Kenjad Pty Ltd v Anzius Holdings Pty Ltd; Kenjad Pty Ltd v French Family Holdings Pty Ltd

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

CORPORATIONS LIST

IN THE MATTER of Kenjad Pty Ltd (ACN 131 282 721)

S ECI 2019 00919

BETWEEN:

KENJAD PTY LTD (ACN 131 282 721)	Plaintiff
v
ANZIUS HOLDINGS PTY LTD (ACN 150 495 622)	Defendant

S ECI 2019 01097

AND BETWEEN:

KENJAD PTY LTD (ACN 131 282 721)	Plaintiff
v
FRENCH FAMILY HOLDINGS PTY LTD (ACN 156 204 330)	Defendant

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JUDGE:	Gardiner AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	19 July and 9 August 2019, submissions last filed 20 August 2019
DATE OF JUDGMENT:	27 May 2020
CASE MAY BE CITED AS:	Kenjad Pty Ltd v Anzius Holdings Pty Ltd; Kenjad Pty Ltd v French Family Holdings Pty Ltd
MEDIUM NEUTRAL CITATION:	[2020] VSC 295 Revised 28 September 2020

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CORPORATIONS – Corporations Act 2001 (Cth), s 459G – Applications to set aside statutory demands by reason of alleged genuine disputes and offsetting claims in respect of the debts – Whether plaintiff has raised evidence in relation to alleged disputes in its ‘21 day affidavits’ – Whether plaintiff has raised sufficient evidence to demonstrate bases for and quantum of offsetting claims – Where certain alleged disputes not raised within 21 day affidavits – Finding that alleged disputes and offsetting claims are not bona fide – Where evidence as to basis for and quantum of offsetting claims is insufficient – Applications dismissed.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff in S ECI 2019 00919	Mr N A Andreou	Robert James Lawyers
For the Defendant in S ECI 2019 00919	Ms E Keynes	Macpherson Kelley
For the Plaintiff in S ECI 2019 01097	Mr N A Andreou	Robert James Lawyers
For the Defendant in S ECI 2019 01097	Ms E Keynes	Macpherson Kelley

TABLE OF CONTENTS

Legal principles............................................................................................................................. 1
Anzius statutory demand............................................................................................................ 4
French statutory demand............................................................................................................. 4
The evidence filed in the applications....................................................................................... 4
Factual background...................................................................................................................... 5
Kenjad’ s evidence in support of the applications................................................................... 7
The Anzius application....................................................................................................... 9
The French application..................................................................................................... 11

The Deeds of Assignment.......................................................................................................... 14
The evidence in opposition to the applications...................................................................... 15
French’s evidence.............................................................................................................. 15
Anzius’ evidence................................................................................................................ 17
Kenjad’s evidence in reply............................................................................................... 19

Bernadette Pinnell’s affidavit of 7 August 2019..................................................................... 24
Consideration..................................................................................................................... 27

Conclusion.................................................................................................................................... 35

HIS HONOUR:

By originating processes filed 5 March 2019 in proceeding S ECI 2019 00919 and 15 March 2019 in proceeding S ECI 2019 01097, Kenjad Pty Ltd (‘Kenjad’) makes application to set aside:

(i) a statutory demand dated 7 February 2019 served upon it by Anzius Holdings Pty Ltd (‘Anzius’) (‘Anzius demand’); and

(ii) a statutory demand dated 13 February 2019 served upon it by French Family Holdings Pty Ltd (‘French’) (‘French demand’).

The applications are each made pursuant to ss 459G, 459H and 459J of the Corporations Act 2001 (Cth) (‘the Act’) and were heard together as there is commonality in the issues which arise for consideration.

For the reasons which follow, I will order that both applications be dismissed.

Legal principles

The principles to be applied in considering what constitutes a genuine dispute or offsetting claim in applications to set aside statutory demands are the subject of numerous authorities of state Supreme Courts and the Federal Court of Australia and Courts of Appeal and Full Courts. In the decision of the Court of Appeal in this State of Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (in liq) (‘Malec’), the principles applicable in applications to set aside statutory demands were succinctly collected and summarised as follows (citations omitted):[1]
[1][2015] VSCA 330, [47]-[51].

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.
Solarite Air Conditioning Pty Ltd v York International Australia Pty Ltd involved a demand for payment of a debt alleged to be due under a contract for the supply of goods. The applicant relied on four matters, each of which had the potential to affect the respondent’s entitlement to be paid the entire amount of the debt. Barrett J held that all four matters were sufficiently plausible to raise a genuine dispute. He relevantly stated:
The [applicant] will fail in [the] task [of establishing a genuine dispute] only if … the contentions upon which it seeks to rely … are so devoid of substance that no further investigation is warranted. Once the [applicant] 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 [applicant], it must find that a genuine dispute exists, even where any case apparently available to be advanced against the [applicant] seems stronger.

In Powerhouse Australasia Pty Ltd v Viarc Pty Ltd (‘Powerhouse’),[2] Dodds‑Streeton J considered the approach and standard to be applied when dealing with applications of this type:

While it is not a very exacting standard, on the other hand mere, assertion of a dispute or off-setting claim, mere bluster or advancing grounds which are illusory or spurious or insufficiently particularised will not suffice. The Court must not enter into the merits of the dispute, but it is not crossing the line in relation to its legitimate role in these applications to consider evidence which ‘bears on whether or not the asserted dispute or off-setting claim is genuine’. Indeed, that is its necessary function.[3] (emphasis added)

[2][2006] VSC 508.

[3]Ibid [48].

In the context of considering what constitutes a genuine offsetting claim, McPherson JA observed in JJMMR Pty Ltd v LG International Corp (‘JJMR’):

Anyone can make a claim to a right of set-off against a creditor. What the definition in s 459H(5) requires, however, is that it be ‘genuine’. The same word in s 459H(1) has already elicited so many synonyms and shades of meaning that it will not help to add more. Its antithesis is to be seen in the word ‘artificial’. The claim to set off against the debt demanded must not have been manufactured or got up simply for the purpose of defeating the demand made against the company. It must have an existence that is objectively demonstrable independently of the exigencies of the demand that evoked it.[4]

[4][2003] QCA 519, [18] (‘JJMR’).

In Macleay Nominees Pty Ltd v Belle Property East Pty Ltd Palmer J stated:

... a genuine offsetting claim for the purposes of CA s 459H(1) and s 459H(2) means a claim on a cause of action advanced in good faith, for an amount claimed in good faith. ‘Good faith’ means arguable on the basis of facts asserted with sufficient particularity to enable the Court to determine that the claim is not fanciful. In a claim for unliquidated damages for economic loss, the Court will not be able to determine whether the amount claimed is claimed in good faith unless the plaintiff adduces some evidence to show the basis upon which the loss is said to arise and how that loss is calculated. If such evidence is entirely lacking, the Court cannot find that there is a genuine offsetting claim for the purposes of s 459H(1) and s 459H(2). (emphasis added).[5]

[5][2001] NSWSC 743, [18].

In Statutory Demands and Winding up in Insolvency, the author observes that:

In order to establish the existence of a genuine claim, the company must give some indication, and adduce some evidence, in support of the alleged quantum of the offsetting claim so that the court may determine whether there is a genuine offsetting claim of a given amount… simply annexing a statement of claim to an affidavit in support of an application to set aside a statutory demand will not provide sufficient evidence as to quantum.[6]
[6]Farid Assaf, Statutory Demands and Winding Up In Insolvency (LexisNexis Butterworths Australia, 2^nd ed, 2012), [6.20]. See also Sewmail (Australia)Pty Ltd v Booby Traps Pty Ltd (1997) 23 ACSR 339.

Anzius statutory demand

The Anzius demand claims that Kenjad is indebted to Anzius for $39,814.80. The schedule to the Anzius demand describes the debt as being owing under a Deed of Agreement dated 1 March 2014 (‘Anzius agreement’). The debt is said to arise from unpaid rental obligations owing by Kenjad from 1 July 2013 to January 2019 for the lease of a property it owned at Edmonton, Queensland. The schedule to the Anzius demand contains a spreadsheet stating how the debt has accrued over time in a conventional running account format for the period 1 July 2013 to January 2019. It details the various debits and credits on the account, the appropriation of payments received and how the amount of the Anzius demand is arrived at. The Anzius demand was accompanied by an affidavit of Michael Pinnell, sworn 7 February 2019, which is in compliance with s 459E(3) of the Act.

