Re Biznerve Consulting and Accounting Pty Ltd

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST

S ECI 2023 00658

IN THE MATTER of BIZNERVE CONSULTING AND ACCOUNTING PTY LTD
(ACN 605 065 030)

BETWEEN:

BIZNERVE CONSULTING AND ACCOUNTING PTY LTD (ACN 605 065 030)	Plaintiff
v
CANDRA INNOVATIONS PTY LTD (ACN 158 094 869)	Defendant

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JUDGE:	Hetyey AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	20 June 2023
DATE OF JUDGMENT:	11 December 2023
CASE MAY BE CITED AS:	Re Biznerve Consulting and Accounting Pty Ltd
MEDIUM NEUTRAL CITATION:	[2023] VSC 737

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CORPORATIONS — Corporations Act 2001 (Cth) — Pt 5.4 — Insolvency — Statutory demand — s 459G — Application to set aside — s 459H(1)(a) — Whether genuine dispute about existence and/or amount of debt – Where debt due under loan agreement — Where loan alleged to be discharged by subsequent agreement for transfer of shares and units in trust in lieu of repayment – Whether subsequent agreement reached a triable issue – s 459E(3) – Failure of deponent of affidavit in support of demand to expressly state source of knowledge of matters set out or entitlement to make affidavit – Deponent sole director and secretary of creditor – s 459J(1)(b) – Whether some other reason to set demand aside.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr D Merriman	Rankin Business Lawyers
For the Defendant	Mr S Ipp	Lancaster Legal Pty Ltd

TABLE OF CONTENTS

Introduction........................................................................................................................................ 1

Background......................................................................................................................................... 1

Loan agreement................................................................................................................... 2
Ownership of Ardmona property..................................................................................... 3
Communications regarding the loan agreement............................................................ 4

Procedural history.............................................................................................................................. 9

Genuine dispute ground................................................................................................................ 10

Legislative provisions and legal principles................................................................... 11
Plaintiff’s evidence............................................................................................................ 13
Defendant’s evidence........................................................................................................ 14
Plaintiff’s further evidence............................................................................................... 16
Key submissions by parties.............................................................................................. 18
Consideration of genuine dispute ground..................................................................... 21

Section 459J(1)(b) ground............................................................................................................... 28

Legislative provisions and legal principles................................................................... 29
Key submissions by parties.............................................................................................. 35
Consideration of s 459J(1)(b) ground.............................................................................. 36

Conclusion......................................................................................................................................... 38

HIS HONOUR:

Introduction

Pursuant to s 459G of the Corporations Act 2001 (Cth) (‘Act’), Biznerve Consulting and Accounting Pty Ltd (‘Biznerve’ or ‘plaintiff’) seeks to set aside a statutory demand dated 1 February 2023 (‘demand’) served upon it by Candra Innovations Pty Ltd (‘Candra’ or ‘defendant’). The demand is for the sum of $338,367.12, in relation to principal and interest owing under a loan agreement between the parties.

The plaintiff contends there is a genuine dispute about the existence of the debt claimed in the demand. That is because of the alleged existence of a subsequent agreement entailing the transfer of shares and units, in lieu of monies owing under the loan agreement ('genuine dispute ground’). Alternatively, the plaintiff claims the demand should be set aside under s 459J(1)(b) of the Act for ‘some other reason’. In particular, it is argued the affidavit accompanying the statutory demand does not comply with the Act because the deponent does not state: (a) the facts entitling him to make the affidavit on the defendant’s behalf; or (b) the source of his knowledge of the matters stated in the affidavit, despite being the sole director of the defendant company (‘s 459J(1)(b) ground’).

Background

Biznerve was registered in Victoria on 31 March 2015 and is in the business of mortgage broking and lending. Mr Harkiran Madanpotra is its sole director and shareholder.

Candra was registered in Queensland on 1 May 2012 and Mr Nagesh Chakka is its sole director and secretary, and one of two shareholders. The company acts as trustee for the Poornima Investment Trust.

Mr Chakka has given evidence that he was introduced to Mr Madanpotra through a mutual acquaintance; Mr Prabhjot (Raj) Ahuja.

Loan agreement

Following this introduction, Candra agreed to lend funds to Biznerve. The monies were used to purchase a property at 725 Turnbull Road, Ardmona, Victoria 3629 (‘Ardmona property’).

On 10 January 2022, Candra and Biznerve executed a written loan agreement (‘loan agreement’), by which Candra (as trustee for the Poornima Investment Trust) agreed to loan the principal sum of $300,000.00 to Biznerve, with Mr Madanpotra acting as guarantor. The second page of the loan agreement recorded the following key terms:

(a) the ‘date advance anticipated’ was 15 January 2022, although the ‘date advance made’ recorded the advance as having occurred on 15 July 2022 (which does not appear to be accurate);

(b) the ‘term of [the] loan’ was identified as 180 days, however, the ‘date of repayment’ is expressed slightly differently, being the ‘first day after the completion of 6 months from the [d]ate advance is made’.

(c) the interest rate was fixed at 16% per annum, with instalments of $4,000.00 per month;

(d) the Ardmona property was listed as the ‘[m]ortgaged property’; and

(e) Mr Madanpotra’s liability as guarantor was expressed as being ‘[a]ll liability under [the loan] agreement’.

Under cl 1 of the operative part of the loan agreement, Biznerve, as borrower, agreed to grant to Candra, as lender, a registered mortgage over the mortgaged property. However, by cl 1 of a series of amendments to the operative terms, it was Mr Madanpotra who agreed to grant to Candra a registered mortgage over the mortgaged property. Under cl 3 of the amendments to the loan agreement, Biznerve agreed that interest for 6 months was payable in advance and to be deducted from the principal sum. Clause 3 of the loan agreement required Biznerve to make payment of the balance of the principal owing on or before the date of repayment. Under cl 9, Mr Madanpotra guaranteed to Biznerve the due and punctual performance of all of Candra’s obligations. Clause 12(b) stated that in the event Biznerve failed to make punctual payment of money falling due under the loan agreement, Candra would be entitled, by notice in writing, to require Biznerve to immediately repay the principal and accrued interest.

The loan agreement was signed by Mr Chakka on behalf of Candra and by Mr Madanpotra for Biznerve.

On 13, 15 and 16 January 2022, Candra made transfers of funds via the bank account of the Poornima Investment Trust to Biznerve, totalling $288,000.00 and representing the principal under the loan agreement, less an advance interest payment of $12,000.00 (‘loan monies’).

Ownership of Ardmona property

Whilst a contract of sale of real estate dated 21 September 2021 records the sale of the Ardmona property to Mr Madanpotra and Mr Ahuja for $1.4 million, the registered proprietor of the Ardmona property is neither the plaintiff nor Mr Madanpotra, but another entity: 725 TBR Investments Pty Ltd (‘725 TBR’), of which Mr Madanpotra and Mr Ahuja are directors. 725 TBR acts as trustee for the 725 TBR Investments Unit Trust (‘725 TBR Trust’). The ownership structure of 725 TBR and the 725 TBR Trust is as follows:

Shares held in 725 TBR Units held in the 725 TBR Trust

Biznerve Family Pty Ltd

10

10

9SA Pty Ltd

10

10

Sukhwinder Rakhra

5

10

Arvinder Rakhra

5

I infer that Biznerve Family Pty Ltd is connected with Mr Madanpotra because its address is the residential address given by Mr Madanpotra on the Australian Securities and Investments Commission (‘ASIC’) extract for 725 TBR. Likewise, it appears that 9SA Pty Ltd is an entity associated with Mr Ahuja given it utilises the same address listed by Mr Ahuja as his residential address on the 725 TBR ASIC extract.

Communications regarding the loan agreement

Following its entry into the loan agreement, Biznerve made no repayments, aside from the $12,000 in interest paid in advance. However, since that time, significant correspondence has passed between the parties and their intermediaries, predominantly in the form of WhatsApp messages and emails. It is necessary to set those communications out in some detail, given the importance attached to them by the parties in this application.

From June 2022 to September 2022, Mr Chakka regularly messaged Mr Madanpotra via WhatsApp concerning the repayment of the loan monies and the calculation of interest. By mid-July 2022, the term of the loan had expired. Mr Madanpotra made a number of representations concerning when he would be in a position to source funds in order to discharge the plaintiff’s obligations under the loan agreement. On 30 August 2022, Mr Madanpotra told Mr Chakka in a WhatsApp message that the Ardmona property had been advertised for sale and that he was ‘also trying to arrange funds on a personal level.’ Mr Chakka responded by asking Mr Madanpotra not to link repayment of the loan monies with the sale of the Ardmona property. Mr Madanpotra agreed the two outcomes were not linked.

By August 2022, Mr Chakka had approached Mr Ahuja to act as an intermediary in dealing with Mr Madanpotra and the plaintiff concerning the loan agreement. On 4 September 2022, Mr Chakka messaged Mr Ahuja complaining about the delay in repayment of the loan monies and recounting a recent conversation with Mr Madanpotra whereby Mr Madanpotra allegedly told Mr Chakka he ‘[did] not have money and to go ahead and take legal action’. On 12 October 2022, Mr Chakka messaged Mr Ahuja asking whether Mr Madanpotra had ‘come out with some plan[?]’. On 26 October 2022, he expressed to Mr Ahuja the hope that ‘things [were] moving in [the] right direction’ and commented that ‘[w]e need to get this sorted out soon’.

