreement dated 11 June 2021 (the June 2021 Agreement) as varied by an Agreement to Amend Loan Agreement dated 22 February 2024 (the February 2024 Agreement) and an Agreement to Further Amend Loan Agreement dated 19 July 2024 (the July 2024 Agreement).

  3. In the materials filed in support of its application to set aside the Statutory Demand, Rothwell One contended that there was a genuine dispute regarding whether it had entered into the June 2021 Agreement, but did not dispute that it had entered into each of the February 2024 Agreement and the July 2024 Agreement.

Background

  1. Rothwell One was incorporated on 5 April 2017. Ms Ada Cheung is its sole director and shareholder, as well as its secretary.

  2. Ms Ada Cheung is the sister of Mei Hung Cora Cheung and the late Mei Ling Anita Cheung.

  3. For convenience, and without intending any disrespect, I will refer to the sisters as “Ada”, “Cora” and “Anita”.

  4. ASEJ is an Australian company which provides loans to other businesses.

June 2021 Agreement

  1. The June 2021 Agreement is expressed to be between ASEJ as Lender, Rothwell One as Borrower, and each of Ada and Anita as Guarantors. The execution pages of the June 2021 Agreement are signed, and the signatures are identified in that document as those of Mr Anup Kumar as sole director/secretary of ASEJ, Ada as director/secretary of Rothwell One, and each of Ada and Anita in their own right as Guarantors. The June 2021 Agreement records that Cora witnessed the signatures of each of Ada and Anita.

  2. Each of Ada and Cora affirmed affidavits in support of Rothwell One’s application to set aside the Statutory Demand.

  3. Ada denied signing the June 2021 Agreement. She deposed that the signatures appearing above her name on the document are not hers, and have been forged.

  4. Similarly, Cora deposed that the signatures appearing above her name in that document are not hers, and that she did not witness either Anita or Ada sign the June 2021 Agreement.

  5. The recitals to the June 2021 Agreement stated that Rothwell One had entered into a contract for the purchase of a property at Redbank Plains, Queensland (the Redbank Property) and had requested ASEJ to loan $400,000 to Rothwell One, secured by a caveat over the Redbank Property, to assist Rothwell One to purchase and subdivide the Redbank Property, with Ada and Anita guaranteeing Rothwell One’s obligations under the agreement.

  6. Clause 1(a) of the June 2021 Agreement provided that ASEJ would, on the Loan Date (which was to be no later than 11 June 2021), advance the Loan Amount of $400,000 to the trust account of DGI Lawyers, and that this amount would be disbursed as follows:

  1. the sum of $100,000 would be paid into a bank account in the name of Anita (provided that this sum would be repaid to the trust account of DGI Lawyers in the event that settlement of the Redbank Property failed to proceed); and

  2. the sum of $300,000 would be paid to the solicitor acting for Rothwell One in relation to the conveyancing, on settlement of the purchase of the Redbank Property.

  1. The June 2021 Agreement also included clauses to the following effect:

  1. interest would accrue on the unpaid balance of the Loan Amount from the Loan Date at the rate of 22.5% per annum (cl 2(a));

  2. Rothwell One would repay ASEJ the entire loan amount plus the balance of any interest owing on the Loan Repayment Date (being one year from the Loan Date) (cl 1(b));

  3. Rothwell One would provide ASEJ with a signed equitable mortgage over the Redbank Property which would be entered contemporaneously with the June 2021 Agreement (cl 3(b)); and

  4. Rothwell One consented to ASEJ lodging a caveat over the Redbank Property (cl 3(c)).

Moneys paid by ASEJ

  1. On 11 June 2021, ASEJ paid an amount of $400,000 into the trust account of DGI Lawyers. The trust account statement of DGI Lawyers records that this amount was received and held on behalf of Rothwell One.