French statutory demand

The French demand claims that the sum of $20,913.97 is owing by Kenjad to French. The schedule to the demand describes the debt as being owing under a Deed of Agreement dated 1 March 2014 (‘French agreement’) for the lease of a property it owned , also at Edmonton, Queensland, and depicts in spreadsheet form how the debt has accrued over time by a running account commencing 30 September 2015 and concluding on 31 January 2019. The demand was accompanied by an affidavit of Glenn French, sworn 13 February 2019, which is in compliance with s 459E(3) of the Act.

The evidence filed in the applications

In the Anzius application (‘Anzius application’), Kenjad relied on affidavits of Adam Landrey[7] sworn 5 March 2019 and 31 July 2019. Anzius relied on an affidavit of Michael Pinnell and Bernadette Pinnell, both sworn 5 July 2019 and a supplementary affidavit of Bernadette Pinnell sworn 7 August 2019.
[7]For clarity, in these reasons I shall refer to Adam Landrey by his full name, to ensure references to Adam Landrey are not confused with references to Geoff Landrey.

In the French application (‘French application’), Kenjad relied on affidavits of Adam Landrey sworn 15 March 2019 and 31 July 2019 and an affidavit of its solicitor, Brent Lodding, sworn 16 April 2019. Mr Lodding deposed to matters regarding service of the French demand and the application to set it aside which are no longer in controversy. French relied on affidavits of Glenn French, sworn 28 June 2019 and 6 August 2019.

All parties filed submissions and, subsequent to the hearing, supplementary submissions. In the Anzius application, Anzius filed further supplementary submissions.

Factual background

The French agreement and the Anzius agreement (‘agreements’) are in substantially the same terms.[8] The recitals to the agreements state that Kenjad is a participant approved by the Australian Government under the National Rental Affordability Scheme (‘NRAS’), administered pursuant to the National Rental Affordability Scheme Act 2008 (Cth) (‘the NRAS Act’). The policy of the NRAS is to increase the supply of affordable rental housing to low and moderate income earners. A substantial government incentive in the form of a tax rebate or cash from the Australian Government for a period of up to ten years is provided to persons who rent out properties under the scheme.
[8]In the Anzius application, exhibit ‘AOL-3’ to Adam Landrey’s affidavit incorrectly exhibits an agreement between Kenjad and Jeri Pty Ltd, a party not associated with this proceeding. The parties accepted that for the purpose of this application the Deed of Agreement between Anzius and Kenjad was in identical terms to that entered into between French and Kenjad.

The agreements each provided for a lease to Kenjad of the respective properties, for a period of eight years from the date of settlement of the dwelling in the case of the Anzius agreement and ten years from 7 June 2013 in respect of the French agreement. Each agreement provided for the payments described below to be made by Kenjad to Anzius and French, including the one-off payments referred to. Kenjad had the right to sub-lease the properties for the period of the leases. Under the terms of the NRAS Act, Kenjad could only let the subject property to tenants approved under the NRAS. Kenjad was required to offer the sub-tenants a 20 per cent discount to the market rent which was to be determined by a sworn valuation.

Under the terms of the Anzius agreement, Kenjad agreed to rent its property to tenants under the NRAS. The Anzius agreement had terms that Kenjad was to pay to Anzius:

(i) $1,300 per month (clause 2);

(ii) a stand-alone payment of $6,000 per annum in September for each full year of the agreement (clause 3); and

(iii) an additional stand-alone payment of $4,600 in September 2014 (clause 5).

Anzius contends that from the date of commencement of the Anzius agreement to the date of the issue of the Anzius demand, Kenjad paid a total of $20,431.00 to Anzius and that during that period, a total of $60,245.80 was payable to Anzius pursuant to the agreement. The Anzius demand claims that the difference between these two sums, $39,814.80, remains owing for the relevant period.[9]
[9]See paragraphs 10 and 11 of the affidavit of Michael Pinnell sworn 5 July 2019.

The background to the French demand follows that of the Anzius demand very closely. Kenjad and French entered into the French agreement by which Kenjad agreed to rent its property to tenants under the NRAS. The French agreement made provision for the same payment obligations to French as those contained in the Anzius agreement.

French says that during the relevant period a total of $111,980.97 was payable to French pursuant to the French agreement. French received an RTO certificate[10] for $6,000 on or about 11 October 2016 which was applied to amounts payable in September 2015 for that year’s stand-alone payment but which was not paid when due. The obligation to make a payment of $6,000 for the September 2016 stand-alone payment remains unpaid. French received another payment for $8,286.03 on 6 November 2017 which it applied in discharge of amounts due and payable in September 2017. The French demand claims that $20,913.97 is owing for the relevant period.

Kenjad’ s evidence in support of the applications

[10]A Refundable Tax Offset (‘RTO’) certificate entitles the holder to apply a rebate against taxation liability.

In these types of applications, because of the jurisdictional principle which has become known as the Graywinter principle,[11] it is necessary to identify what matters are ‘raised’ by the plaintiffs, expressly or by available inference in the evidence filed by it in the period of compliance with the demand[12] (‘the 21 day affidavits’). Adam Landrey’s 21 day affidavits in support of the applications to set aside the Anzius and French demands are very similar in substance and raise much the same disputes and claims.
[11]Derived from the decision of Sundberg J in Graywinter Properties Pty Ltd v Gas & Fuel Corp Superannuation Fund (1996) 70 FCR 452.
[12]See s 459E(3) of the Corporations Act 2001 (Cth).

Adam Landrey is the sole director and secretary of Kenjad. In the 21 day affidavits, Adam Landrey says that in early 2014 the parties negotiated and agreed on terms and conditions by which Kenjad took leases of the respective properties.

In the affidavits, under the heading ‘Grounds to set aside the statutory demand’, he identifies the grounds upon which Kenjad relies. The principal ground raised is that Anzius and French respectively have no claims or causes of action against Kenjad because the rights and obligations of Kenjad were assigned by it to another entity. Adam Landrey contends that included in the agreements ‘were terms to allow assignment of the agreement’. Kenjad alleges that on 31 August 2015, Kenjad undertook ‘a corporate restructure’ and on 31 August 2015 it assigned its rights, benefits and obligations under the Anzius agreement and the French agreement (‘the assignments’) to an entity identified as Kenjad Rentals, an Australian Business Name held by Adam Landrey’s father, Geoff Landrey.[13]
[13]See exhibit AOL-6 to the affidavit of Adam Landrey, sworn 31 July 2019 in the French application.

Adam Landrey says that following the assignments, Kenjad Rentals undertook all of the responsibilities and obligations under the agreements, including the collection of rent from the sub‑tenants.

Adam Landrey contends that Kenjad validly assigned its rights and obligations under the agreements in accordance with the common law, the provisions of the Residential Tenancies and Rooming Accommodation Act 2008 (Qld) (‘RTRA Act’) and the express provisions of the agreements. Section 238 of the RTRA Act requires that the lessor agree in writing to a transfer or sublet of the property. He contends that clause 15 of the French agreement specifically provides: ‘Deed ensures [sic] for the benefit of and is binding upon the parties and their heirs, executor successors and permitted assigns’ (emphasis in original affidavit). The same provision appears in clause 15 of the Anzius agreement.

Adam Landrey asserts that these clauses give rise to a written acknowledgment in the agreements that Kenjad was entitled to assign its rights and obligations under the agreements. Further, he asserts that the phrase ‘permitted assigns’ is not, and was not intended to be, a defined term in the agreements. He contends that the conduct of the parties is in accordance with the rights and obligations having been assigned from the date of the assignments, including, amongst other things, Kenjad Rentals collecting all rental payments from tenants and arranging for the payment to Anzius and French respectively of all rental payments. He contends that the agreements have therefore been validly assigned and the Anzius and French claims or causes of action are against Kenjad Rentals, not Kenjad.

Adam Landrey also asserts that Anzius and French are in breach of their respective agreements with Kenjad, resulting in liabilities which must be offset against the amounts claimed.

In the Anzius application, Kenjad also contends that Anzius has failed to provide a copy of the contractual documents upon which it relies for its claim, despite requests by Kenjad, but this ground was not pursued in Kenjad’s written or oral submissions.

In the French application, Kenjad contends that the French demand fails to take into account monies that it paid to French which it claims results in an overstatement of the amount claimed by French by $6,000.