On 19 November 2022, Mr Chakka sent Mr Ahuja a WhatsApp message stating:

Hi Raj, Can I get the accountant and the solicitors details so that we can complete the transfer[?]

(’19 November WhatsApp message’).

Mr Ahuja responded the next day and provided the address and phone number for Yogesh Gupta, a tax planner. Mr Chakka replied on 21 November 2022 and asked whether it was also necessary to involve a solicitor.

On 3 December 2022, Mr Chakka had the following WhatsApp exchange with Mr Ahuja:

[Mr Chakka] Hi Raj, if I remember you may be leaving to India this weekend?
How do we make progress with the transfer

[Mr Ahuja] Hi Nagesh,
I reached India yesterday. I will email the accountant today and copy Harkiran and yourself to it. I will also send you details of the purchase price that includes total contributions to date.

(‘3 December WhatsApp exchange’).

On 9 December 2022, Mr Ahuja messaged Mr Chakka asking him to advise of ‘the Trust and Trustee name that will own the Units’.

Then, on 14 December 2022, the following further exchange occurred between Mr Ahuja and Mr Chakka:

[Mr Ahuja] Hi Nagesh, how are you?
Please take it on from here with Yogesh (accountant). Please respond to the last email in the chain.

[Mr Chakka] Hi raj. Am I bearing all these costs alone. I also need to know the other costs to settle.
[Mr Ahuja]Yes, costs to be borne by you as discussed in our call with Harkiran. Please ask the accountant for any additional costs and if you have any queries.
I will send you the total funds contributed to date by the existing unit holders. We will then divide the total by 3 where you will pay the remaining balance of your share.

(‘14 December WhatsApp exchange’).

At 4:50pm on 15 December 2022, Mr Madanpotra sent Mr Chakka an email marked ‘[w]ithout prejudice to save [sic] legal costs’, although neither party currently seeks to characterise the email in that way. The email is in these terms:

Hi Nagesh
As discussed with you the other day, we need to sort the transfer of my share in the property 725 Turnbull road before end of this year. We need to take [the] following actions
1.   Get a legal contract sorted which is agreed with all parties involved.
2.   I will need a seperate [sic] letter confirming “all debt given to biznerve consulting and accounting Pty Ltd has been paid off in full and there is no furthur [sic] payments to be made”. We need this without any mention of share settlement as the loan was taken by biznerve and shares are in my personal name
3.   I need to resign as director of the trust
4.   My name needs to be removed from the loan taken from NAB
5.   I need to be indemnified from any claims related to the property
6.   I need to be paid the amount of $20,344.66 into my account. I have attached the calculations of the same.
7.   Raja will send a seperate [sic] email for the amount you will have to pay him
Kind regards
Harkiran

Mr Madanpotra added by way of further email later that day that ‘any costs associated with [the] transfer needs [sic] to be covered by [Mr Chakka].’ For convenience, I will refer to both Mr Madanpotra’s emails as the ‘15 December emails’.

Mr Ahuja then had a WhatsApp exchange with Mr Chakka in the evening of 15 December 2022:

[Mr Chakka] Hi Raj, Harkiran sent me a calculation with no details as to how it came up to the amount he is claiming. I am not sure if he is putting his stamp duty in to the calculation which is not acceptable
[Mr Ahuja]He will not be charged any stamp duty when he sells the units to you
[Mr Chakka] Yes but I was checking on the stampduty [sic] he paid at the time of purchase
Whether he wants me to pay that to him

[Mr Ahuja]I believe the calculation includes all monies invested and would include stamp [duty].

[Mr Chakka] and why would I pay for his stamp duty, this is crazy
It is like blackmailing me with all the list just because he cheated me with no security
He thinks I need to accepts [sic] all his conditions
I am not going to go ahead in this way

[Mr Ahuja] So, What do we propose
[Mr Chakka] I am already at [sic] the loosing [sic] side Raj, he can not [sic] dictate terms like this with no guilt. Since I have no choice I agreed for his share and [sic] but not to cover his legal cost and stampduty [sic]
I can not [sic] pay double stamp duty his legal cost and my legal cost and he sits comfortably and I loose [sic] money
This is crazy and unacceptable

[Mr Ahuja] Should we schedule a 3 way conversation to work it out
[Mr Chakka] I am sure this will not end well
He can sell it [sic] someone else and repay me debt [sic]
I am not sure what is there to discuss when this is blatant looting

(’15 December WhatsApp exchange’).

On 21 December 2022, Mr Chakka and Mr Ahuja conversed further over WhatsApp (‘21 December WhatsApp exchange’). Mr Chakka asked Mr Ahuja for his breakdown of costs before he could ‘work on the other aspects.’ Mr Ahuja responded by saying he had paid an additional $51,700 and that Mr Chakka’s one third share of those costs would be $17,233.

On 22 December 2022, Mr Chakka replied to Mr Madanpotra’s 15 December emails in these terms:

Hi Harkiran
Can I please get the break down of the cost you have listed to see what [I] am reimbursing you for.
I am still waiting for few [sic] details from Raj to take the next step.
Regards
Nagesh

On 7 January 2023, Mr Chakka sent an email to both Mr Madanpotra and Mr Ahuja titled ‘Transfer of shares - Documentation required 725 Turnbull Road’ (‘7 January email’). In that email, Mr Chakka said he had spoken to his lawyer, who requested a copy of the executed contract of sale of the Ardmona property recording the corporate trustee (725 TBR) as the purchaser, a signed loan agreement and mortgage documents with the National Australia Bank (‘NAB’), a ‘[s]ettlement statement from the conveyancer’ and ‘[s]upporting documentation for the breakdown of individual lines [in Mr Madanpotra’s] excel transaction statement’. Mr Chakka concluded the 7 January email by stating:

My lawyer has said that once the above documentation [sic] reviewed by him on Monday morning, he will be able to ensure that when the conveyancer resumes his work on 9th January, my lawyer will be able to advise on the manner in which the transfer of the shares needs to take place.
Can you please send the requested documentation today or tomorrow so that my lawyer can see it on Monday morning and ensure everything can go smoothly.

Mr Chakka separately contacted Mr Ahuja by WhatsApp message on 7 January 2023, seeking the information requested so that he could ‘work on it’. He followed up again with Mr Ahuja on 8 January 2023, noting that the ‘silence and the response’ from Mr Madanpotra was making him ‘nervous’. Mr Ahuja responded by telling Mr Chakka there was no need to worry and that Mr Madanpotra ‘[wanted] it to be finalised quicker than [Mr Chakka]’. Mr Chakka continued to press Mr Ahuja for specific documentation between 9 to 12 January 2023. Various emails were sent by Mr Ahuja to Mr Chakka on 12 January 2023 attaching certain documents associated with the acquisition of the Ardmona property. Mr Ahuja messaged Mr Chakka on 12 January 2023 saying:

All sent. You should have everything now.

Mr Chakka responded shortly thereafter with:

Thanks a lot

Later in the evening of 12 January 2023, Mr Chakka responded to Mr Ahuja’s earlier breakdown of costs given in the 21 December WhatsApp exchange. He said:

With relation to this payment, do you want it before settlement or after settlement. Can I also get supporting documents for that so that I understand what is happening. Why is that the other person not sharing the payments [sic]. I know Harkiran was not sharing it but did not know that Sukwinder is also not paying. How will it be moving forward.

On 2 February 2023, Mr Ahuja messaged Mr Chakka and requested that he call when he could. There is no record of any further communication passing between Mr Chakka and Mr Ahuja or Mr Chakka and Mr Madanpotra after this time. The defendant then served the plaintiff with the statutory demand on 8 February 2023.

Procedural history

On 21 February 2023, the plaintiff commenced this proceeding by way of originating process. The matter has been the subject of a number of procedural steps. Timetabling orders were made by consent on 6 March 2023, providing for the filing of further affidavit material and written submissions. The matter was listed for hearing on 1 June 2023, on an estimate of one day.

On 9 May 2023, the matter was listed for mention, at which time orders were made to extend the existing timetable. The hearing of the proceeding was relisted for 20 June 2023.

On 1 June 2023, further orders were made, granting the plaintiff leave to file an additional affidavit and further extending time for the plaintiff to file and serve written submissions. The plaintiff was also granted leave to serve a subpoena on Mr Ahuja to produce documents and give oral evidence at the hearing. Whilst that is an unusual step in a s 459G application, it was considered appropriate because of the contents of an email sent by Mr Ahuja to Mr Madanpotra dated 24 May 2023 and exhibited to Mr Madanpotra’s affidavit sworn 25 May 2023 (‘24 May 2023 Ahuja email’) (which is discussed later in these reasons) and because of Mr Ahuja’s apparent reluctance to provide an affidavit in admissible form.

The defendant subsequently gave notice of an intention to cross-examine Mr Ahuja. However, at the hearing on 20 June 2023, the defendant confirmed that it would not object to the admissibility of the 24 May 2023 Ahuja email on the basis that Mr Ahuja need not be called to give viva voce evidence. The plaintiff was content to proceed on that basis.

Biznerve relies upon the following material in support of its application:

(a) the affidavits of Harkiran Madanpotra sworn 21 February 2023, 16 May 2023, and 25 May 2023, respectively; and

(b) written submissions dated 1 and 16 June 2023.