  2. Rothwell One did not dispute that ASEJ had, on the “Loan Date” specified in the June 2021 Agreement, paid the “Loan Amount” specified in that agreement, and had done so in the manner specified in cl 1(a) of that agreement, namely, by payment into the trust account of DGI Lawyers. Nor did Rothwell One dispute that the DGI Lawyers trust account indicates that this sum was received for the benefit of, and held on trust for, Rothwell One. However, Rothwell One disputed that it retained DGI Lawyers, or that it gave instructions to DGI Lawyers regarding those moneys.

  3. There was, in evidence, an email chain containing emails dated 8 to 10 June 2021. At least the last of the emails in this chain was copied to Ada’s email address (such that Ada thereby received each of the earlier emails in that chain). Relevantly, this chain included emails from Anita to DGI Lawyers providing instructions on behalf of Rothwell One in relation to the June 2021 Agreement, including instructions in relation to the drafting of that agreement, and in relation to the payment of the funds by ASEJ into the trust account of DGI Lawyers for the benefit of Rothwell One. The email chain did not include any response from Ada to the effect that she disagreed with any of those instructions or disputed Anita’s authority to give those instructions. Ada did not dispute that she received this email chain, but deposed that she “was not aware of it and did not read it”.

August 2021 Agreement

  1. On 20 August 2021, Anita advised Mr Kumar that the vendor of the Redbank Property had requested a sum of $220,000 be released prior to settlement, so that he could settle the purchase of another property. Mr Kumar agreed to vary the June 2021 Agreement to allow this to occur.

  2. A document was created which was dated 23 August 2021 and which was described as an amendment to the June 2021 Agreement (the August 2021 Agreement).

  3. The August 2021 Agreement is expressed to be between the same parties as the June 2021 Agreement. The recitals to the August 2021 Agreement state that ASEJ and Rothwell One had entered into the June 2021 Agreement, and that the parties wished to amend its terms.

  4. Like the June 2021 Agreement, the execution pages of the August 2021 Agreement are signed, and the signatures are identified in the document as those of Mr Kumar as sole director/secretary of ASEJ, Ada as director/secretary of Rothwell One, and each of Ada and Anita in their own right as Guarantors. Further, the August 2021 Agreement records that the signatures of Ada and Anita have been witnessed by Cora, and signatures said to be those of Cora appear in the document.

  5. In their affidavit evidence, each of Ada and Cora denied signing the August 2021 Agreement.

  6. The relevant amendment in the August 2021 Amendment was in the following terms:

“1. Clause 1(a)(ii) of the Loan Agreement is hereby amended as follows:

ii. DGI Lawyers is hereby authorised and instructed to pay the amount of $220,000.00 to the Borrower’s solicitor acting in relation to the conveyancing upon signature of this Amendment, prior to settlement of the purchase of the Property (which has been extended):

Name: Pennisi Zia Lawyers Trust Account

BSB: [XXXXX X]

Account: [XXXXX X]

Reference: 2101731

and the balance of $80,000.00 will be paid to the Borrower’s solicitor on settlement of the purchase of the Property.”

  1. Pennisi Zia were the solicitors for the vendor of the Redbank Property.

Payments out of DGI trust account and settlement of Redbank Property

  1. Rothwell One did not dispute that four payments of, respectively, $100,000, $200,000, $20,000 and $80,000 were made from the amount of $400,000 which was held in the trust account of DGI Lawyers, or that those payments were made to the persons specified in the June 2021 Agreement as amended by the August 2021 Agreement (namely, $100,000 to Anita, $220,000 to Pennisi Zia and $80,000 to the solicitors acting for Rothwell One on the conveyancing).

  2. However, Rothwell One disputed that it gave instructions to DGI Lawyers regarding the payment of those moneys. Further, Rothwell One denied that it received any benefit from the payments made out of the DGI Lawyers trust account. That was despite some $220,000 being paid to Pennisi Zia in respect of the purchase by Rothwell One of the Redbank Property (which Rothwell One continues to own).

  3. There was, in evidence, an email from DGI Lawyers to Ada sent on or about 28 August 2021, requesting that she sign a trust account authority; and a reply email from Anita, copied to Ada, which attached a signed trust account authority bearing a signature of “Ada Cheung”. However, Ada denied that she saw this email or signed this authority.