The Anzius application

In his 21 day affidavit, in addition to the matters referred to above, Adam Landrey states that in November 2017 he was present at a meeting in Cairns with his father, Geoff Landrey, representing Kenjad and Bernadette Pinnell representing Anzius. Adam Landrey states that he was present at the meeting to assist Geoff Landrey, who was seriously ill at the time and ‘was in need of his assistance for a range of business and personal matters’.[14]
[14]This evidence runs counter to a statement made earlier in his affidavit that Geoff Landrey ‘… has no authority to bind Kenjad’.

Adam Landrey says that the purpose of the meeting was to discuss the amounts that Anzius claimed it was owed by Kenjad Rentals. He states that the result of the meeting was that ‘Kenjad Rentals agreed to pay monies to Anzius on the condition that Anzius complied with its obligations under the lease’. He asserts that ‘Anzius knew during that meeting that the [Anzius agreement] had been assigned from Kenjad Pty Ltd to Kenjad Rentals and that it was Kenjad Rentals that collected rent and was [to] be responsible for making any payment’. He does not elaborate upon his assertion as to how it is said that Anzius knew of the assignment.

As for the offsetting claim, Adam Landrey states that Geoff Landrey informed him that Kenjad Rentals had served Anzius with a ‘Notice to Remedy Breach’ on 1 February 2019. That Notice to Remedy Breach was in Form 11 of the RTRA Act and is signed by Geoff Landrey. The Notice to Remedy Breach details what are said to be breaches by Anzius of ss 88, 89 and 185 of the RTRA Act. These provisions relate to the obligations to keep financial records, to testing of smoke alarms and to keep premises clean and in good repair. Neither Adam Landrey’s affidavit, nor the Notice to Remedy Breach quantify the losses flowing from the alleged breaches or explain how the alleged breaches resulted in loss. Further, I note that there is no supporting evidence of the type that one would expect to see in respect of such allegations such as complaints from Kenjad or the tenant about the condition of the premises, requests for repairs to be carried out or communications about the state of the financial records which are said to be wanting. Adam Landrey contends that Kenjad Rentals was the appropriate party to have served the Notice to Remedy Breach ‘having taken the assignment of the rights and obligations in regard to the property’.

He also asserts that even if Anzius has a claim against Kenjad, ‘it would follow that the breach notice must be issued by [Kenjad] rather than Kenjad Rentals and [Kenjad] would therefore have the significant set‑off claim that flows from the breach notice’. He does not explain how, if the agreements were validly assigned, Kenjad would retain the right of set-off in circumstances where Kenjad has purportedly assigned its rights to Kenjad Rentals under the Anzius agreement, including any rights of redress arising by reason of breaches on Anzius’ part. This feature is of course relevant on the questions of whether such an alleged offsetting claim has the necessary element of mutuality, and whether it is genuine and bona fide or to adopt the expression of McPherson JA in JJMR, ‘… been manufactured or got up simply for the purpose of defeating the demand made against the company’.[15]
[15]JJMR (n 4).

Adam Landrey also asserts that all amounts claimed prior to 30 June 2015 have been paid in full by Kenjad and the Anzius demand incorrectly calculates the amount claimed to be owing to Anzius. His basis for contending this is that the spreadsheet annexed to the Anzius demand does not provide particulars or an explanation as to why certain payments have been appropriated in the manner described in the table. He asserts that Kenjad disputes the quantum contained in the Anzius demand ‘insofar [as] payments concern it (prior to the assignment)’ but does not elaborate as to its alleged deficiencies or contend with supporting evidence what he considers to be the correct quantum.

In submissions made by Kenjad in the Anzius proceeding, it was contended that the Anzius demand should be set aside by reason that Anzius had not complied with the dispute resolution provisions in the Anzius agreement. In paragraph 7 of the 21 day affidavit filed in the Anzius proceeding, Adam Landrey specifically identifies the three grounds upon which Kenjad relies to set aside the statutory demand. They are, first, the ground relating to the alleged assignment by Kenjad to Kenjad Rentals on 31 August 2015, secondly, that Anzius has failed or refused to provide a copy of the contractual documents upon which it relies for its claim, despite the request by Kenjad (which was not pressed) and, thirdly, Anzius being in breach of its agreement with Kenjad,[16] resulting in liabilities which must be set off against any amounts claimed.
[16]The affidavit refers to ‘the defendant’ being in breach of its agreement ‘with the defendant’ which, from its context, is clearly a reference to Anzius being in breach of its agreement with Kenjad.

There is no reference in the 21 day affidavit filed in the Anzius proceeding to the dispute resolution provisions of the Anzius agreement and I do not consider that that issue has been ‘raised’ by available inference. It is not possible for the reader of that affidavit to discern any such ground and any defendant responding to that affidavit would not be alerted to such a ground. I shall deal further with this issue below.

The French application

In his 21 day affidavit filed in the French proceeding, Adam Landrey identifies the three specific grounds upon which Kenjad relies to set aside the French demand. First, the ground arising from the alleged assignment by Kenjad to Kenjad Rentals on 31 August 2015, secondly, the failure to take into account payments made to French in the sum of $6,000, and, thirdly, an allegation that French has breached its agreement with Kenjad[17], resulting in liabilities which must be set off against any amounts claimed. Adam Landrey contends that French has not accounted for a payment of $6,000 made by Kenjad on 11 October 2016.[18] He exhibits a bank statement which purports to prove the $6,000 payment. He also contends that the demand does not provide particulars to how certain payments have been applied by French and disputes such appropriation. The bank statement exhibited is redacted but it can be seen that $6,000 was advanced for ‘Rent 6 Pyrite’. The French agreement requires an annual payment every September of $6,000. It will be seen that the evidence of French is that a payment of $6,000 made by Kenjad on 11 October 2016 was appropriated to discharge the liability for that amount which had accrued in September 2015 for the stand alone payment. Kenjad has not exhibited evidence of a yearly payment in this amount for the September of each year. I am not satisfied that the exhibition of this single payment assists Kenjad in making out the second ground referred to in Adam Landrey’s affidavit.
[17]Again, the affidavit refers to ‘the defendant’ being in breach of its agreement ‘with the defendant’ which, from its context, is clearly a reference to French being in breach of its agreement with Kenjad.
[18]The affidavit employs the word ‘apportionment’ which from the context is a reference to the appropriation of the payment.

Adam Landrey deposes that he is informed by Geoff Landrey that on 19 February 2019 Kenjad Rentals served French with a ‘Notice to Remedy Breach’.[19] Unlike in the Anzius application, the assertions of breach in the French application are not contained in the prescribed form, and instead are contained in a letter on the letterhead of ‘G.V. Landrey BA TC LLB GDLP’, signed by Geoff Landrey and dated 17 February 2019 (‘purported Notice to Remedy Breach’). The letterhead does not identify Geoffrey Landrey as a solicitor as such but states that he is the holder of an LLB and a GDLP.[20] The purported Notice to Remedy Breach is titled ‘Breach of Contract – 6 Pyrite Place Edmonton (“the Property”)’. The purported Notice to Remedy Breach states that the author acts for Kenjad Rentals, makes reference to the French Agreement and asserts that Kenjad assigned the agreement to Kenjad Rentals on 31 August 2015. The purported Notice to Remedy Breach alleges that French has committed multiple breaches of the RTRA Act and identifies the same breaches as those specified in the Notice to Remedy Breach served on Anzius. The breaches of s 88 are said to arise by reason of non-compliance with the requirements to issue receipts and other records. The breach of s 89 is said to arise by reason of failing to keep records and those in respect of s 185 are said to arise from the breach of ‘lessor’s obligations generally’. In the purported Notice to Remedy Breach, Geoff Landrey also alleges that French has breached the Queensland Fire and Emergency Services (Domestic Smoke Alarms) Amendment Act 2016 (Qld) and its predecessor, the Fire and Emergency Services Act (1990), pertaining to the testing of smoke alarms and that ‘as also provided by the Act [French], as owner, [has] not maintained the dwelling nor paid for it’.
[19]The purported Notice to Remedy Breach is exhibited as AOL-4 and AOL-9 to the Adam Landrey affidavits.
[20]I infer he holds a Graduate Diploma of Legal Practice.

There was no further elaboration of the alleged breaches. The letter culminates in an assertion that each of the breaches referred to constitute breaches of the French agreement. On this basis, the purported Notice to Remedy Breach demands ‘liquidated and unliquidated compensation’ as follows:

·For loss of indexed rental income in the sum of $5,545;
·For loss of rent due to reasons attributable to the Owner over the period to January, 2019 in the sum of $8,856;
·For shortfall of rent from Annual Payments due to reasons attributable to the Owner in the sum of $24,000;
·For breach of contract to June 2023 in the sum $9,630.