In opposition to the plaintiff’s application, the defendant relies upon the following material:

(a) the affidavits of Nagesh Chakka affirmed 22 March 2023 and 19 June 2023; and

(b) written submissions dated 13 June 2023.

Genuine dispute ground

It is convenient to first address the plaintiff’s contention that there is a genuine dispute in relation to the debt the subject of the statutory demand.

Legislative provisions and legal principles

Section 459G(1) of the Act provides that a company may apply to the Court for an order setting aside a statutory demand served on the company.

Section 459H(1) of the Act states:

(1)This section applies where, on an application under section 459G, the Court is satisfied of either or both of the following:
(a)that there is a genuine dispute between the company and the respondent about the existence or amount of a debt to which the demand relates;
(b)that the company has an offsetting claim.

The following well-established statements of principle explain what constitutes a genuine dispute for the purpose of s 459H(1) of the Act:

(a) for a dispute to be ‘genuine’, it must be ‘bona fide and truly exist in fact’;[1]
[1]Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452, 464 (Northrop, Merkel and Goldberg JJ) (‘Spencer Constructions’), cited with approval by the Victorian Supreme Court of Appeal in Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (in liq) [2015] VSCA 330, [49] (Kyrou, Ferguson and Kaye JJA) (‘Malec’).

(b) ‘the grounds for alleging the existence of a dispute … [must be] real and not spurious, hypothetical, illusory or misconceived’;[2]
[2]Ibid.

(c) the dispute must have ‘a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion, and sufficient factual particularity to exclude the merely fanciful or futile … Something “between mere assertion and the proof that would be necessary in a court of law” may suffice’;[3]
[3]TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd (2008) 66 ACSR 67, 79 [71] (Dodds-Streeton JA) (‘TR Administration’); Malec, [49] (Kyrou, Ferguson and Kaye JJA).

(d) a genuine dispute may involve a ‘plausible contention requiring investigation’ and raise the same sort of considerations as the ‘serious question to be tried’ test that applies in the case of interlocutory injunctions;[4]

(e) the Court should not uncritically accept statements about an alleged genuine dispute that are ‘equivocal, lacking in precision, inconsistent with undisputed contemporary documents … or inherently improbable …’;[5] and

(f) if the dispute appears to be something ‘merely created or constructed in response to the pressure represented by the service of the statutory demand’, then it is not advanced in good faith and will not be regarded as genuine.[6]

[4]Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd (2013) 85 NSWLR 601, 608 [31] (Beazley P, Meagher and Gleeson JJA) (‘Britten-Norman’); Malec, [48] (Kyrou, Ferguson and Kaye JJA).

[5]Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, 787 (McClelland CJ in Eq), cited with approval by the Victorian Supreme Court of Appeal in TR Administration, 78 [64] (Dodds-Streeton JJA) and Malec, [50].

[6]Creata (Aust) Pty Ltd v Faull (2017) 125 ACSR 212, 224 [47] (Barrett AJA, Gleeson JA agreeing at 213 [1], White JA agreeing at 213 [2]) (‘Creata’). See also JJMMR Pty Ltd v LG International Corp [2003] QCA 519, [18] (McPherson JA), where the same point was made in respect of an offsetting claim.

The Court’s role in determining the existence or otherwise of a genuine dispute can be summarised as follows:

(a) whilst the underlying nature of the disputed debt ‘must be exposed’, the Court will not deal with the merits and nothing of substance will be decided;[7]

(b) it is unhelpful to perceive that one party is more likely to succeed or that the account between the parties is more likely to be one result than another.[8] That is because the determination of the ‘ultimate question’ of the existence of the debt at a substantive hearing should not be compromised;[9] and

(c) the Court’s state of mind concerning the existence of a genuine dispute may range from ‘a clear conviction that the debt does not exist to the opinion that the genuine dispute hurdle has only just been cleared’.[10]

[7]Quadrant Constructions Pty Ltd v HSBC Bank Australia Ltd [2004] FCA 111, [4] (Finkelstein J); Malec, [48].

[8]Malec, [48].

[9]Ibid.

[10]Spacorp Australia Pty Ltd v Myer Stores Ltd [2001] VSCA 89, [3]–[4] (Brooking and Charles JJA); Re Litigation Insurance Pty Ltd [2017] NSWSC 334, [31] (Gleeson JA) (‘Re Litigation Insurance’).

Whilst the bar for establishing a genuine dispute or offsetting claim is relatively low, an applicant must still satisfy the Court that such a dispute (or offsetting claim) exists on the balance of probabilities.[11] It is usually the case that the application will only fail if the asserted dispute is ‘so devoid of substance that no further investigation is warranted’.[12] Once the applicant company can demonstrate even one ground has a sufficient degree of cogency to be arguable, there will be a finding of genuine dispute.[13]
[11]See Farid Assaf, Assaf’s Winding Up in Insolvency (LexisNexis, 3^rd ed, 2021) [6.25] (‘Assaf’s Winding Up in Insolvency’), citing Re Speedy Loans Pty Ltd [2014] VSC 273, [17] (Gardiner AsJ); Moyall Investments Services Pty Ltd v White (1993) 12 ACSR 320, 324 (Ryan J); Southern Canola Producers Pty Ltd v Painter Griffith & Associates Pty Ltd (1997) 15 ACLC 956 (Santow J) and Sterling Estates (SA) Pty Ltd v Bradley (2000) 34 ACSR 177, [16] (Hamilton J).
[12]Bendigo and Adelaide Bank Ltd v Pekell Delaire Holdings Ptd Ltd (2017) 118 ACSR 592, 605–6 [47]–[48] (Santamaria, Ferguson and McLeish JJA) (‘Pekell’), citing Solarite Air Conditioning Pty Ltd v York International Australia Pty Ltd [2002] NSWSC 411, [23] (Barrett J) (‘Solarite’).
[13]Malec, [51], citing Solarite, [23].

In determining whether there is a genuine dispute, it may be appropriate for the Court to resolve a short point of law,[14] although this will usually only be possible in the absence of conflicting evidence.[15] Further, an application to set aside a statutory demand is not ordinarily an occasion for the Court to construe a contract where its meaning is in dispute.[16] By attempting to decide competing contentions about the interpretation of a contract on an application to set aside a statutory demand, the Court may embarrass a judge before whom that issue later arises at trial.[17] Moreover, where there are clearly arguable alternatives as to the meaning of a term and related questions of construction, this of itself may give rise to a genuine dispute.[18]
[14]Delnorth Pty Ltd v State Bank of New South Wales (1995) 17 ACSR 379, 384 (Cohen J) (‘Delnorth’); Lifestyle Retirement Projects No 2 Pty Ltd v Parisi Homes Pty Ltd [2005] NSWSC 705, [16]-[17] (Campbell J); Wellnora Pty Ltd v Fiorentino [2008] NSWSC 483, [46]-[48] (Barrett J); Pekell, 605–606 [47].
[15]Delnorth, 384; BBX Holdings Pty Ltd v American Home Assurance Co [2007] NSWSC 549, [16]-[17] (White J).
[16]Infratel Networks Pty Ltd v Gundry’s Telco & Rigging Pty Ltd (2012) 92 ACSR 27, 34 [46] (Young AJA); Broadspectrum (Australia) Pty Ltd v Centauri Business Services Pty Ltd [2016] NSWSC 1045, [22] (Barrett AJA); Re Litigation Insurance, [31] (Gleeson JA); Creata, 219 [29] (Barrett AJA; Gleeson JA agreeing at 213 [1], White JA agreeing at 213 [2]).
[17]Grandview Ausbuilder Pty Ltd v Budget Demolitions Pty Ltd (2019) 99 NSWLR 397, 417 [90] (White JA).) (’Grandview’). See also Re Aurora Funds Management Ltd [2021] VSC 690, [44] (Gardiner AsJ).
[18]Drillsearch Energy Ltd v Carling Capital Partners Pty Ltd [2009] NSWSC 1192, [47] (Barrett J, as his Honour then was); Re AA Management Co Pty Ltd [2019] NSWSC 1443, [60] (Rees J); Grandview, 417 [90]; Re Australian Builders Group Pty Ltd [2022] VSC 254, [39] (Hetyey AsJ).

Plaintiff’s evidence

In his evidence, Mr Madanpotra alleges that in or around June 2022, following discussions between himself and Mr Chakka, the loan agreement was varied by consent: the parties agreed the Ardmona property would be sold and the loan sum and any accrued interest would be repaid to the lender from the sale proceeds after settlement (‘deferral agreement’). The Ardmona property was apparently then listed for sale and placed on the market from late June 2022 but was unable to be sold (an email received by Mr Madanpotra from a real estate agent on 21 February 2023 suggests the property remained on the market at that time, with some negotiation with a potential buyer). Whilst the plaintiff relied on the existence of the deferral agreement as a ground of genuine dispute about whether the debt the subject of the demand was due and payable, this argument was ultimately abandoned at the hearing.

Mr Madanpotra further deposes that over December 2022 and early January 2023 the parties determined to end the loan agreement and instead entered into an arrangement whereby one third of the shares in 725 TBR and one third of the units in the 725 TBR Trust would be transferred to persons or entities nominated by the defendant (‘transfer agreement’), with associated payments made by Mr Chakka to Mr Madanpotra and Mr Ahuja in the amount of $20,344.66 and $17,233.33, respectively.