  4. The purchase of the Redbank Property settled on 1 September 2021.

  5. Following purchase, ASEJ lodged two caveats over the Redbank Property.

Death of Anita

  1. Rothwell One submitted that the signatures of Ada and Cora on the June 2021 Agreement and the August 2021 Agreement were likely forged by Anita, since she had been the person who was dealing with ASEJ and DGI Lawyers.

  2. Anita died on 16 November 2023. Ada deposed that it was not until December 2023, shortly after Anita’s death, that she became aware of the caveats lodged over the Redbank Property and, after requesting her solicitors to investigate those caveats, became aware of the June 2021 Agreement and the debt claimed to be owing to ASEJ.

February 2024 Agreement

  1. On 22 February 2024, ASEJ, Rothwell One, Ada and Surewin Development No 2 Pty Ltd entered into the February 2024 Agreement. The directors of Surewin are Ada and Cora.

  2. Ada did not dispute that she executed the February 2024 Agreement as a director of Rothwell One, as a director of Surewin, and in her own right as Guarantor. Cora did not dispute that she executed the February 2024 Agreement as a director of Surewin.

  3. Rothwell One did not advance any submission to the effect that the February 2024 Agreement was not validly executed, or was otherwise not binding (for example, because of lack of consideration), or was liable to be set aside due to having been entered as a result of some mistake, misrepresentation or misleading conduct.

  4. The recitals to the February 2024 Agreement were as follows:

“A.   The Lender, Borrower and Ada executed [the June 2021 Agreement], together with Mei Ling Anita Cheung (Anita), who has since passed away.

B.   The Borrower and Surewin have requested to amend the Property charged as security under the [June 2021 Agreement] and the Lender has agreed to this request

C.   The parties agree to amend the [June 2021 Agreement] on the terms set out in this Amendment.”

  1. The February 2024 Agreement annexed a copy of the June 2021 Agreement.

  2. In executing the February 2024 Agreement, Rothwell One and Ada warranted to ASEJ (cl 4.1) that, prior to doing so, each had:

“(a)   obtained or had a reasonable opportunity to obtain independent legal advice about the terms of the [June 2021 Agreement] and this Amendment;

(b)   obtained or had a reasonable opportunity to obtain independent financial, accounting and taxation advice about the terms of the [June 2021 Agreement] and this Amendment;

(c)   read and understood each provision of the [June 2021 Agreement] and this Amendment; and

(d)   after obtaining or having had a reasonable opportunity to obtain independent legal, financial, accounting and taxation advice, voluntarily signed this Amendment.”

  1. The February 2024 Agreement provided for various changes to the terms of the June 2021 Agreement. These included matters such as:

  1. extending the Loan Repayment Date to 22 July 2024 (cl 2.1(a));

  2. providing for accrued interest to be compounded and added to the original Loan Amount, and amending the Loan Amount to be $635,479.48 (cl 2.1(b), cl 2.3, cl 2.7);

  3. adding Surewin as a guarantor (cl 2.1(c), cl 2.2, cl 2.6, cl 2.11);

  4. releasing the Redbank Property as security for the loan and requiring ASEJ to withdraw the caveat over the Redbank Property (cl 2.1(d), cl 3.1);

  5. charging another property in Labrador, Queensland, which was owned by Surewin (the Labrador Property) as security for the loan (cl 2.1(e), cl 2.4);

  6. requiring Surewin to grant a second mortgage over the Labrador Property (cl 2.6);

  7. providing that interest, at the rate of 22.5% per annum, would accrue daily on the Loan Amount (as amended) from 1 February 2024 to the Loan Repayment Date (cl 2.8, cl 2.9); and

  8. adding a clause providing for compounding interest in the event of late payment (cl 2.10).

  1. Clause 2.12 of the February 2024 Agreement provided that, except as otherwise expressly stated in that agreement, “all the terms and conditions of the [June 2021 Agreement] will remain unchanged and in full force and effect”.