A table is annexed to the letter in spreadsheet form which purports to explain how there is a loss of indexed rental income in the sum of $5,545, however there is no elaboration as to how the amounts making up the individual components are comprised or calculated in either the letter or Adam Landrey’s affidavit, or how the alleged breaches have caused the losses claimed.

As to the alleged knowledge by French of the assignment of the French agreement, at paragraphs 23 to 26 of his first affidavit, Adam Landrey deposes:

In 2016-2018 Geoff Landrey as authorised agent for [Kenjad], held telephone discussions with [French]. On some occasions I was present so as to assist Geoff Landrey who was seriously ill, particularly during 2017, for a range of business and personal matters.
The purpose of the telephone conversations was to discuss the money [French] claimed was owed by Kenjad Rentals.
The result of the meeting was that Kenjad Rentals agreed to pay monies to French on condition that [French] complied with its obligations under the lease.
[French] knew during the discussions that Kenjad Rentals was responsible for the [French agreement] and that it was Kenjad Rentals that collected rent and was [to] be responsible for making any payment.

The Deeds of Assignment

Central to Kenjad’s case in both applications is the contention that Kenjad assigned its rights and obligations under the French and Anzius agreements. The Deeds of Assignment, both dated 31 August 2015, are exhibited to Adam Landrey’s 21 day affidavits and are in substantially the same form. Clause 5 to each of the Deeds of Assignment, headed ‘the parties agree’, provides as follows:

1.In consideration of $1, the receipt of which is hereby acknowledged, and in consideration of forbearance to sue, the assignor hereby assigns to the assignee all of the assignor’s rights, title and interest to and under the agreement.
2.The assignee hereby assumes all the assignee’s duties and obligations under the agreement.
3.This assignment is binding on the assignor, the assignee and the lessor.
4.The definitions will be as set out in the dictionary of the Act.[21]

[21]‘The Act’ is not defined in the Deeds of Assignment.

Clause 7 of each Deed of Assignment provides:

This deed enures for the benefit of and is binding upon the parties and their heirs, executors, successors and permitted assigns.

Although clause 5 provides that the assignment is binding on the ‘lessor’, i.e. Anzius and French respectively, Anzius and French are not parties to the assignments which purport to respectively assign the Anzius and French agreements and no provision is made in the documents for execution by them. The assignments are executed by Geoff Landrey on behalf of Kenjad and Kenjad Rentals.

The evidence in opposition to the applications
French’s evidence

In his affidavit, Mr French describes the purchase of the property at Edmonton in Queensland as being part of the NRAS scheme. He states that he was advised by a financial advisor that the purchase would provide a long term benefit providing guaranteed rent for 10 years and tax benefits. He states that French has not received any taxation benefits as he has declared all monies earned as income in his personal yearly tax returns.

Initially, a company, Stony Creek Pty Ltd, which was an approved participant in the NRAS, entered into an agreement with French to rent the property for the purposes of then renting it to approved tenants under the NRAS. In April 2014, Geoff Landrey advised Mr French that Stony Creek was ‘no longer operating’. In its stead, in March 2014, Kenjad entered into an agreement with French to rent out the property to approved tenants under the NRAS. Geoff Landrey indicated to him that he would be the main contact for Kenjad as he had been with Stony Creek. He details the significant terms of the French agreement which are mentioned above. Mr French says that he has had no involvement in any tenancy agreement between the approved tenant and Kenjad or with the tenant.

Mr French says from the date of the Stony Creek agreement to the date of the French demand, a total of $102,078.92 has been paid to French. He identifies two bank accounts from which payments were received and states that it was difficult to determine from which entity the payments were from, the payer of account number 333732 being described as ‘Kanjad’ and the other, account number 128594 titled ‘Kenjad’. From May 2017, all payments were from account number 128594 titled ‘Kenjad’.

Mr French states that an amount of $20,913.97 is owing to French. The last payment was received on 18 January 2019 for $1,300, which was for the rent collected for September 2018. Further accounts have accrued each month, from February 2019 to May 2019, at a rate of $1,300 per month, since the filing of the French demand. He states that in addition to the amount claimed in the demand, an amount of $5,200 is owed.

As to the assertion by Adam Landrey that an amount of $6,000 has not been accounted for, Mr French says that a payment in that amount was received in October 2016, however, this was appropriated in discharge of Kenjad’s obligation to pay a stand‑alone payment of $6,000 payable on 30 September 2015 under clause 3 of the French agreement. The amount claimed in the French demand relates to a stand-alone payment which was due in September 2016.

Mr French says that he was not aware of nor was he provided with a copy of the Deed of Assignment of August 2015 referred to by Adam Landrey in his affidavit. He states that he was never advised in writing or verbally about the assignment. The telephone communications were limited and he only had a handful of conversations with Geoff Landrey and one conversation with Adam Landrey when Geoff Landrey was unwell. He understood that Adam Landrey was Geoff Landrey’s son.

He states that although the Deed of Assignment is dated 31 August 2015, he received rental statements from Kenjad Rentals as early as 13 August 2013. At the time, the use of the name Kenjad Rentals did not raise a concern, as he did not discern that there was a difference. His understanding was that the agreement was with Kenjad. He exhibits a copy of a document on Kenjad Rentals letterhead that contained a rental statement for the period July 2012 to June 2013, and July 2013 to June 2014, prior to the date of the purported Deed of Assignment. Mr French states that since the date of the purported assignment, the two names have been used interchangeably. He exhibits a letter on Kenjad letterhead of 6 November 2017 enclosing a tax offset certificate signed by Adam Landrey as ‘Sole director, Kenjad Pty Ltd’.

Mr French deposes that he was never requested to consent to the assignment, nor did he provide consent.

With respect to the alleged offsetting claim, Mr French states that at no time prior to 17 February 2019 (when Kenjad Rentals’ purported Notice to Remedy Breach was issued) were the alleged breaches brought to his attention. Mr French states that he understood that Geoff Landrey was the managing agent and he would arrange for any necessary repairs and then invoice him. He is not aware of the amount, if any, that would create a set‑off claim. Beyond the assertions set out in the purported Notice to Remedy Breach, Kenjad has not particularised to French what the alleged set‑off is comprised of.

Anzius’ evidence

In his affidavit, Mr Pinnell states that Anzius purchased the property at Mallory Close, Edmonton, Queensland, on 21 October 2011 with a view to participating in the NRAS.

On 27 July 2011, Stony Creek Pty Ltd entered into a Deed of Agreement with Anzius to rent the property to tenants who were approved under the NRAS.

On 1 March 2014, because Stony Creek had apparently entered into external administration, Kenjad, which was an approved participant in the NRAS, entered into the Anzius agreement to rent out the property.

Mr Pinnell states that he had no involvement in the arrangement between Kenjad and the tenant of the property. He describes the terms of the Anzius agreement as to Kenjad’s payment obligations which are set out in paragraph 16 above.

Mr Pinnell deposes that in the period 1 March 2014 to the date of the Anzius demand, Kenjad has paid a total of $20,431.00 to Anzius under the Anzius agreement. An amount of $39,814.80 remains owing and Kenjad has ceased making payments to Anzius. The last payment was made in January 2019 for an amount of $1,300. Further amounts in the sum of $5,200 have accrued since service of the Anzius demand. Mr Pinnell exhibits bank statements of Anzius for the period May 2014 to June 2015 which detail the payments which have been made in respect of the property.

Mr Pinnell states that he was not provided with a copy of the assignment, nor was he made aware of it until receipt of correspondence from Geoff Landrey on behalf of Kenjad Pty Ltd dated 31 January 2019 and received on 1 February 2019.[22] This correspondence, which is titled ‘Breach of Contract – 15 Mallory Close Edmonton (“the Property”)’ is in response to a breach notice that was issued by Anzius to Kenjad.
[22]Exhibit ‘MCP-4’. The letter is written in response to Anzius’ breach notice to Kenjad.

Mr Pinnell states that at no point prior to this were he or his wife, Bernadette Pinnell, advised verbally or in writing that the Anzius agreement had been assigned to Kenjad Rentals and that payment would be made by Kenjad Rentals. Correspondence continued to be received on Kenjad letterhead after the date of the alleged assignment. He states that he did not consent to an assignment of the Anzius agreement.