Defendant’s evidence

In his affidavit affirmed 22 March 2023, Mr Chakka deposes that the loan agreement was a short-term loan of 180 days or 6 months’ duration because Mr Madanpotra was applying for finance from various banks. He states the repayment of the loan monies should have occurred on or about 17 July 2022. Whilst Mr Chakka believed the Ardmona property would be used as security for the loan agreement, a title search of the property dated 23 January 2023 does not reveal any security lodged by Candra, although there is a registered mortgage in favour of the NAB. Mr Chakka notes that shortly after the loan monies were advanced to the plaintiff, Mr Madanpotra became the registered proprietor of another property located in Nunawading, Victoria.

Mr Chakka references his repeated requests of Mr Madanpotra via WhatsApp to make repayment of the loan monies and Mr Madanpotra’s reassurance that the Ardmona property was in the process of being sold. He says the sale process for the Ardmona property has been controlled by 725 TBR and its directors.

Mr Chakka accepts there are WhatsApp conversations concerning a proposal by Mr Madanpotra for Mr Chakka to acquire an interest in the Ardmona property. However, Mr Chakka states he was not provided with any details that would have enabled him to make a considered decision as to whether he should accept such a proposal. Accordingly, he became increasingly concerned about its terms (which he does not set out). He denies the transfer agreement alleged by the plaintiff was ever reached between the parties. Instead, Mr Madanpotra informed him he would arrange for repayment of the loan monies. These reassurances continued until a telephone conversation occurred between Mr Chakka and Mr Madanpotra on 4 September 2022 during which Mr Chakka asked about the sale of the Ardmona property and the absence of a caveat. Mr Chakka was apparently told by Mr Madanpotra that he did not have the money and that Mr Chakka could ‘do what [he] want[ed]’.

Mr Chakka then contacted Mr Ahuja to assist in the recovery of the loan monies as it was through Mr Ahuja that he came to know Mr Madanpotra. He says that Mr Ahuja organised a three-way telephone conversation including Mr Madanpotra in early October 2022, during which options were discussed to resolve the matter (‘October conference call’). In the conversation, Mr Madanpotra apparently said the transfer of the shares was an option, otherwise Mr Chakka could wait until March 2023 for repayment of the principal together with interest.

He explains that his statement in the 15 December WhatsApp exchange that ‘I have no choice I agreed for [Mr Madanpotra’s] share and but not to cover his legal cost and stampduty [sic]’, was intended to indicate that he ‘both felt compelled to try and recover something, being forced to consider the [transfer agreement], but that [he] had not agreed to accept the terms that were being put forward at the time’.

Mr Chakka states he was not furnished with sufficient information to conduct proper due diligence or consider the transfer agreement proposed by Mr Madanpotra. He makes the following further statements in relation to the transfer agreement alleged by the plaintiff:

(a) it was never reduced to writing and he did not sign any agreement;

(b) the 7 January email was evidence of him undertaking his own due diligence in relation to the proposal put forward by Mr Madanpotra but does not constitute evidence of any agreement to alter the terms of the loan agreement;

(c) the fact that Mr Madanpotra is continuing to attempt to sell the property, indicates he does not consider the transfer agreement to be proceeding;

(d) he did not agree to the transfer agreement as he was not satisfied, after being provided with limited information, that the agreement was an equal or better proposal than the repayment of the loan under the loan agreement. He understood the transfer agreement entailed the purchase of the units in the 725 TBR Trust at the price paid in January 2021 and payment to Mr Madanpotra for his outgoings, legal costs, and stamp duty. The combined value of this arrangement was approximately $100,000 less than the loan principal, ignoring the lost value of the property in a declining market; and

(e) he believes Mr Madanpotra made the transfer agreement proposal to dispose of an underperforming asset and to pass on the risk associated with a declining property market, whilst avoiding the liability incurred under the loan agreement.

Plaintiff’s further evidence

In his 16 May 2023 affidavit, Mr Madanpotra relevantly asserts that the 15 December WhatsApp exchange and other WhatsApp communications exhibited to Mr Chakka’s affidavit evidence the existence of the transfer agreement.

In his subsequent affidavit sworn 25 May 2023, Mr Madanpotra exhibits the 24 May 2023 Ahuja email, together with the WhatsApp messages Mr Ahuja has provided to him (which are also exhibited to Mr Chakka’s affidavit). As previously noted, although it is unsworn, the parties have proceeded on the basis that it is admissible.

In the 24 May 2023 Ahuja email, Mr Ahuja confirms he introduced Mr Chakka and Mr Madanpotra ‘on or around August-September 2021 due to their mutual business interest where [Mr Chakka] had money to provide for finance and [Mr Madanpotra] had clients who needed finance.’ In or around October 2022, Mr Ahuja attempted to mediate the dispute between Mr Chakka and Mr Madanpotra and convened the October conference call. He says that in the October conference call Mr Madanpotra proposed to repay the loan monies by one of two methods, namely:

a.Harkiran’s total share (33.33%) as a full and final settlement at cost which meant Nagesh was to accpt [sic] the transfer as though Nagesh had purchased the property in the first place instead of Harkiran buying it, meaning Nagesh would reimburse Harkiran for all costs incurred since the purchase. i.e. reimburse all documented costs and capital repayments to Harkiran over and above the $288,000.[19] Nagesh would not charge any interest to Harkiran at all;
b.Harkiran would repay the full amount including any accrued interest to Nagesh by [the] end of March2023 [sic] by all means even if the [Ardmona property] did not sell.

[19]I understand this to represent the loan principal of $300,000, less the $12,000 in interest paid in advance.

Mr Ahuja says Mr Chakka chose option a – to have Mr Madanpotra’s share in the Ardmona property transferred to him. In the days following the October conference call, Mr Chakka requested documents and information regarding the Ardmona property which Mr Ahuja provided ‘to [his] fullest capacity’. On 19 November 2022, Mr Chakka messaged Mr Ahuja to request the details of an accountant and solicitor to enable the completion of the transfer. On 3 December 2022, Mr Chakka followed up, expressing his wish ‘to speed up the transfer’.

Mr Ahuja references the 15 December WhatsApp exchange in which Mr Chakka expressed his discontent at having to pay stamp duty and legal costs initially incurred by Mr Madanpotra at the time of the purchase of the Ardmona property. Mr Ahuja indicated that Mr Chakka had already agreed to such costs during the October conference call. On 12 January 2023, Mr Chakka apparently confirmed he had received all the information he had requested. However, on 16 January 2023, Mr Chakka sent Mr Ahuja an email requesting information he had already been provided.[20] Since that time, Mr Chakka has not answered Mr Ahuja’s calls or replied to his text messages. Mr Madanpotra then called Mr Ahuja on 1 or 2 February 2023 to inform him Mr Chakka had ‘sued’ Mr Madanpotra.
[20]The 16 January 2023 email is not in evidence.

Key submissions by parties

As previously noted, the plaintiff contends there is a genuine dispute about the existence of the debt the subject of the statutory demand. In particular, the plaintiff argues that:

(a) under the transfer agreement, the parties agreed to a transfer of shares and units in lieu of repayment under the loan agreement. In other words, the parties agreed the loan principal advanced under the loan agreement would be treated as consideration for Mr Chakka or an entity nominated by him to acquire a one third interest in 725 TBR and the 725 TBR Trust. This had the effect of discharging the debt due under the loan agreement;

(b) the correspondence passing between Mr Chakka and Mr Ahuja, including the 19 November WhatsApp message, the 3 December and 15 December WhatsApp exchanges and the 7 January email not only support the conclusion that the transfer agreement was reached in late 2022, but also that the agreement was approaching settlement. To that end, the parties arranged for accounting and legal services to facilitate and give effect to the transaction;

(c) the 24 May 2023 Ahuja email confirms that by the middle of January 2023, Mr Chakka and the plaintiff had been provided with all the information requested to enable settlement under the transfer agreement. However, Mr Chakka ceased communicating after this occurred;

(d) whether the transfer agreement was concluded is, at the very least, a plausible contention requiring investigation;

(e) assuming an agreement had been reached, there is a difference in the recollection between the parties as to its terms, including what costs were to be borne by Mr Chakka and the defendant;

(f) for the purposes of determining whether there is a ‘genuine dispute’, the applicant need not establish evidence akin to a fully evidenced claim and the Court should not engage in an in-depth examination or determination of the merits of the alleged dispute; and

(g) it is not the role of the Court, in the present application, to resolve contested issues of fact and law, including the existence of the transfer agreement, its terms, and the authority of Mr Madanpotra to conclude such an agreement.

The defendant submits that the alleged dispute does not rise beyond mere assertion and ‘has the characterisation of the plaintiff simply seeking to avoid paying the debt.’ In this regard, the defendant notes that both the deferral agreement (now abandoned as an argument) and the transfer agreement are said to arise after the loan monies became due and payable under the loan agreement.