  2. Clause 6.1 of the February 2024 Agreement was headed “Borrower and Guarantors Acknowledgement”. It provided as follows:

“(a)   The Borrower hereby acknowledges, consents and agrees that all of its obligations and liabilities under the [June 2021 Agreement] (as amended by the terms of [the February 2024 Agreement]) remain in full force and effect, and that the execution of [the February 2024 Agreement] shall not alter, amend, reduce or modify its obligations and liability under the terms of any security it has granted in connection with its obligations under the [June 2021 Agreement] (as amended by the terms of [the February 2024 Agreement]).

(b)   The Guarantors hereby acknowledge, consent, and agree that all of their obligations and liabilities under the [June 2021 Agreement] (as amended by the terms of [the February 2024 Agreement]) remain in full force and effect, and that the execution of this Amendment shall not alter, amend, reduce or modify their obligations and liability under the terms of the guarantee as specified in the [June 2021 Agreement] (as amended by the terms of [the February 2024 Agreement]).”

  1. Clause 6.4(a) of the February 2024 Agreement provided as follows:

“This Amendment expresses and incorporates the entire agreement between the parties in relation to its subject matter and all the terms of that agreement, and supersedes and excludes any prior or collateral negotiation, understanding, communication, agreement, representation or warranty by or between the parties in relation to that subject matter or any term of that agreement.”

  1. Following entry into the February 2024 Agreement and in accordance with its terms, ASEJ withdrew its caveat over the Redbank Property (cl 2.1(d), 3.1) and Surewin granted a mortgage over the Labrador Property (cl 2.1(e), cl 2.4, cl 2.6), which was executed by each of Ada and Cora as directors of Surewin and which was registered by ASEJ.

July 2024 Agreement

  1. On 19 July 2024, ASEJ, Rothwell One, Ada, Surewin and Grand Pacific Property Investment Pty Ltd entered into the July 2024 Agreement. Ada is the sole shareholder of Grand Pacific and Cora is its director.

  2. Ada did not dispute that she executed the July 2024 Agreement as a director of Rothwell One, as a director of Surewin, and in her own right as Guarantor. Cora did not dispute that she executed the July 2024 Agreement as a director of Surewin and as a director of Grand Pacific.

  3. Rothwell One did not advance any submission to the effect that the July 2024 Agreement was not validly executed, or was otherwise not binding, or was liable to be set aside for any reason.

  4. The recitals to the July 2024 Agreement were as follows:

“A.   The Lender, Borrower and Ada executed [the June 2021 Agreement] together with Mei Ling Anita Cheung (Anita) who has since passed away.

B.   The Lender, Borrower, Ada, Surewin and Cora executed [the February 2024 Agreement].

C.   The Borrower and Grand Pacific have requested to further amend the Property charged as security under the Loan Agreement and the Lender has agreed to this request.

D.   The parties agree to amend the Loan Agreement on the terms set out in this Further Amendment.”

  1. The July 2024 Agreement provided for various further changes to be made to the terms which had been agreed between the parties, including that:

  1. Grand Pacific would be added as a guarantor (cl 2.1(a), cl 2.2, cl 2.6);

  2. the security over the Labrador Property would be released (cl 2.1(b));

  3. a property situated at Waterford in Queensland (the Waterford Property), which was owned by Grand Pacific, would be charged as security for repayment of the Loan Amount (cl 2.1(c), cl 2.3); and

  4. ASEJ would lodge a caveat over the Waterford Property (cl 2.5).

  1. Clause 3.1 of the July 2024 Agreement acknowledged that the Labrador Property had been sold and that settlement of the sale was scheduled to occur on or about 18 July 2024. By clause 3.2, ASEJ agreed to discharge its mortgage over the Labrador Property on settlement of that sale, provided that (a) Surewin repaid an amount of at least $200,000 to ASEJ and (b) ASEJ was entitled to register a caveat over the Waterford Property.