The letter from Geoff Landrey to Anzius of 31 January 2019 was not referred to or exhibited by Kenjad in its 21 day affidavit, rather it was exhibited to Mr Pinnell’s affidavit. The letter asserts losses including ‘loss of rent due to reasons attributable to the Owner’ in the sum of $6,400 and ‘loss of indexed rental income’ in the sum of $7,424. These losses were not ‘raised’ by Kenjad in its 21 day affidavit in the Anzius proceeding and in any event there has been no particularisation or substantiation of how the alleged losses are comprised to the required standard.

Bernadette Pinnell, the wife of Michael Pinnell, deposed in her affidavit of 5 July 2019 that at no time during the meeting held in November 2017[23] was there any discussion concerning an assignment of the Anzius agreement from Kenjad to Kenjad Rentals. She states that the discussion was with respect to the ongoing delays in the payments from Kenjad, despite repeated assurances that payment would be made. She confirms her husband’s evidence that they were not made aware of the purported assignment until they received the letter dated 31 January 2019 from Geoff Landrey who indicated that he acted for Kenjad Pty Ltd.
[23]In her supplementary affidavit, Bernadette Pinnell states that after reviewing correspondence between the parties she believes that the meeting in fact occurred on 18 August 2017 by reason of Adam Landrey referring in his letter dated 18 August 2017 to ‘our meeting today’ – see exhibit BMP-4 to Bernadette Pinnell’s subsequent affidavit.

Bernadette Pinnell states that following the date of the purported assignment, the two names, Kenjad and Kenjad Rentals, have been used interchangeably in communications to Anzius. In this regard, on 18 August 2017, correspondence was received on Kenjad letterhead indicating that ‘full payment of rents from Kenjad Pty Ltd will be payable on the first Friday of each month from November 1^st 2017’. I note that the letter was signed by Adam Landrey above the words ‘Adam Landrey, director of Kenjad Pty Ltd, Approved NRAS participant’. I note Adam Landrey again wrote to the Pinnell’s on Kenjad Pty Ltd letterhead on 30 November 2017 noting the availability of two RTO certificates and signing off in the capacity of sole director of Kenjad Pty Ltd. When being notified of the 2018 RTO certificate, correspondence dated 30 October 2018 was also sent on Kenjad Pty Ltd letterhead and signed by Mr Landrey in his capacity of director of Kenjad Pty Ltd.

Bernadette Pinnell states that since the date of the alleged assignment on 31 August 2015, Anzius has received payments from a party identified as ‘Kanjad’ from an account number 333732. Payments were received from this payer prior to 31 August 2015. Bernadette Pinnell exhibited the bank statements of Anzius for the period August 2015 to February 2019 in support of this.

Kenjad’s evidence in reply

In his affidavit in reply in the French proceeding, Adam Landrey exhibits an ASIC extract of the registered business name of Kenjad Rentals. The extract records that the name was initially registered on 17 August 2013 and that the business name holder is registered in the name of Geoffrey Vance Landrey.

Adam Landrey states that Kenjad is the ‘approved participant’ under the NRAS and has approximately 70 residential properties registered under the NRAS. As an approved participant, Kenjad is entitled to receive payment for an amount of rental for each property registered under the NRAS from the Commonwealth. The payments are indexed and, as of the financial year 2018-9, amount to $8,394.10 per property per annum. The payments are made in the form of an RTO certificate. He states that only an ‘Approved Participant’ is entitled to pass on RTO certificates to investors other than the Approved Participant. Adam Landrey states that he is aware of certain individuals and entities who have claimed RTO certificates in their income tax returns, with several sometimes being claimed in the single return.

Adam Landrey asserts that it is a term of the deed of assignment that Kenjad Rentals receives the benefit and obligations of the agreement, including all RTO certificates from Kenjad. Under the assignment and consistent with the relevant regulations, Kenjad Rentals has directed Kenjad, as the approved participant, to pass the RTO certificates to French in certain circumstances, such as making payments to French.

As to the evidence in his earlier affidavit concerning the knowledge of French of the assignments, Adam Landrey states that he was present when there was a telephone conversation between Geoff Landrey and Mr French in late 2017. He states that he heard Geoff Landrey say to Mr French words to the effect that Kenjad Rentals ‘was already collecting rent from his property and would pay the agreed monthly rental to him’. Adam Landrey states that he heard Geoff Landrey explain what an RTO certificate was and how it was a form of payment. Mr French was then asked whether it mattered to Mr French whether he received ‘incentives’ in lieu of cash rental. He states that he heard Mr French saying words to the effect that he agreed to accept the RTO certificates. He states that consistent with this, Kenjad Rentals (i.e. Geoff Landrey) directed Kenjad to provide an RTO certificate which it had accrued in the financial year ended 30 June 2017 in lieu of rental due to French. The RTO certificate was in the sum of $8,286.66 which has been accounted for by French.

Adam Landrey then states that French has not abided by the dispute resolution procedures in the French agreement. He contends that French has sought to frustrate the dispute resolution procedure by the use of a statutory demand.

As I have mentioned, this ground was not raised, expressly or by available inference, in Adam Landrey’s 21 day affidavit and in my view cannot, as a matter of jurisdiction on an application of the Graywinter principle, now be raised. For completeness, I will discuss this ground in any event later in these reasons.

Adam Landrey contended that because French was in breach of the lease, Kenjad was unable to increase the rent for the property, resulting in loss to it. He states that the breaches included the failure to service smoke alarms, failure to clean gutters and failure to maintain the property. He does not present any evidence in support of such allegations (or indeed demonstrate that it was French’s responsibility to conduct such maintenance rather than Kenjad, which was leasing the property to subtenants). He asserted that the amount of the loss was claimed in the purported Notice to Remedy Breach[24] and must be ‘set off’. He asserted that Kenjad Rentals was the appropriate party to serve the purported Notice to Remedy Breach by reason of the assignments. He stated that ‘no objection was made by [French] at the time in relation to Rentals serving the breach notice’. He does not explain how such loss, which is said to be suffered by Kenjad Rentals, could be set off against an obligation of Kenjad to French or how, given the nature of such alleged breaches, they would result in a loss to Kenjad.
[24]As stated above, the purported Notice to Remedy Breach which is exhibited in the French proceeding (see AOL-9 to Adam Landrey’s second affidavit) is a letter which purports to be a Notice to Remedy Breach.

Adam Landrey repeats his assertion that Kenjad, at the direction of Kenjad Rentals, paid $6,000 in tax free incentives to French which has not been accounted for and should be set off against French’s demand, however he does not respond to Mr French’s evidence that that amount was appropriated to discharge the liability for the stand alone payment due in September 2015 and I find that the balance of the evidence is such that the payment of $6,000 in September 2016 was in respect of the payment due in September 2015 and that the payment for September 2016 remains unpaid and owing.

Further, Adam Landrey contends that Kenjad is entitled to annual incentives for its participation in the NRAS, however, if an owner/investor is in breach of the NRAS Act or Regulations, Kenjad loses this entitlement despite French being the alleged cause of the breach. He asserts that Kenjad has lost the sum of $47,200 for the period 1 May 2020 until 13 June 2023, the end date of the French agreement. The purported Notice to Remedy Breach identifies the loss as being $24,000 and Adam Landrey contends the loss and damage continues to accrue. I pause to observe that there is no evidence, as one would expect there to be, to demonstrate that the government authority which administers the NRAS has indicated that such entitlements have been withdrawn or affected as Kenjad contends.

Adam Landrey contends that the amount of the claim made by French is overstated. This assertion is based on the French agreement providing for a monthly rental of $1,300 plus a one‑off annual payment of $6,000, resulting in an annual obligation to pay $21,600. In a spreadsheet exhibited to the affidavit, he shows amounts paid for rental by way of RTO certificates, and maintenance expenses incurred by Kenjad Rentals, yielding a balance owing by Kenjad Rentals of $647.27.

Adam Landrey concludes by stating that French served a Notice to Leave upon Kenjad, dated 28 February 2019, and that French re‑entered possession of the property and terminated the lease. He asserts that French has no right to claim payments of rent after the date of termination which he contends wrongfully ended Kenjad’s occupation of the property and deprived Kenjad of the right to collect income and incentives from the NRAS for the balance of the term.

In his affidavit in reply filed in the Anzius proceeding, Adam Landrey deposes in very similar terms to the matters he deposed to in the French application in relation to the alleged assignment to Kenjad Rentals and I do not consider it necessary to repeat that evidence here.