The defendant further contends that:

(a) the plaintiff’s asserted dispute is not genuine as it is equivocal in its nature and inconsistent with contemporaneous evidence, namely the WhatsApp conversations;

(b) there is no evidence of any agreement about the value of the Ardmona property or the corresponding number of shares or units to be transferred under the transfer agreement. In other words, the evidence of consideration is unclear. Further, it is improbable either party would have agreed to the transfer agreement without first assessing whether the repayment of the loan monies and the value of the shares and units in 725 TBR and the 725 TBR Trust respectively were equivalent;

(c) negotiations between the parties simply did not advance beyond a proposal. The 15 December emails from Mr Madanpotra indicated that further steps were required before an agreement could be established;

(d) the 7 January email clearly demonstrated that further information was required by the defendant before there was any consensus ad idem. The emails and attached documents sent to Mr Chakka on 12 January 2023 are simply examples of due diligence being undertaken;

(e) the elements of a legal contract have not been established. There is an absence of evidence that the parties intended to create legal relations at a particular time or that there was any formal offer and acceptance;

(f) there is no precise date upon which the transfer agreement was said to have been formed and the conversations giving rise to the agreement are not set out. Nor is there any objective evidence of when settlement was to occur;

(g) there is no evidence Mr Madanpotra had the authority or capacity to deal with the Ardmona property and enter into an agreement involving 725 TBR and the 725 TBR Trust, which would likely have required the acceptance of others (including Sukhwinder Rakhra and Arvinder Rakhra); and

(h) there is no evidence of the payments referred to in the 15 December email as having been made by Mr Chakka (or Candra) and no action has been taken by Mr Madanpotra (or Biznerve) to seek specific performance of the transfer agreement. Instead, the Ardmona property remains on the market.

Further, at the hearing, counsel for the defendant suggested the Court could determine as a ‘short point of law’ whether there was a binding transfer agreement. Counsel elaborated that the plaintiff bore the evidentiary onus of establishing a prima facie case for the transfer agreement.

The defendant submits that, when viewed objectively, the facts fall within the third category of case identified by the High Court in Masters v Cameron (‘Masters v Cameron’),[21] namely ‘one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.’[22] According to the defendant, the 15 December emails make clear the parties did not intend to conclude a bargain about the Ardmona property unless and until a formal contract was signed.
[21](1954) 91 CLR 353.
[22]Ibid 360-2 (Dixon CJ, McTiernan J and Kitto J).

Finally, the defendant contends that by virtue of ss 53(1)(b) or (c) of the Property Law Act 1958 (Vic) (‘PLA’), the transfer agreement would only be valid if it was reduced to writing (which it was not).

Consideration of genuine dispute ground

On the totality of the evidence, I consider Biznerve has established, to the requisite standard, that there is a genuine dispute about the existence of the debt claimed in the demand. In my view, there is a plausible contention requiring investigation that the loan agreement was superseded, replaced or discharged by the alleged transfer agreement.

The evidence clearly demonstrates Mr Madanpotra, Mr Chakka and Mr Ahuja (collectively, ‘the relevant parties’) had engaged in extended communications in the latter part of 2022 and the start of 2023 concerning the transfer of shares in 725 TBR and units in the 725 TBR Trust controlled by Mr Madanpotra to entities or persons nominated by Candra and/or Mr Chakka in lieu of repayment of the loan monies. The fact these negotiations took place is not denied by Candra. The real question is whether the relevant parties had moved beyond preliminary negotiations and due diligence to formally consummate the transfer agreement. The evidence demonstrates at least a credible basis to conclude they did so.

The contemporaneous WhatsApp messages and emails passing between the relevant parties provide a sufficient objective existence and prima facie plausibility to distinguish the dispute from a merely spurious claim, bluster or assertion. In particular:

(a) the 19 November WhatsApp message, in which Mr Chakka asked Mr Ahuja for details of an accountant and lawyer to ‘complete the transfer’, may be read as suggesting the parties had already struck the essential terms of the transfer agreement by this time but required professional assistance to ensure it could be implemented. The 3 December WhatsApp message, in which Mr Chakka indicates a desire to ‘make progress with the transfer’, is capable of being read in a similar way, as is the 14 December WhatsApp exchange in which Mr Chakka says he ‘need[ed] to know the other costs to settle’;

(b) in the 15 December emails, Mr Madanpotra also communicated a sense of urgency in ‘sort[ing] the transfer of [his] share in the [Ardmona property] before the end of [the] year’. Whilst the actions outlined in the email may be interpreted as being the steps required before an agreement could be reached (as contended by the defendant), they may equally represent what was needed to give effect to, and implement, an agreement already reached in principle between the parties. In other words, the identified steps may have been procedural or facultative in nature, with the essential terms of the bargain already agreed;

(c) the 15 December emails provoked concern by Mr Chakka about how Mr Madanpotra had treated certain costs associated with the transaction, including stamp duty. In the 15 December WhatsApp exchange, Mr Chakka reflected that he was ‘already [on] the [losing] side’ and said that since he had no choice he ‘agreed for [Mr Madanpotra’s] share…but not to cover his legal cost and stampduty [sic]’. He regarded Mr Madanpotra’s insistence on being reimbursed certain costs as ‘blatant looting’. On one view, this may indicate that Mr Chakka had reluctantly agreed to accept the shares and units instead of payment under the loan agreement but there remained disagreement between the parties about what costs were to be reimbursed to Biznerve / Mr Madanpotra as part of the transfer agreement. Whether the words used by Mr Chakka in the 15 December WhatsApp exchange amount to an admission that a binding agreement was struck is arguable; and

(d) Mr Chakka then re-engaged with both Mr Ahuja and Mr Madanpotra on 21 December 2022 and 22 December 2022, respectively, and asked them both for a breakdown of their costs. The 7 January email, in which Mr Chakka requested certain documentation, may be read as conveying an immediacy to the settlement of the transfer agreement. For example, Mr Chakka’s reference to his lawyer advising ‘on the manner in which the transfer of the shares needs to take place’ and his desire to provide the requested documentation to his lawyer to ‘ensure everything can go smoothly’, may indicate the parties had previously entered into the transfer agreement and were working towards its implementation and completion. Following his receipt of the requested documentation on 12 January 2023, Mr Chakka expressed his gratitude to Mr Ahuja and then asked whether Mr Ahuja wanted his share of reimbursed costs ‘before settlement or after settlement’, which is suggestive of the settlement of the transfer agreement being imminent.

Whilst I accept the WhatsApp messages and emails are open to differing interpretations as a matter of substance and form, the words expressed in the WhatsApp communications and emails referred to above are capable of supporting Biznerve’s contention that the parties had formally entered into the transfer agreement.

The evidence given by the parties can be considered against the backdrop of the objective contemporaneous documents. Whilst Mr Chakka explicitly denies the parties moved beyond the stage of negotiations, Mr Madanpotra has given evidence that over December 2022 and early January 2023 the parties determined to end the loan agreement and instead enter into the transfer agreement.

Support for Mr Madanpotra’s account can be found in the contents of the contemporaneous documents to which I have referred. Mr Madanpotra’s evidence is also somewhat corroborated by the 24 May 2023 Ahuja email in which Mr Ahuja states that during the October conference call, Mr Chakka elected for Candra to be repaid the loan monies owed by Biznerve by way of transfer of the one third interest in the Ardmona property held by Mr Madanpotra and his related entities. The 24 May 2023 Ahuja email also indicates that as part of the transfer agreement reached between the parties, Mr Chakka would reimburse Mr Madanpotra for all documented costs (for example, stamp duty and legal fees) and capital repayments.

I note that in the 14 December WhatsApp exchange, Mr Ahuja appears to reference the October conference call when he says that Mr Chakka agreed to bear the costs of the acquisition of the Ardmona property. The fact the October conference call occurred does not appear to be in dispute. Whilst Candra submits there is an absence of particulars as to when the transfer agreement was allegedly reached, in my view, the plaintiff’s evidence clearly points to the October conference call as being the key event at which the terms of the transfer agreement were discussed.

Given the absence of any formal signed document recording the terms of the transfer agreement, it will be necessary for a court to determine whether, in all the circumstances, the parties objectively intended to reach a binding agreement.[23] In Sully v Englisch,[24] Walker JA (with whom Niall and Sifris JJA agreed) adopted the synthesis of relevant principles given by the trial judge, Matthews AsJ (as her Honour then was), which I also gratefully adopt[25]:
[23]See Tasman Capital Pty Ltd v Sinclair [2008] NSWCA 248 at [26] (Giles JA, Young CJ in Eq and McColl JA agreeing); Sully v Englisch [2022] VSCA 184, [3] (Niall JA), [62] (Walker JA).
[24][2022] VSCA 184.
[25]Ibid [62], citing Matthews AsJ (as her Honour then was) in Englisch v Sully [2021] VSC 434, [34]–[39].