  2. Clause 2.7 of the July 2024 Agreement provided that, except as expressly stated in the February 2024 Agreement and the July 2024 Agreement, “all the terms and conditions of the [June 2021 Agreement] will remain unchanged and in full force and effect”.

  3. In executing the July 2024 Agreement, Rothwell One and Ada warranted to ASEJ (cl 4.1) that, prior to doing so, each had:

“(a)   obtained or had a reasonable opportunity to obtain independent legal advice about the terms of the [June 2021 Agreement] and this Further Amendment;

(b)   obtained or had a reasonable opportunity to obtain independent financial, accounting and taxation advice about the terms of the [June 2021 Agreement] and this Further Amendment;

(c)   read and understood each provision of the [June 2021 Agreement] and this Further Amendment; and

(d)   after obtaining or having had a reasonable opportunity to obtain independent legal, financial, accounting and taxation advice, voluntarily signed this Further Amendment.”

  1. Clause 6.1 of the July 2024 Agreement was headed “Borrower and Guarantors Acknowledgement”. It provided as follows:

“(a)   The Borrower hereby acknowledges, consents and agrees that all of its obligations and liabilities under the [June 2021 Agreement] (as amended by the terms of the [February 2024 Agreement] and [the July 2024 Agreement]) remain in full force and effect, and that the execution of [the July 2024 Agreement] shall not alter, amend, reduce or modify its obligations and liability under the terms of any security it has granted in connection with its obligations under the [June 2021 Agreement] (as amended by the terms of the [February 2024 Agreement] and [the July 2024 Agreement]).

(b)   The Guarantors hereby acknowledge, consent and agree that all of their obligations and liabilities under the [June 2021 Agreement] (as amended by the terms of the [February 2024 Agreement] and [the July 2024 Agreement]) remain in full force and effect, and that the execution of [the July 2024 Agreement] shall not alter, amend, reduce or modify their obligations and liability under the terms of the guarantee as specified in the [June 2021 Agreement] (as amended by the terms of the [February 2024 Agreement] and [the July 2024 Agreement]).”

  1. Clause 6.4(a) of the July 2024 Agreement provided as follows:

“This Further Amendment expresses and incorporates the entire agreement between the parties in relation to its subject matter, and all of the terms of that agreement, and supersedes and excludes any prior or collateral negotiation, understanding, communication, agreement, representation or warranty by or between the parties in relation to that subject matter or any term of that agreement.”

  1. Following entry into the July 2024 Agreement and in accordance with its terms, ASEJ lodged a caveat over the Waterford Property (cl 2.5).

Payments to ASEJ

  1. On 25 July 2024, the sale of the Labrador Property settled. In accordance with clause 3.2 of the July 2024 Agreement, Surewin repaid the sum of $200,000 to ASEJ from the settlement proceeds.

  2. No other amount has been paid to ASEJ in respect of the Loan Amount.

  3. On 22 August 2024, ASEJ’s solicitors sent a letter to Ada, demanding payment of the moneys which were said to be due under the June 2021 Agreement as amended by the February 2024 Agreement and the July 2024 Agreement. No response was received to this letter.

Statutory Demand

  1. On 2 September 2024, the Statutory Demand was served on Rothwell One, together with an accompanying affidavit sworn by the director of ASEJ, Mr Kumar. The amount demanded was $435,479.48, being the “Loan Amount” specified in the February 2024 Agreement ($635,479.48) less the payment of $200,000 which had been made pursuant to the terms of the July 2024 Agreement.

  2. The Schedule to the Statutory Demand described the debt in the following terms.

Description of Debt

Amount of Debt

Loan amount of $400,000 due and payable pursuant to the [June 2021 Agreement], as varied by the [February 2024 Agreement] and the [July 2024 Agreement] plus interest on the Loan Amount fixed at $235,479.48 in accordance with clauses 1.1(a) and (e), 2.1(b) and 2.3 of the [February 2024 Agreement] (being the Original Loan Amount of $400,000 plus accrued interest of $235,479.48)

635,479.48

Less payment made on settlement of the sale of property located at [Labrador Qld]

(200,000.00)

Total

$435,479.48

  1. The accompanying affidavit included the same description of the debt. In this affidavit, Mr Kumar deposed that the debt of $435,479.48 was owing:

“pursuant to the Loan Agreement entered into with the Creditor dated 11 June 2021, as varied by the:

(a)   Agreement to Amend Loan Agreement dated 22 February 2024; and

(b)   Agreement to Further Amend Loan Agreement dated 19 July 2024”.