In reference to his evidence in his first affidavit concerning Anzius’ knowledge of the assignment to Kenjad Rentals, Adam Landrey elaborates upon the meeting that he says took place in November 2017 which he attended with Geoff Landrey and Bernadette Pinnell. He deposes that he heard Geoff Landrey say to Bernadette Pinnell words to the effect that Kenjad Rentals ‘was already collecting rent from her property and would pay the agreed monthly rental to her’. He heard Geoff Landrey ask whether it mattered to Bernadette Pinnell whether she received incentives in lieu of cash rental to which Bernadette Pinnell responded, ‘that it did not matter to her’. He states that Kenjad Rentals directed Kenjad to provide two RTO certificates which it had accrued for 2017 in lieu of rental due to Anzius, totalling $16,572.06 and Anzius has accounted for it in its claim and applied such certificates in its income tax return.

Adam Landrey then contends, as he did in the French proceeding, that Anzius is in breach of the dispute resolution provisions of the Anzius agreement. Again, this issue was not raised in Adam Landrey’s 21 day affidavit filed in the Anzius proceeding nor do I consider that it is available by inference. As has been mentioned, paragraph 7 of Adam Landrey’s 21 day affidavit very specifically identifies the grounds upon which it relies to set aside the Anzius demand. On an application of the Graywinter principle, as a matter of jurisdiction it is not permissible for it now to be raised.

Adam Landrey refers to the Notice to Remedy Breach which was served on Anzius on 1 February 2019. In his affidavit he asserts that Kenjad has suffered various categories of loss but those losses are not quantified, either in the notice itself or in the affidavit[25] as they are required to be if they are to constitute an offsetting claim.[26] The Notice to Remedy Breach is in Form 11 to the RTRA Act and merely identifies various sections of legislation which are said to have been breached. There is no elaboration as to the quantum of any loss which is said to flow from such breaches and given their nature, it is difficult to perceive how such breaches would result in loss to Kenjad. Adam Landrey repeats the assertion made in his affidavit in reply to the French proceeding that Kenjad Rentals was the appropriate party to serve the Notice to Remedy Breach, having taken an assignment of the rights and obligations under the Anzius agreement. He does not explain how Kenjad can have an offsetting claim if it had assigned its rights under the Anzius agreement, elaborate on why he contends that such a claim survives the alleged assignment or on how such a claim has the necessary element of mutuality so as to constitute an offsetting claim under s 459H of the Act.
[25]Despite a statement in paragraph 24 of the second Adam Landrey affidavit to the effect that the amount of loss is set out, it does not appear so on the face of the Notice to Remedy Breach.
[26]Sewmail (Australia)Pty Ltd v Booby Traps Pty Ltd (1997) 23 ACSR 339, 343.

Adam Landrey contends that in October 2018, Kenjad, at the direction of Kenjad Rentals, sent three RTO certificates to a total alleged value of $25,007.25 to Anzius. He asserts those RTO certificates should be applied as an offset against Anzius’ claim. No such offsetting claims were raised in Adam Landrey’s first affidavit in the Anzius proceeding, nor are they available by inference and in my opinion cannot, on an application of the Graywinter principle, now be raised. Paragraph 7(c) of his 21 day affidavit states in very general terms that Anzius has committed certain unspecified breaches giving rise to an offsetting claim but Kenjad did not describe or outline any claim arising from failure to account for RTO certificates. Similarly, Adam Landrey contends that Kenjad is entitled to certain annual incentives by reason of its participation in the NRAS which are lost if the owner/investor is in breach of the NRAS or regulations, or the RTRA Act. It contends that the loss and damage relating to the annual incentives were specified to be in the sum of $18,000 in the claim for compensation in the Notice to Remedy Breach. However, the Notice to Remedy Breach contains no particulars of loss of the type he contends for and merely asserts alleged breaches of various statutory provisions without substantiating any consequent alleged loss or how such loss would be suffered by Kenjad given their nature.

Bernadette Pinnell’s affidavit of 7 August 2019

In her supplementary affidavit of 7 August 2019 filed in the Anzius proceeding, Bernadette Pinnell elaborates on her previous affidavit relating to the alleged meeting said to have been held in around November 2017 and the purported conversations which are said to have taken place. She refers to Adam Landrey’s affidavit in reply of 31 July 2019, in particular his evidence concerning the meeting in November 2017. As stated above, Bernadette Pinnell subsequently deposed that the meeting in fact took place on 18 August 2017. She states that she attended the property in Cairns and met with Geoff Landrey before visiting the property with Adam Landrey on that day. She states that at no point during the conversation with Geoff Landrey on 18 August 2017 did she agree that Anzius would accept incentives in lieu of cash rentals. She says this is clearly evident from the letter that she received from Adam Landrey on 18 August 2017 following the meeting, confirming the terms agreed upon. The letter (on Kenjad letterhead) states:

Following our meeting today here are the terms that we agreed: Provision of two refundable tax certificates to the value of A$16,572.06
Full repayment of balance of arrears by 18^th October 2017, plus any other monies owed up to this date.
Full payment of rents from Kenjad Pty Ltd will be payable on the first Friday of each month from November 1^st 2017.

Bernadette Pinnell refers to the terms of the Anzius agreement which provides that $1,300 per month would be paid to Anzius ‘from the last day of the money [sic] commencing from 31 March 2014’ and a lump sum tax free payment of $6,000 per annum, described as the incentive, would be paid in September for each full year, starting from the date of the Anzius agreement. When the rental period was not a full year, the agreement provided that the payment would be calculated as a portion of $6,000 pro rata to the number of days the property was rented in that particular year.

Bernadette Pinnell states that since the meeting in or around November 2017,[27] Geoff Landrey committed to paying rent in two separate emails. On 6 March 2018, Bernadette Pinnell wrote to Geoff Landrey stating ’When can we expect payment of outstanding monies and regular monthly payment of rent’. In an email dated 7 March 2018 from Geoff Landrey to Bernadette Pinnell, he stated ‘The rent will be there this month Bernadette. The other will take longer of course’. In an email dated 30 October 2018 from Geoff Landrey to her, Adam Landrey stated, ‘As discussed, rent will follow shortly’. These promises to pay were made in 2018 in circumstances where Kenjad later contended by correspondence dated 31 January 2019 that it had offsetting claims dating back to August 2015. In the 2018 emails in which the promises to pay were made, there was no mention of the alleged offsetting claims which were described in Geoff Landrey’s letter of 31 January 2019. Those claims were described as being for loss of rent “due to reasons attributable to the Owner over the period to 30 August 2015 in the sum of $6,400 and for loss of indexed rental income of $7,424.” That is to say the offsetting claims alleged must have been known to Kenjad at the time it made the promises to pay (having been said in the letter dated 31 January 2019 that the alleged losses extended back to August 2015) yet they were not mentioned in the 2018 emails.
[27]See footnote 23.

Similarly, as will be seen from the letter from Kenjad of 18 August 2017 referred to in paragraph 80, Adam Landrey informed Bernadette Pinnell that two RTO certificates were available and made a promise to pay including payment of rental arrears without reference to any outstanding claims which were said to date back to 2015. As to the two RTO certificates, Bernadette Pinnell deposes that she and her husband were not aware at that time that each property was only entitled to one RTO certificate allocated to it. They provided the certificates to their accountant who included both of them in their 2016/2017 tax return. On 30 November 2017, Adam Landrey informed Bernadette Pinnell and her husband by letter, that a further two RTO certificates were available. On 4 December 2017, the Pinnell’s accountant, Mr Barker, advised them that they were unable to utilise the RTOs referenced above as they did not relate to their property. Mr Barker had made enquiries and was informed that only RTO certificates labelled ‘1BHA-348’ could be utilised in relation to their property. Geoff Landrey responded by email the same day stating ‘That opinion [of Mr Barker, the accountant] is not correct. Accordingly however, I will now have to redeem them myself and remit those funds to you’.

Bernadette Pinnell states that the position of their accountant is in conformity with the policy of the scheme which provides that one Australian Government contribution in the form of one RTO certificate is provided per dwelling, per year.

She states that in response to Adam Landrey’s affidavit of 31 July 2019 that she and her husband were not provided with three RTO certificates, rather, they were provided with one RTO certificate under cover of a letter dated 30 October 2018 which is being considered by their accountant for the 2018/19 tax return.

Consideration

In his submissions filed in support of both applications, Mr Andreou, who was engaged as counsel on behalf of Kenjad for the second day of the hearing of this matter, contended that the Anzius demand and French demand should be set aside on a number of bases.