Whether an agreement is reached which is intended to be immediately binding falls to be determined objectively, having regard to the presumed or inferred intention of the parties. The parties’ objective intention is fact-based and to be determined having regard to all of the surrounding circumstances, including ‘by drawing inferences from [the parties’] words and their conduct’ and from the terms of the parties’ correspondence, such correspondence to be read in the light of the surrounding circumstances and having regard to the commercial context in which they were exchanged. The ultimate question to be answered is what each party, by its words or conduct, would have led a reasonable person in the position of the other party to believe.
The relevant intention or belief which is the subject of the Court’s assessment is that which obtained at the time an alleged agreement was made. The subjective intention or belief of a party is not determinative though it may be relevant.
In certain circumstances, regard may be had to the subsequent conduct of the parties. In Nurisvan Investment Ltd v Anyoption Holdings Ltd (‘Nurisvan’), [[2017] VSCA 141] the Victorian Court of Appeal distinguished between ‘cases involving contracts that are said to have come into existence as a result of an exchange of correspondence of other communication between the parties’, and cases involving an agreement purported to be contained in a single document, and noted that regard may be had to conduct subsequent to an alleged agreement made in the former kind of case. In [Queensland Phosphate Pty Ltd v Korda (as joint and several liquidators of Legend International Holdings Inc(in liq) [2017] VSCA 269], a case involving an exchange of emails said to evidence a binding contract, the Victorian Court of Appeal held that regard may be had to subsequent communications between the parties: ‘(1) in order to see what was important or essential to the transaction; (2) as admissions; and (3) as probative of the parties’ contractual intention’.
…
In circumstances such as the present, where the parties agreed that they would prepare a written document setting out terms of agreement, the Court may consider the three categories of contract set out by the High Court in Masters v Cameron [(1954) 91 CLR 353, 360]. These categories describe circumstances in which:
(a)the parties intend to be bound immediately, though expressing a desire to draw up their agreement in a more formal document at a later stage;
(b)the parties intend to be bound immediately, but may wish the operation of a particular clause or term to be delayed pending the drawing up of a more formal document; or
(c)the parties intend to postpone the creation of contractual relations until a formal contract is drawn up and executed.

…
For an agreement to be made with immediate binding force, notwithstanding that a written instrument may be executed at a later time, the original oral agreement must be complete, certain and enforceable on its own terms. Relative completeness and certainty of contractual terms may be taken as indicators of the parties’ intention to be bound, in addition to fundamental aspects of an agreement without which the Court cannot enforce the agreement. However, and as is recognised in Masters v Cameron, parties may in their negotiations leave aspects of an agreement to be decided at a later date while agreeing to be immediately bound in respect of other, concluded terms.

Candra, of course, contends the third category of case in Masters v Cameron is the applicable one here. Whether that is so, or whether a binding contract was reached under either of the first or second categories in Masters v Cameron, is ultimately a matter for trial. In ascertaining whether the parties objectively intended to reach a binding transfer agreement, a court will have regard to the surrounding circumstances in late 2022 and early 2023, including the relevant parties’ words and conduct and the terms of their correspondence (including subsequent conduct and correspondence via WhatsApp and email) and the commercial context in which that correspondence was exchanged. It will also be necessary to determine whether the terms discussed in the October conference call were complete, certain and enforceable, noting the parties may have left aspects of the transfer agreement to be decided at a later date (including the precise date of settlement), whilst agreeing to be immediately bound in respect of its essential terms. Further, whether Mr Madanpotra had the authority or capacity to deal with the Ardmona property and enter into an agreement involving 725 TBR and the 725 TBR Trust, which would likely have required the acceptance of third parties (including Sukhwinder Rakhra and Arvinder Rakhra), is a triable issue.

The fact that neither Mr Madanpotra nor Biznerve have sought specific performance of the transfer agreement in another forum is not determinative of the existence of a genuine dispute. The present application may represent a greater priority for Biznerve given the statutory presumption of insolvency which would otherwise arise under s 459C(2)(a) of the Act in the event of non-compliance with the demand. Similarly, the fact the Ardmona property remains on the market is not decisive. Mr Chakka has made it clear he does not consider himself bound by the alleged transfer agreement in any event. For the same reason, the apparent non-payment by Mr Chakka or Candra of the amounts referred to in the 15 December email tends to support, rather than undermine, the existence of a genuine dispute about whether there was a concluded transfer agreement.

As previously noted, the defendant submitted at the hearing that by virtue of ss 53(1)(b) or (c) of the PLA, the transfer agreement could only be valid if it was in writing, but it was not.

Section 53(1) of the PLA provides:

Instruments required to be in writing
(1)Subject to the provisions hereinafter contained with respect to the creation of interest in land by parol—
(a)no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by his agent thereunto lawfully authorized in writing, or by will, or by operation of law;
(b)a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will;
(c)a disposition of an equitable interest or trust subsisting at the time of the disposition must be in writing signed by the person disposing of the same, or by his agent thereunto lawfully authorized in writing or by will.

The introductory words of s 53(1) indicate the provision is directed to ‘the creation of interest in land by parol’. Assuming the transfer of shares in a company and units in a trust amounts to ‘the creation of interest in land’, I accept the plaintiff’s submission that the provision would only serve to negate evidence of a verbal agreement reached between the parties. Here, in addition to the content of conversations between the relevant parties, the plaintiff also relies upon contemporaneous written communications in support of the existence of the transfer agreement. In any event, the precise application of s 53(1) of the PLA to the alleged transfer agreement is a further incident of the genuine dispute between the parties and a question to be determined at a substantive hearing on the merits.

However, it is not for this Court to perceive that one party is more likely to succeed on the matters referred to above. The resolution of the ‘ultimate question’ – whether the debt claimed in the statutory demand is no longer owing because of the operation of the alleged transfer agreement – is properly the subject of a contested trial. For the above reasons, and despite the defendant’s suggestion, I do not consider it appropriate or practical for the Court to determine as a ‘short point of law’ whether there is a binding transfer agreement.

Assuming the parties agreed to be bound by the transfer agreement, there is also a genuine dispute as to its precise terms. In particular, there is a bona fide dispute about whether the agreement required Candra and/or Mr Chakka to reimburse to Mr Madanpotra and/or his associated entities for all documented costs incurred and for capital repayments. However, as previously noted, questions of contractual interpretation should not ordinarily be considered in an application to set aside a statutory demand under s 459G of the Act and there are no compelling reasons to do so in the present proceeding.

For the reasons I have expressed, I am satisfied the dispute is bona fide and truly exists in fact. The plaintiff has cleared the relatively low hurdle of establishing that a dispute exists on the balance of probabilities. That is sufficient for the purpose of the present application.

Section 459J(1)(b) ground

I will now address the independent s 459J(1)(b) ground relied upon by the plaintiff, namely: the affidavit accompanying the statutory demand (‘s 459E(3) affidavit’) does not comply with s 459E(3) of the Act, which is ‘some other reason’ to set aside the demand under s 459J(1)(b). This ground was expressly raised by Biznerve for the first time in its submissions in reply dated 16 June 2023. Section 459J is not referred to in the originating process or Mr Madanpotra’s affidavit sworn on 21 February 2023 in support (‘February Madanpotra affidavit’).

The body of the s 459E(3) affidavit, which was affirmed by Mr Chakka on 1 February 2023, relevantly reads:

1.I am the sole director and secretary of Candra Innovations Pty Ltd (ACN 158 094 869) (“the Creditor”).
2.Annexed and marked “A” is a true copy of an ASIC Current & Historical Organisation Extract dated 23 January 2023, for the Creditor.
3.…
4.Annexed and marked “C” is a true copy of a Loan Agreement between the Creditor and Biznerve Consulting and Accounting Pty Ltd (ACN 605 065 030) (“the Debtor Company”) dated 10 January 2022.
5.Between 13 January 2022 and 16 January 2022, the Creditor paid funds to the debtor Company in the sum of $288,000.00 representing the Principal of the loan of $300,000.00, less pre-payment of interest in the amount of $12,000.00 as interest in advance.
6.Since the loan was made, the Debtor Company has only paid the interest amount of $12,000.00 in advance and has made no payment of the Principal amount of $300,000.00.
7.I have calculated the interest as follows:

…
8.…
9.I believe that there is no genuine dispute about the existence or amount of the debt.
10.The total amount of the debt, being $338,367.12 is due and payable by the Debtor Company.

Legislative provisions and legal principles

Section 459E(3) of the Act states:

Unless the debt, or each of the debts, is a judgment debt, the demand must be accompanied by an affidavit that:
(a)verifies that the debt, or the total of the amounts of the debts, is due and payable by the company; and

(b) complies with the rules of court.

Rule 5.2 of the Supreme Court (Corporations) Rules 2013 (Vic) (‘Corporations Rules’), which was in force at the time the s 459E(3) affidavit was affirmed,[26] provided:

For the purposes of section 459E(3) of the Corporations Act, the affidavit accompanying a statutory demand relating to a debt, or debts, owed by a company must—
(a)be in accordance with Form 7 and state the matters mentioned in that Form;
(b)be made by the creditor or by a person with the authority of the creditor or creditors; and
(c)not state a proceeding number, or refer to a Court proceeding, in any heading or title to the affidavit.

[26]The Supreme Court (Corporations) Rules 2013 (Vic) were revoked by the Supreme Court (Corporations) Rules 2023 (Vic), which came into operation on 15 June 2023 (‘current Corporation Rules’). Clause 5.2 of the current Corporation Rules is essentially in the same terms.

Form 7, which was found in Schedule 1 to the Corporations Rules, relevantly contained the following instructions:

2.[If the deponent is not the creditor, state the facts entitling the deponent to make the affidavit, e.g. “I am authorised by the creditor(s) to make this affidavit on its/their behalf”].
3.[State the source of the deponent’s knowledge of the matters stated in the affidavit in relation to the debt or each of the debts, e.g. “I am the person who, on behalf of the creditor(s), had the dealings with the debtor company that gave rise to the debt”, “I have inspected the business records of the creditor in relation to the debtor company’s account with the creditor”].[27]

[27]Form 7 of the current Corporation Rules is in the same terms.

Section 459J of the Act is in the following terms:

(1)On an application under section 459G, the Court may by order set aside the demand if it is satisfied that:
(a)because of a defect in the demand, substantial injustice will be caused unless the demand is set aside; or
(b)there is some other reason why the demand should be set aside.