  1. On 23 September 2024, being 21 days from the date on which the Statutory Demand was served, Rothwell One commenced this proceeding.

Relevant Principles

  1. Rothwell One brings this application to set aside the Statutory Demand pursuant to s 459G(1) of the Corporations Act 2001 (Cth) (the Act). The application is brought within time: s 459G(2).

  2. The sole basis on which Rothwell One seeks to set aside the Statutory Demand is that there is a genuine dispute between it and ASEJ about the existence of the debt to which the demand relates: s 459H(1)(a).

  3. The relevant principles were not in dispute.

  4. In Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452 at 464; [1997] FCA 681, the Full Court of the Federal Court observed that a genuine dispute must be bona fide and truly exist in fact, and that the grounds for the dispute must be real and not spurious, hypothetical, illusory or misconceived.

  5. The threshold to establish a genuine dispute is not high. The task faced by a company in challenging a statutory demand on the genuine dispute grounds “is by no means at all a difficult or demanding one”: CGI Information Systems v APRA Consulting Pty Ltd [2003] NSWSC 728 at [16] (Barrett J).

  6. In Panel Tech Industries (Australia) Pty Ltd v Australian Skyreach Equipment Pty Ltd (No 2) [2003] NSWSC 896 at [18], Barrett J said that:

“Once the company shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow. The Court does not engage in any form of balancing exercise between the strengths of competing contentions. If it sees any factor that, on rational grounds, indicates an arguable case on the part of the company, it must find that a genuine dispute exists, even where any case apparently available to be advanced against the company seems stronger.”

  1. In Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd (2013) 85 NSWLR 601; [2013] NSWCA 344, the Court of Appeal reviewed the relevant authorities and observed (at [36]) that “there must be evidence that satisfies the court that there is ‘a serious question to be tried’”, or “an issue deserving of hearing”, or a “plausible contention requiring investigation”. The Court emphasised (at [38]) that the issue in such a proceeding is “not whether a debt to which the statutory demand relates is owed”, but rather “whether there is a genuine dispute about whether a debt is owed”. The Court observed (at [46]) that:

“In determining whether there is evidence of a genuine dispute as to the debt, or that there is an offsetting claim, except in extreme cases, the Court is not concerned to engage in an inquiry as to the credit of the deponent of the affidavit filed in support of the application.”

  1. The Court added (at [47]) that “the court’s concern [is] to determine whether there was plausible evidence to establish the existence of a genuine dispute, not whether the evidence was disputed or even likely to be accepted on a final hearing of any such claim.”

  2. In Ligon 158 Pty Ltd v Huber [2016] NSWCA 330 at [8], Barrett JA (McColl and Meagher JJA agreeing) endorsed the following summary of the applicable principles (based on Black J’s judgment in Re Wollongong Coal Ltd [2015] NSWSC 1680 at [9]-[22]):

“(1)    A dispute is ‘genuine’ if it is not ‘plainly vexatious or frivolous’ or ‘may have some substance’ or ‘involves a plausible contention requiring investigation’. A genuine dispute requires that it be bona fide and, to that effect, be premised on sufficiently particularised grounds that are ‘real and not spurious, hypothetical, illusory or misconceived’ and which demonstrate the dispute’s ‘objective existence’ and ‘prima facie plausibility’.

(2)   The test is governed by principles analogous to those which underpin an application for an interlocutory injunction or summary judgment. The court must, however, guard against setting the threshold too low for that is liable to defeat the legislative purpose of the section.