The first of these is that relating to the alleged non‑compliance by Anzius and French with the mandatory dispute resolution clauses of the respective agreements. As I have observed above, although there is reference in Adam Landrey’s second affidavits[28] to the dispute resolution clauses, there was no mention in either application of this ground in the 21 day affidavits of Adam Landrey where he expressly identifies the grounds relied upon[29], nor do I consider that on an application of the Graywinter principle was it raised by available inference. In this regard, I do not consider that the mention of the dispute resolution provisions in the purported Notice to Remedy Breach exhibited to the 21 day affidavit in the French application suffices to ‘raise’ it as a ground to set aside the French demand, particularly in the context of the 21 day affidavit specifically and expressly identifying the three grounds relied upon.
[28]Paragraphs 19 and 20 of the second affidavit of Adam Landrey in the Anzius proceeding, paragraphs 14 and 15 of the second affidavit of Adam Landrey in the French proceeding.
[29]See paragraphs 6 and 7 of Adam Landrey’s 21 day affidavits in the French and Anzius applications respectively.

In Saferack Pty Ltd v Marketing Heads Australia Pty Ltd Barrett J considered that a ground is ‘raised’ if the ground is evident from the supporting affidavit even if only because it can be discerned from some annexed documents, the content of which ‘reveals’ it.[30] The mere exhibition of the agreements to the 21 day affidavits does not in my view enable the alleged breaches of the dispute resolution clauses to be the subject of alleged disputes in these applications. It is not possible in my opinion for the reader to ‘discern’ that such a ground is being raised or being revealed by either of the 21 day affidavits filed in the applications.[31]
[30][2007] NSWSC 1143, [25].
[31]See Farid Assaf, Statutory Demands and Winding Up In Insolvency (LexisNexis Butterworths Australia, 2^nd ed, 2012), [4.38]-[4.40], [5.47]-[5.56].

The case law on the application of the Graywinter principle is not consistent in approach and there has emerged what might be described as a strict and narrow approach on the one hand and a liberal application of the principle on the other. If I am not correct in my application of the principle in this instance, I shall for completeness deal with Mr Andreou’s submission in respect of the dispute resolution clauses. Reference was made by him to the decision of Palmer J in Arris Investments Pty Ltd v Fahd & Ors[32] where the agreement the subject of the application contained a dispute resolution clause whereby any dispute be referred to mediation or if mediation failed, arbitration. Palmer J considered that the existence of a mediation/arbitration clause in the agreement was of considerable significance in the exercise of discretion under s 459J(1)(b) to set aside the demand for ‘some other reason’. Palmer J stated:[33]

I agree that the existence of a mediation or arbitration clause in an agreement between parties will not automatically preclude one of them from serving a Statutory Demand on the other for a debt said to arise under the agreement. This is so because the Court retains its discretion under s 459J(1)(b) as to what significance to attach to such a contractual term in the circumstances of the case. A dispute between the parties might have to be resolved by compulsory arbitration before one party can enforce the result by judgment against the other, but the Court may see the position taken by one of the disputants is so transparently untenable that it can conclude for the purposes of s 459J(1)(b) that that party is invoking the arbitration clause in bad faith. Again, the Court might give no discretionary weight under s 459J(1)(b) to a compulsory arbitration clause where a plaintiff seeking to set aside the Statutory Demand has continually frustrated the endeavours of the defendant to have the dispute resolved in accordance with the arbitration clause.
However, where a dispute is not resolvable by the Court virtually at a glance because the position taken by one of them is transparently untenable, or where there is no conduct making it unconscionable for one party to invoke an arbitration clause, then an express agreement that the parties’ disputes must be determined by arbitration rather than by any other form of litigious proceeding should carry great discretionary weight in considering whether a Statutory Demand should be set aside under s 459J(1)(b).

[32][2010] NSWSC 309.

[33]Ibid [18]-[19].

If the argument concerning non‑compliance with the dispute resolution clauses were available to Kenjad by express or available inference in these applications, I would not in any event set aside the statutory demands for ‘some other reason’ under s 459J(1)(b). In order for the operation of the clauses to be attracted, it is implicit that for the dispute resolution mechanism to come into play there must be a bona fide dispute in truth and in fact. By reason of my consideration of the evidence in these applications I do not consider that the matters sought to be agitated by Kenjad in the dispute resolution process can, when assessed objectively, give rise to genuine disputes or claims. Rather, I have come to the conclusion that the alleged disputes and claims which Kenjad asserts (and which would be the subject of any reference to dispute resolution) are not bona fide or tenable, and are not a basis for requiring Anzius or French to participate in the dispute resolution regime in the agreements.[34]
[34]Farid Assaf, Statutory Demands and Winding Up In Insolvency (LexisNexis Butterworths Australia, 2^nd ed, 2012) [5.34].

In regard to the Anzius proceeding, if one attempts to discern what the ‘dispute’ the subject of dispute resolution procedures would be, one goes to the Notice to Remedy Breach said to have been served on Anzius, which merely identifies breaches of several sections of the RTRA Act but does not substantiate or quantify the losses which are said to flow from such alleged breaches. In the French application, the figures for loss are asserted in the purported Notice to Remedy Breach but again there is no substantiation of such losses in my view to the required standard and I refer to my observations at paragraph 39 in that regard. It is also to be remembered that Kenjad’s case is that its rights under the agreements had in any event been assigned to Kenjad Rentals but that Kenjad had somehow retained the set off rights. To my mind the position that Kenjad contends for has all the features of an argument which has been ‘manufactured or got up simply for the purpose of defeating the demand ....’.[35]
[35]JJMR (n 4).

Kenjad’s submissions then move to the subject of the purported assignments of the agreements. In succinct terms, the Court is asked to accept that there have been valid assignments to Kenjad Rentals despite Anzius and French having not been made aware of their existence, much less consented to them. I cannot accept that contention. It amounts to a submission that a party with obligations under a contract can, without the knowledge or consent of the party which has the benefit of enforcing those obligations, assign the burden of such contract to a third party. That is to say, any party facing onerous liabilities under a contractual obligation can, at its whim, and without the consent or knowledge of the other party, shed itself of that liability, and put itself beyond reach of enforcement of that obligation. Further, the conduct of Kenjad (and Kenjad Rentals) is inconsistent with there having been assignments of the French and Anzius agreements, exemplified by the fact that correspondence continued to be generated by Kenjad well after the date of the purported assignments.

In this regard, the evidence of Anzius is that it was not made aware of the purported assignment of the Anzius agreement until about 1 February 2019 nor was it ever provided with a copy of the Deed of Assignment. Anzius notes that Kenjad Rentals is a business name owned by Geoff Landrey and that it is not an NRAS approved participant so it would not be entitled to be involved in an arrangement under the NRAS. Anzius’ evidence is that, from the date of the alleged assignment, payments continued to be made by Kenjad and not Kenjad Rentals. In addition, correspondence confirming payments was sent by Kenjad to Anzius well after the purported assignment and at no stage did Anzius consent to the assignment. In this regard, on or about 1 February 2019, Kenjad issued a Notice to Remedy Breach under the RTRA Act to Anzius.

Likewise, French submits that Kenjad has produced no evidence to contradict French’s evidence that Kenjad has acted inconsistently with the existence of any purported assignment of the French agreement by:

i. failing to seek French’s consent to the assignment, or advise it of the assignment at all;

ii. making payments pursuant to the French agreement before and after the time the alleged assignment is said to have occurred; and

iii. issuing correspondence on its letterhead in respect of the French agreement after the date the alleged assignment is said to have occurred.

I do not consider that the contentions of Kenjad that there is a genuine dispute based on the assertions that, by reason of the purported assignments, it is not the contracting party and therefore not liable to French and Anzius. Kenjad, which bears the onus of establishing the existence of such disputes to the requisite standard has not in my view overcome the evidence put on by French and Anzius of its conduct before and after the date of the purported assignments which to my mind is completely inconsistent with any purported assignment of the agreements. In particular, this is exemplified by Kenjad:

(i) making payments pursuant to the agreements before and after the time that the alleged assignment; and

(ii) promising that it would make payments to Anzius pursuant to the agreement after the time the alleged assignment occurred; and

(iii) writing to both Anzius and French on Kenjad letterhead after the purported assignment.