(2)Except as provided in subsection (1), the Court must not set aside a statutory demand merely because of a defect.

In Re MHC Pathology Pty Ltd,[28] I made the following observations about s 459J(1)(b) of the Act:

… [T]he authorities are clear that the ‘other reason’ required by s 459J(1)(b) cannot be a defect in the demand.[29] Something else is required. In Arcade Badge Embroidery Co Pty Ltd v DCT,[30] the Court of Appeal of the Australian Capital Territory found that the other reasons envisaged by s 459J(1)(b) include ‘conduct that may be described as unconscionable, an abuse of process, or which gives rise to substantial injustice’.[31] Whilst the discretion conferred by the provision is broad, a judge should not set aside a statutory demand under s 459J(1)(b) simply because she or he subjectively considers it fair to do so.[32] The Court’s power under the sub-section exists to maintain the integrity of the statutory demand procedure in Part 5.4 of the [Act] and to counter its subversion.[33]

[28](2020) 356 FLR 222, 245 [75].

[29]Spencer Constructions 458–9; Daewoo v Suncorp-Metway (2000) 33 ACSR 481, 493‑4 [44]–[45].

[30](2005) 157 ACTR 22 (Crispin P, Gray and Marshall JJ).

[31]Ibid 26 [27]. See also Hoare Bros Pty Ltd v Deputy Commissioner of Taxation (1996) 62 FCR 302 (Black CJ, Einfeld and Sackville JJ); Neutral Bay Pty Ltd v Deputy Commissioner of Taxation (2007) 25 ACLC 1341 (Keane, Holmes and Muir JJA).

[32]Meehan v Glazier Holdings Pty Ltd (2005) 53 ACSR 229, 240 [60]–[61] (Santow and Tobias JJ, and Young CJ in Eq).

[33]Rinfort Pty Ltd v Arianna Holdings Pty Ltd (2016) 111 ACSR 607, 633 [84] (Black J).

A failure by a creditor to properly verify matters required by the prescribed Form 7 affidavit may constitute ‘some other reason’ to set aside the statutory demand under s 459J(1)(b) of the Act.[34] Importantly, a failure of the supporting affidavit to comply with the rules of court is not a defect in the demand itself and is therefore not protected by s 459J(2).[35]
[34]See Portrait Express (Sales) Pty Ltd v Kodak (Australasia) Pty Ltd (1996) 20 ACSR 746 (Bryson J) (‘Portrait Express’) and IFA Homeware Imports Pty Ltd v Shanghai Jerrys Candle Co Ltd [2003] FCA 533 [22]–[26] (Tamberlin J) (failure to state belief that no genuine dispute in relation to the debt claimed); Main Camp, [23] (Barrett J) and Saferack Pty Ltd v Marketing Heads Australia Pty Ltd (2007) 214 FLR 393, 402-3 [39]-[41] (Barrett J) (‘Saferack’) (failure to verify that the debt is due and payable). See also Farid Assaf, Assaf’s Winding Up in Insolvency [8.53]-[8.57] and the additional authorities referred to therein.
[35]B & M Quality Constructions Pty Ltd v Buyrite Steel Supplies Pty Ltd (1994) 15 ACSR 433, 436 (McLelland CJ in Eq); Portrait Express, 752.

Whilst in the present case, the s 459E(3) affidavit fails to expressly state the source of Mr Chakka’s knowledge of the matters stated in that affidavit or the facts entitling him to make the affidavit on the defendant’s behalf, the authorities pull in different directions on whether such deficiencies mean the demand should be set aside for ‘some other reason’ under s 459J(1)(b).

In Portrait Express (Sales) Pty Ltd v Kodak (Australasia) Pty Ltd (’Portrait Express’),[36] the demand included amounts which were not due and payable until after the date of the demand. The affidavits in support of the demand (made by a director of the creditor) incorrectly verified that such amounts were in fact due and payable, which was misleading.[37] The supporting affidavits also failed to state the source of the deponent’s knowledge. Justice Bryson considered that the requirement for a deponent of an affidavit in support of a statutory demand to state the source of their knowledge and belief that the matters concerning the debts were true and that there was no genuine dispute, were of equal importance to the requirement that the verification be made by an authorised person.[38] His Honour determined to set the demand aside under s 459J(1)(b), stating:

…It is not enough that a responsible officer should support a statutory demand by oath or affirmation; the exercise must be carried out in a responsible way, and regard must be paid, with a strictness appropriate for verification, to the need to review the available information and observe whether what is being verified conforms to the information in the creditor’s own hands. If there had been a conscientious review of [the creditor’s] own records, the affidavits made in this case could not have been made…[39]

[36](1996) 20 ACSR 746.

[37]Ibid, 751.

[38]Ibid 752.

[39]Ibid.

Similarly, in Rapcivic Contractors Pty Ltd v Mapol Nominees Pty Ltd[40] (‘Rapcivic’), the affidavit accompanying a statutory demand was deposed to by the director of the creditor but, in failing to comply with s 459E of the Act and the equivalent of r 5.2 of the Corporations Rules, the affidavit did not state the source of the deponent’s knowledge of the matters set out or the facts entitling the deponent to make the affidavit. Chief Justice de Jersey held that the deficiencies in the supporting affidavit were sufficient to set aside the statutory demand for ‘some other reason’ within the meaning of s 459J(1)(b).[41] In doing so, his Honour stated:

This accompanying affidavit was in my view plainly deficient because the deponent failed to state the source of her knowledge, as she may have done in the manner suggested in paragraph three of form 7. That was a substantial deficiency, in the context of r 5.2 which is cast in mandatory terms requiring compliance with the form. The other deficiency, the failure to state that [the creditor company] had authorised the deponent to give the affidavit, was of arguably less significance, although it is not to be assumed that a director of a company ipso facto would have such authority. In light of r 5.4 read with form 7, I consider it is stretching the bow too widely to say that the omission may be supplied by a process of implication. This is an area of the law where, as is well known, there is need for substantial compliance with a raft of plain statutory requirements, if some of them are rather technical in nature.[42]

[40][2009] 1 Qd R 21 (de Jersey CJ).

[41]Ibid, 24.

[42]Ibid.

In LB Schofields One Pty Ltd v Trevet Property Pty Ltd (‘LB Schofields’),[43] Markovic J also set aside two statutory demands under s 459J(1)(b) because the accompanying affidavits did not state the source of the deponent’s knowledge about the matters set out, aside from a statement that the deponent was a director of the creditor company.[44] Nor was there any evidence that the deponent knew the matters deposed to because he had inspected the creditor’s records or had dealings with the debtor companies.[45] Other cases involving similar facts which resulted in the setting aside of the relevant demand include: Wildtown Holdings Pty Ltd v Rural Traders Company Ltd (‘Wildtown’)[46] and Buzd Pty Ltd v Acurix Networks Pty Ltd (‘Buzd’).[47]
[43][2015] FCA 1416.
[44]Ibid [99].
[45]Ibid.
[46][2002] WASCA 196 (Steytler, Templeman and Miller JJ).
[47][2019] WASC 152 (Sanderson M).

There are also cases where a statutory demand has been set aside under s 459J(1)(b) because the affidavit in support contained hearsay evidence and the deponent was one or more steps removed from the ultimate source of information contained within the affidavit. For example, in Standard Commodities Pty Ltd v Société Socinter Départment Centragel,[48] the deponent of the affidavit was a solicitor who stated he was instructed by the creditor’s overseas lawyers as to the matters set out in the affidavit. Justice Barrett (as his Honour then was) considered that ‘[t]he company receiving the demand is entitled to know that the information given both comes from and is attested to by the person claiming to be a creditor.’[49] However, because the affidavit could not be regarded as containing any statement sourced from the creditor as to the matters referred to in the affidavit, his Honour considered there was ‘some other reason’ under s 459J(1)(b) for setting the demand aside.[50] Likewise, in Faji (Australia) Constructions Pty Ltd v AC Professional Accounting Pty Ltd (‘Faji’),[51] Barrett J set aside a statutory demand where the supporting affidavit was affirmed by a solicitor who did not have first-hand knowledge of the matters deposed to.[52] Relevantly, his Honour observed that ‘[n]o one who might have been expected to have first-hand knowledge of those matters – for example, a company officer with access to the books and records of the defendant company – was put forward by the defendant company to give… sworn assurance’ as to the required matters.[53]
[48](2005) 54 ACSR 489.
[49]Ibid 494.
[50]Ibid.
[51][2009] NSWSC 180.
[52]Ibid [29]. See also Re Ozlift Pty Ltd [2018] VSC 824 [34]–[35] (Gardiner AsJ), where his Honour set aside a statutory demand under s 459J(1)(b) on a similar basis.
[53]Ibid.