(3)   The task faced by a company challenging a statutory demand on the genuine dispute ground is by no means at all a difficult or demanding one. Once the company shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow and the demand will be set aside. A finding to the contrary could only be arrived at if the contentions advanced are so devoid of substance that no further investigation is warranted.

(4)   The function of the court is merely to determine the existence of a genuine dispute. While this neither requires nor invites it to weigh or assess the merits of the dispute, the court will not exceed its legitimate function by having regard to evidence which bears upon whether the asserted dispute is genuine.”

Is there a genuine dispute about existence of the debt?

  1. Rothwell One contended that there was a genuine dispute about whether or not the June 2021 Agreement and the August 2021 Agreement were entered, and in particular about whether or not those agreements were signed by Ada on behalf of Rothwell One.

  2. In this regard, Rothwell One relied on the sworn evidence of each of Ada and Cora that they did not sign either of those agreements, as well as Ada’s evidence that she did not engage DGI Lawyers to act for Rothwell One and did not provide any instructions in relation to those agreements or to the payments said to have been made from the DGI Lawyers trust account pursuant to those agreements. Rothwell One submitted that Ada’s account was supported by various matters including the absence of any copy of the retainer of DGI Lawyers which was signed by Ada on behalf of Rothwell One; the fact that the emails providing instructions to DGI Lawyers about the agreements and about the payments to be made from the $400,000 which was paid by ASEJ into the DGI Lawyers trust account came from Anita (although, as noted above, a number of these emails were copied to Ada); and the fact that none of the payments made from the DGI Lawyers trust account was a payment to Rothwell One.

  3. ASEJ acknowledged that, if the Statutory Demand had claimed a debt which was said to arise solely under the June 2021 Agreement, then these matters might be sufficient to give rise to a genuine dispute about that debt. However, ASEJ submitted that the Statutory Demand instead claimed a debt which arose under the June 2021 Agreement as varied by the February 2024 Agreement and the July 2024 Agreement; and that, in circumstances where there was no dispute that each of the February 2024 Agreement and the July 2024 Agreement was validly executed and was binding on Rothwell One, there could be no genuine dispute about the debt claimed in the Statutory Demand.

  4. As set out above, the amount claimed in the Statutory Demand is comprised of the “Loan Amount” specified in the February 2024 Agreement (namely, $635,479.48) less the amount which has been paid to ASEJ pursuant to the terms of the July 2024 Agreement ($200,000).

  5. The February 2024 Agreement:

  1. annexed the terms set out in the June 2021 Agreement;

  2. provided that the terms in the June 2021 Agreement were varied in certain specified respects (including by changing the Loan Amount, the Loan Repayment Date and the terms as to interest);

  3. contained an acknowledgement by Rothwell One and Ada that each of them had obtained advice about, read and understood the terms of the June 2021 Agreement and the February 2024 Agreement;

  4. provided that the terms of the June 2021 Agreement as amended by the February 2024 Agreement were binding on Rothwell One; and

  5. provided that the February 2024 Agreement constituted the entire agreement between the parties in relation to its subject matter and superseded any prior agreement.

  1. Similarly, the July 2024 Agreement:

  1. provided that the terms which had been agreed by the February 2024 Agreement (being the June 2021 terms, as amended by the February 2024 terms) were further varied in certain specified respects, including by changing the security and by requiring a payment of $200,000 to be made on settlement of the sale of the Labrador Property;

  2. contained an acknowledgement by Rothwell One and Ada that each of them had obtained advice about, read and understood the terms of the June 2021 Agreement and the July 2024 Agreement;

  3. provided that the terms of the June 2021 Agreement as amended by the February 2024 Agreement and the July 2024 Agreement were binding on Rothwell One; and

  4. provided that the July 2024 Agreement constituted the entire agreement between the parties in relation to its subject matter and superseded any prior agreement.

  1. In circumstances where there is no dispute that each of the February 2024 Agreement and the July 2024 Agreement was validly executed and was binding on Rothwell One, it is of little consequence whether or not the June 2021 Agreement had been validly executed.