Further, I do not accept Kenjad’s submission that Kenjad Rentals was a ‘permitted assign’ under the agreements. I consider that when that expression is properly construed in context, it clearly means an assignee of whom the lessor (i.e Anzius and French) approves. I agree with Anzius and French’s submissions that the agreements do not provide a ‘written acknowledgement and agreement … that Kenjad was entitled to assign its rights and obligations under the deed’. In this regard, Kenjad relied on clause 15 which states: ‘This deed enures for the benefit of … permitted assigns.’ Anzius and French submit that Kenjad has misconstrued the meaning and effect of clause 15 as ‘permitted assigns’ would only include assignees which the other party has provided permission for the assignor’s rights and obligations to be assigned after having assessed its suitability to be an assignee. Anzius and French contend that the assignments would only be valid if Anzius and French consented to the assignments, which has not occurred. Anzius and French cited Linden Gardens Trust Limited v Lenesta Sludge Disposals Limited,[36] where Lord Browne-Wilkinson made the succinct observation that ’the burden of a contract can never be assigned without the consent of the other party to the contract in which event such consent will give rise to a novation’.
[36](1994) 1 AC 85 at [103].

Mr Andreou contended that in the alternative the assignments amounted to equitable assignments upon which Kenjad is entitled to rely. In this regard he referred to the decision of Santow J in Molina v Leask[37] where it was stated:

An assignment for value which is not a legal assignment will nevertheless be upheld as an assignment in equity where there is either written evidence or part performance of that assignment: Ferguson v Hullock (1995) VLR 202; Colman v Golder (1957) VR 19; Walsh v Lonsdale (1882) 21 Ch D 9. Here there is both written evidence of the agreement by way of a contract for sale … and part performance. [The equitable assignee] took possession of the premises and paid some rent. He also attempted to negotiate with [the landlord’s agents] about changes to the rent, behaving as a tenant in this capacity. He was aware at the time he signed the contract that it included a transfer of the existing lease. Where an assignment has been effected in equity – as is clearly the case here – the parties should be in the same position as if there had been a legal transfer of the lease.

[37](1998) ANZ Conv R 361; BC9800182 at 6-7.

The facts of Molina v Leask are complex and I will not recite them here save for the salient facts. A business had been sold in a shopping complex owned by GIO. An agreement for the sale of the business was prepared and exchanged between the vendor and the purchaser. A deed of assignment of lease was also prepared by the solicitors acting for GIO naming all the relevant parties (the lessor [GIO] and the vendor and purchaser of the business) and forwarded to the vendor’s solicitors. Settlement of the sale of the business occurred but the deed of assignment was not delivered at settlement. The purchaser then exhibited the behaviour of a tenant by taking possession of the premises, paying some rent, and attempting to negotiate with GIO about reducing the rent. It was in this context that Santow J considered that there had been an effective assignment in equity to the purchaser of the business by reference, inter alia to his conduct.

In my view, the scenario involving the purported assignments here does not have any of the features of an effective assignment in equity to Kenjad Rentals. Unlike the position in Molina where the purchaser had paid rent to the landlord, negotiated with the landlord concerning rent and was aware of the terms of the assignment documentation, Anzius’ and French’s representatives had not sighted the assignments and there is no conduct on the part of Anzius and French consistent with or referable to their assent to the assignments. I do not consider that the Anzius and French assignments could in the present context, constitute ‘written evidence’ so as to bind Anzius and French in equity to the assignments. My view in that regard is fortified by the evidence of the conduct which has been described of both Kenjad and Kenjad Rentals subsequent to when the alleged assignments are said to have taken effect.

In my view, it could not be said that there is evidence of relevant part performance on the part of Anzius and French which is referrable to the existence of effective assignments. The evidence is clear that the names Kenjad and Kenjad Rentals were used interchangeably in the communications and dealings with Anzius’ and French’s representatives. The evidence of Anzius and French is in my view much more plausible than that of Kenjad on the issue of when Anzius and French were first made aware of the purported assignments. The evidence in the Anzius application is that it first became aware of the purported assignment by correspondence sent to it by Geoff Landrey on 31 January 2019. In her first affidavit, Bernadette Pinnell deposes that at no time during a meeting between herself and Adam and Geoff Landrey held in 2017 was there any discussion concerning an assignment of the Anzius agreement from Kenjad to Kenjad Rentals. This is in the context of the fact that following the date of the purported assignment, the names Kenjad and Kenjad Rentals were used interchangeably in correspondence. On 18 August 2017, correspondence was received on Kenjad letterhead indicating that payment of rent would be payable by Kenjad on the first Friday of each month from 1 November 2017. Correspondence dated 30 October 2018 was also received on Kenjad letterhead. Anzius then received payments from a party identified as ‘Kanjad’ from an account number 333732. The occasional use of a different business name, especially one which is so similar, does not in my view demonstrate to any degree that Anzius was aware of (or should have been aware of) the assignment or had assented to it and conducted itself in such a way as to constitute part performance on Anzius’ part of the purported assignment.

In the French application, Mr French identifies two bank accounts from which payments were received, the payer of account number 333732 being described as ‘Kanjad’ and the other, account number 128594 titled ‘Kenjad’. From May 2017, all payments were from account number 128594 titled ‘Kenjad’. Mr French also states that despite the purported assignment being executed on 31 August 2015, he received rental statements from Kenjad Rentals as early as 13 August 2013 but was not concerned as he did not discern that there was a difference between Kenjad and Kenjad Rentals. Mr French also exhibits a letter on Kenjad letterhead of 6 November 2017 enclosing a tax offset certificate signed by Adam Landrey as ‘Sole director, Kenjad Pty Ltd’.

I reject Kenjad’s submissions in respect of there having been valid assignments in equity of the respective leases.

I now move to the alleged offsetting claims. Anzius and French submit that the set‑off claims by Kenjad cannot be maintained. Anzius and French contend that Kenjad has not produced evidence to substantiate to the required standard the assertions, in the Notice to Remedy Breach in the Anzius application, or the purported Notice to Remedy Breach in the French application, that (a) Anzius or French have respectively breached the agreements in any way, or that (b) Kenjad has suffered any loss or damage as a result of any alleged breach of the agreements by Anzius or French which would constitute offsetting claims. I accept that submission. Kenjad’s claim that it has significant set‑offs against Anzius and French cannot be maintained as Kenjad has not provided sufficient particulars and evidence in support of its assertion of how the set‑off claims are made up or calculated. Moreover I am not persuaded that the claims are at all bona fide. Kenjad made payments of rent to Anzius and French as late as January 2019, shortly before it contended it had offsetting claims extending back several years. Similarly in October 2018 Kenjad had offered RTO certificates to Anzius at a time when it later contended it had suffered losses going back to August 2015 as a result of breaches by Anzius.

Because of the conclusions that I have reached in respect of the efficacy of the purported assignments I do not consider it necessary to determine whether the RTRA Act has any application in these circumstances.

Anzius and French conclude with the general submission that the Court ought to view Kenjad’s assertions as to the existence of the disputes and claims the subject of its submissions as spurious and should not be accepted. I agree with that submission. Kenjad’s contention that it was able to absolve itself of liability under the Anzius and French agreements by adopting the device of the purported assignments to which neither French nor Anzius were party, and yet contend that it retained the rights to raise the offsetting claims, is to my mind audacious and is not tenable. I find the alleged offsetting claims (which could not survive the purported assignments in any event) to be unsupported and have to my mind all the features of being artificial and contrived for the purpose of confronting the two demands. The elaborate legal labyrinth which has been constructed by Kenjad does not, in my view, bear scrutiny.

Conclusion

I will order that both proceedings be dismissed. As to costs, my provisional view is that Kenjad is to pay Anzius’ and French’s costs of the proceedings including any reserved costs but I will ask the parties to submit any written submissions (not exceeding three pages) which they wish to make in respect of costs by email to my associate within 7 days of this date. I will then make a separate order as to costs on the papers at a later date.

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Citations

Kenjad Pty Ltd v Anzius Holdings Pty Ltd; Kenjad Pty Ltd v French Family Holdings Pty Ltd [2020] VSC 295

Most Recent Citation

Re Wallace Building Systems Pty Ltd [2024] VSC 767

Cases Citing This Decision

2

Kenjad Pty Ltd (ACN 131 282 721) v Anzius Holdings Pty Ltd (ACN 150 495 622) , , Kenjad Pty Ltd (ACN 131 282 721) and French Family Holdings Pty Ltd (ACN 156 204 330) [2020] VSCA 255

Re Wallace Building Systems Pty Ltd [2024] VSC 767

Cases Cited

4

Statutory Material Cited

0

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

Pacific Islands Express Pty Ltd v Empire Building Development Pty Ltd [2008] NSWSC 576

Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743

[2020] VSC 295

27 May 2020