Justice Barrett explored the question further in Saferack Pty Ltd v Marketing Heads Australia Pty Ltd (‘Saferack’).[54] There, the affidavit in support of the demand, sworn by a director of the creditor, did not: (a) depose that the debt was ‘due and payable’; (b) state a belief of the deponent as to the absence of genuine dispute about the debt; and (c) state the source of the deponent’s knowledge of the matters stated in the affidavit. Whilst Barrett J considered the first two deficiencies to be material departures from s 459E of the Act so as to warrant the exercise of the Court’s remedial jurisdiction under s 459J(1)(b),[55] his Honour did not consider the third deficiency to be of the same order. His Honour said this:

It is true that there is no explicit statement to the effect contemplated by para 3 of Form 7. But there is, I think, an implicit indication that it is Mr Wakeling’s status as a director that enables him to make the statements he makes. The position of a director of a company is, of course, distinguishable from the position of, for example, an employed clerk. The way in which a person of the latter kind has obtained information to which he or she deposes may well be of significance. In the case of a director, however, the right of full access to company records for the purpose of discharging directorial functions and the expectation that the director will have broad knowledge of the company’s affairs as a whole makes a statement of the source of knowledge less significant. It follows that while the absence of such a statement from Mr Wakeling’s affidavit represents a non-compliance with the requirement arising from para 3 of Form 7, the deficiency is not one which can reasonably be regarded as productive of injustice.[56]

[54](2007) 214 FLR 393.

[55]Ibid 403–5.

[56]Ibid 405.

In Walltech Building Systems Limited v Gerlich (‘Walltech’),[57] Hammerschlag J did not consider an affidavit in support of a statutory demand deposed to by the creditor’s solicitor to be deficient because the deponent made clear that the information was sourced from the creditor.[58] Likewise, in Blayney Wholesale Foods Pty Ltd v BIS Cleanaway Ltd (‘Blayney’),[59] whilst the deponent of the affidavit in support of the demand did not include an express statement as to the source of his knowledge, Barrett J considered that this was off-set by the fact the deponent was the national credit manager of the defendant.[60] His Honour was prepared to accept that someone occupying such a position had access to information concerning the defendant’s defaulting customers and debtors.[61]
[57][2008] NSWSC 1048.
[58]Walltech [17].
[59][2008] NSWSC 1146.
[60]Ibid [44].
[61]Ibid.

Key submissions by parties

Biznerve principally contends Mr Chakka’s statement in his s 459E(3) affidavit that ‘[t]he total amount of the debt … due and payable by the Debtor Company [Biznerve]’ is deficient because he does not provide the basis of such a statement,[62] and that such a deficiency cannot be overcome by the drawing of inferences.[63] Biznerve says the demand should be set aside under s 459J(1)(b) accordingly. It further contends the failure by Mr Chakka to state the facts entitling him to make the supporting affidavit on behalf of Candra is also a deficiency which justifies the setting aside of the demand.[64] It is submitted the mere fact Mr Chakka is a director of the creditor company is not, of itself, sufficient to overcome the mandatory requirements of Form 7.[65]
[62]Citing Buzd, [7]–[10].
[63]Citing Rapcivic, 24 [16].
[64]Ibid.
[65]Citing Buzd, [10].

Conversely, Candra argues that Biznerve’s failure to refer to s 459J in either its originating process or the February Madanpotra affidavit within the 21 day statutory period means it should now be shut out from raising the s 459J(1)(b) ground.[66] In the alternative, Candra seeks leave to rely on Mr Chakka’s affidavit of 19 June 2023, which is said to cure, or otherwise excuse, the deficiencies identified in the s 459E(3) affidavit.[67] In his most recent affidavit, Mr Chakka deposes he is the sole director and secretary of Candra and makes the affidavit from his own knowledge. He confirms he had the authority to swear previous affidavits on behalf of Candra, including the s 459E(3) affidavit and that he is the person who, on behalf of Candra, had dealings with Biznerve which gave rise to the debt. He confirms that for the reasons set out in the s 459E(3) affidavit, the total amount of the debt was and remains due and payable by Biznerve.
[66]Relying on the decision in Graywinter Properties Pty Ltd v Gas and Fuel Corporation Superannuation Fund (1996) 70 FCR 452 (Sundberg J).
[67]Relying on 115 Constitution Road Pty Ltd v Downey (2008) 220 FLR 216, 223 where Rein J observed by way of obiter that if evidence had been led establishing that one of two trustees of the defendant creditor trust fund did in fact have authority from the second trustee to issue a statutory demand either in his name or in their joint names, and that the absence of a reference to authority in the affidavit was an oversight, the breach of the New South Wales equivalent to r 5.2 of the Corporations Rules might be excused.

Relying on Barrett J’s decision in Saferack, Candra argues that any deficiency in the s 459E(3) affidavit was not productive of injustice or otherwise fatal. Further, it may be inferred that Mr Chakka had authority to make his affidavit because of his position as sole director of Candra.

By way of reply, Biznerve argues the deficiencies in the s 459E(3) affidavit go to the core issue of the validity of the demand and the Court ought not completely disregard those deficiencies given the explicit requirements under s 459E of the Act and r 5.2 of the Corporations Rules. Moreover, Mr Chakka’s affidavit of 19 June 2023 cannot remedy the prior deficiencies in the s 459E(3) affidavit because it was not served either with the demand or within a reasonable time before the expiration of the 21 days available to Biznerve to apply to set aside the demand.[68]
[68]Relying on Wollongong Coal Ltd v Gujarat NRE India Pty Ltd (2015) 104 ACSR 425 (Wigney J) (‘Wollongong Coal’).

Consideration of s 459J(1)(b) ground

Despite the lack of express reference to the s 459J(1)(b) ground in the originating process and the February Madanpotra affidavit, I consider the ground was sufficiently raised within the requisite 21 day statutory period because it is evident on the face of a document exhibited to the February Madanpotra affidavit; namely the s 459E(3) affidavit itself.[69] In this way, the February Madanpotra affidavit raises by ‘necessary or reasonable inference’ the s 459J(1)(b) ground and can be described as an affidavit which ‘supports’ the application filed with the Court within the statutory period.[70]
[69]Saferack, 400.
[70]Sceam Construction Pty Ltd v Clyne (2021) 64 VR 404, 415 [38], 417 [42], 421 [62] (Ferguson CJ, Sifris and Walker JJA).

In affirming the s 459E(3) affidavit in support of the demand, Mr Chakka exhibits an ASIC extract for the defendant, which reveals Mr Chakka is its sole director and shareholder and its secretary. He also exhibits the loan agreement, which is the basis of the debt claimed. It may reasonably be assumed that, in preparing the s 459E(3) affidavit, Mr Chakka reviewed the loan agreement and is familiar with its terms, including the principal sum advanced and the entitlement to, and calculation of, interest. Further, it was Mr Chakka who signed the loan agreement on behalf of the defendant. He is the person who, on behalf of the defendant, had the relevant dealings with the plaintiff that gave rise to the purported debt. As the sole director and secretary of the defendant, Mr Chakka can also be expected to have had access to the company’s books and records at the time the s 459E(3) affidavit was made. It can therefore be reasonably inferred that Mr Chakka’s knowledge about the matters he deposes to were sourced from the defendant creditor, and that he was authorised to make the affidavit.

Having regard to the particular circumstances set out above, it is possible to distinguish the authorities of Portrait Express, Rapcivic, LB Schofields, Wildtown and Buzd. However, even if I am wrong and the present matter cannot be distinguished on the facts, I prefer the pragmatic approach taken by Barrett J in Saferack and Blayney (and in Faji, by way of obiter) and by Hammerschlag J in Walltech, as those decisions are not plainly wrong.

In my view, the failure of Mr Chakka to explicitly state: (a) the source of his knowledge of the matters set out in the affidavit; and (b) the facts entitling him to make the affidavit on the defendant’s behalf, does not undermine or subvert the integrity of the statutory demand procedure in Pt 5.4 of the Act. Whilst it would clearly have been preferable for Mr Chakka to state those matters, the plaintiff was not denied the entitlement to know that the information given in the s 459E(3) affidavit came from, and was attested to by, the person claiming to be a creditor. Nor are the deficiencies in the affidavit of an appropriate seriousness to warrant the setting aside of the demand under s 459J(1)(b).

In light of the above, it is unnecessary for me to determine whether the defendant is entitled to rely on Mr Chakka’s updating affidavit of 19 June 2023 to address the deficiencies in the s 459E(3) affidavit. However, were I required to decide the point, I would not allow the updating affidavit as it was served outside the 21 day statutory period available to the plaintiff to make its application to set aside the demand.[71]
[71]See Wollongong Coal, 441; Ambassador at Redcliffe Pty Ltd v Emerald Constructions Australia Pty Ltd [2007] 2 Qd R 199 [21]; Re Unity Resources Group Australia Pty Ltd [2015] NSWSC 1174, [12] (Brereton J). See also Assaf’s Winding Up in Insolvency [8.62]

Conclusion

In the result, whilst Biznerve has not succeeded on its s 459J(1)(b) ground, it has nevertheless established the existence of a genuine dispute in relation to the debt the subject of the statutory demand for the purpose of s 459H(1)(a) of the Act. Accordingly, the demand will be set aside.

I will hear the parties on the question of costs.

SCHEDULE OF PARTIES

S ECI 2023 00658
BETWEEN:
BIZNERVE CONSULTING AND ACCOUNTING PTY LTD (ACN 605 065 030)	Plaintiff
- v -
CANDRA INNOVATIONS PTY LTD (ACN 158 094 869)	Defendant

Shares held in 725 TBR	Units held in the 725 TBR Trust
Biznerve Family Pty Ltd	10	10
9SA Pty Ltd	10	10
Sukhwinder Rakhra	5	10
Arvinder Rakhra	5	10

[2023] VSC 737

11 December 2023