  2. Irrespective of the effect of the June 2021 Agreement, the February 2024 Agreement was an agreement to the effect that the terms of the June 2021 Agreement, varied in the manner set out in the February 2024 Agreement, would bind the parties (including Rothwell One) from the date of the February 2024 Agreement and would constitute the entire agreement between the parties in relation to its subject matter.

  3. Similarly, the July 2024 Agreement was an agreement that the terms of the June 2021 Agreement as varied by the terms of the February 2024 Agreement and as further varied by the July 2024 Agreement would bind the parties from the date of the July 2024 Agreement and would constitute the entire agreement between the parties in relation to its subject matter.

  4. The subject matter of the February 2024 Agreement and the July 2024 Agreement was the sum of $400,000 which had, as a matter of fact, been paid by ASEJ on the date specified in the June 2021 Agreement (11 June 2021) and in the manner specified in the June 2021 Agreement (by payment into the DGI Lawyers trust account in the name of Rothwell One).

  5. By the February 2024 Agreement, Rothwell One agreed to pay to ASEJ by 22 July 2024 the Loan Amount of $635,479.48 (representing that sum of $400,000, together with accrued interest on that sum at the rate specified in the June 2021 Agreement).

  6. The July 2024 Agreement confirmed that Rothwell One was bound by the terms of the February 2024 Agreement, which were amended so as to require, relevantly, $200,000 of the Loan Amount specified in the February Agreement to be paid from the settlement proceeds of the Labrador Property.

  7. In executing each of the February 2024 Agreement and the July 2024 Agreement, Rothwell One and Ada acknowledged that they had read and understood the terms of the June 2021 Agreement, which were annexed to the February 2024 Agreement.

  8. Counsel for Rothwell One accepted that, whether or not the June 2021 Agreement had been validly executed, the effect of the February 2024 Agreement was to bind the parties (including Rothwell One) to perform the terms of the June 2021 Agreement as varied by the February 2024 Agreement:

“HIS HONOUR: … Let’s just say that there is a document that is a contract, that on its face is a contract, that for some reason never had any effect.

[COUNSEL FOR PLAINTIFF]: Yes.

HIS HONOUR: It’s just a document that contains terms. And then parties at a later point say, we are now going to be bound by those terms, but with some amendments.

[COUNSEL FOR PLAINTIFF]: Yes, your Honour.

HIS HONOUR: Even if there hadn’t been an agreement as at June 2021, can’t that create an agreement as at February 2024.

[COUNSEL FOR PLAINTIFF]: I concede that point, yes, your Honour.”

  1. Counsel for Rothwell One indicated that “the highest” that he could put his client’s case was as follows: “in the way that debt is described [in the Statutory Demand], it refers to all three of them [the June 2021 Agreement, the February 2024 Agreement and the July 2024 Agreement], not just the [latter] two.”

  2. ASEJ did not issue the Statutory Demand in respect of a debt due under the June 2021 Agreement. Instead, ASEJ issued the Statutory Demand in respect of a debt due under the terms of the June 2021 Agreement as varied by the February 2024 Agreement and the July 2024 Agreement.

  3. There is no dispute that the July 2024 Agreement was validly executed; that its effect was that the parties agreed to be bound by a set of terms which consisted of terms in the June 2021 Agreement as varied by the February 2024 Agreement and the July 2024 Agreement; or that the effect of that particular set of terms was that Rothwell One was obliged to repay the amount of $635,479.48 by 22 July 2024, with $200,000 of that sum being payable on the sale of the Labrador property.

  4. The Statutory Demand claimed a debt of $435,479.48, being the balance of the sum due under that set of terms.

  5. For the reasons set out above, I am not satisfied that there is any genuine dispute between the parties about the existence of that debt.

Conclusion

  1. As Rothwell One has not established its sole ground for seeking to set aside the Statutory Demand, its application must be dismissed.

  2. Accordingly, I make the following orders.

  1. The Originating Process filed 23 September 2024 is dismissed.

  2. The Plaintiff pay the Defendant’s costs of the proceeding.

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Decision last updated: 17 February 2025

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