Re Phasegen7 Pty Ltd
[2025] VSC 505
•20 August 2025
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2025 02941
IN THE MATTER of PHASEGEN7 PTY LTD (ACN 643 599 071)
BETWEEN:
| PHASEGEN7 PTY LTD (ACN 643 599 071) | Plaintiff |
| v | |
| SOLUTIONS HIRED PTY LTD (ACN 632 065 377) | Defendant |
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JUDGE: | Gobbo AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 22 July 2025 |
DATE OF JUDGMENT: | 20 August 2025 |
CASE MAY BE CITED AS: | Re Phasegen7 Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2025] VSC 505 |
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CORPORATIONS — Application to set aside creditor’s statutory demand — Whether the company has an offsetting claim — Corporations Act 2001 (Cth), s 459H(1)(b) — Britten Norman Pty Ltd v Analysis & Technology Australia Pty Ltd (2013) 85 NSWLR 601, applied — TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd (2008) 66 ACSR 67, applied — No offsetting claim.
CORPORATIONS — Winding up — Creditor’s statutory demand — Application to set aside creditor’s statutory demand — Whether there is some other reason — Corporations Act 2001 (Cth), s 459J(1)(b) — Arcade Bridge Embroidery Co Pty Ltd v The Deputy Commissioner of Taxation (2005) 157 ACTR 22; Kisimul Holdings Pty Ltd v Clear Position Pty Ltd [2014] NSWCA 262, applied — Some other reason not found.
PRACTICE AND PROCEDURE — Application to rely on evidence out of time — Re Tarrawarra Yarra Valley Holding Pty Ltd [2025] VSC 293, applied — Application refused.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J Petras | PCL Lawyers |
| For the Defendant | Mr B Carew | Colin Biggers & Paisley Lawyers |
Contents
The application
Background
Legal principles
Civil Procedure Act 2010 (Vic)
Plaintiff’s evidence and submissions
Offsetting claim
Some other reason
Defendant’s evidence and submissions
Analysis
Admissibility
Offsetting claim
Conclusion
HER HONOUR:
The application
By originating process filed 26 May 2025, the plaintiff sought orders under s 459G of the Corporations Act 2001 (Cth) (‘Act’) to set aside the defendant’s statutory demand dated 17 April 2025 (‘Demand’).
The plaintiff sought to rely on the:
(a)affidavit of Tiklik Lee filed 26 May 2025 (‘First Lee Affidavit’);
(b)affidavit of Eva-Lyn Moir filed 4 July 2025 (‘Moir Affidavit’);
(c)affidavit of Tiklik Lee filed 4 July 2025 (‘Second Lee Affidavit’);
(d)affidavit of Hugh McDermott filed 11 July 2025 (‘McDermott Affidavit’);
(e)affidavit of Tiklik Lee filed 18 July 2025 (‘Third Lee Affidavit’); and
(f)written outline of submissions filed 4 July 2025.
At the commencement of the hearing, the plaintiff withdrew the affidavit of Huw Christopher Wilkinson filed 4 July 2025 on the basis that the plaintiff accepted it contained evidence that was inconsistent with evidence filed in a previous related proceeding (‘Wilkinson Affidavit’).[1]
[1]Transcript of Proceedings (22 July 2025) 1.34–2.5.
The defendant opposed the application and relied on the affidavit of Andrew Price Williams filed 20 June 2025 (‘Williams Affidavit’) and its written outline of submissions filed 11 July 2025.
The affidavits in sub-paragraphs 2(b) to 2(e) above were filed out of time. No application for leave to rely on these affidavits was made prior to the hearing before me. The defendant objected to the plaintiff having leave to rely on these affidavits on the basis that they were filed late and by reason of this, the defendant submitted that it was prejudiced. The McDermott Affidavit and the Third Lee Affidavit were filed after the defendant had filed its written submissions. The defendant otherwise objected to the admissibility of various parts of the affidavits in sub-paragraphs 2(b) to 2(e) above.
I refused leave for the plaintiff to rely on the Moir Affidavit, the Second Lee Affidavit, the Third Lee Affidavit and the McDermott Affidavit (‘Late Affidavit Material’). I will return to this issue in my reasons which follow. Accordingly, the only evidence of the plaintiff before me at the hearing was the First Lee Affidavit.
Background
The Demand claims that the plaintiff owes the defendant the sum of $1,695,625.49, comprised as follows:
(a)judgment debt in the County Court of Victoria dated 1 September 2023 (Order Cl-23-04748) in the sum of $22,789.78;
(b)judgment debt in the County Court of Victoria dated 1 September 2023 (Order Cl-23-04751) in the sum of $358,288.32;
(c)judgment debt in the County Court of Victoria dated 1 September 2023 (Order Cl-23-04763) in the sum of $1,170,915.07; and
(d)judgment debt in the County Court of Victoria dated 7 September 2023 (Order Cl-23-04755) in the sum of $143,632.32.
The judgment debts relate to monies owed by the plaintiff to the defendant for advisory and project management services provided by the defendant in or around April 2021 until February 2022 for the construction of a power station. The project was more broadly known as the Hazelwood power project (‘Project’).
The plaintiff’s primary contention was that the Demand ought to be set aside on the basis that it is unconscionable, an abuse or process and/or gives rise to a substantial injustice principally because:
(a)the plaintiff has a counterclaim against the defendant which is likely to exceed the amount that is currently owing by the plaintiff to the defendant; and
(b)the circumstances in which the defendant obtained its judgments against the plaintiff were such to render each of those judgments liable to be set aside upon judicial review.[2]
[2]Affidavit of Tiklik Lee filed 26 May 2025, [5] (‘First Lee Affidavit’).
The plaintiff did not pursue the ground outlined in sub-paragraph 9(b).[3] I will return to this point later in my reasons.
[3]Transcript of Proceedings (22 July 2025) 16.2–16.6.
Legal principles
The legal principles applicable to applications under s 459G of the Act are well established and uncontroversial. A company seeking to set aside a statutory demand on the basis that there is a genuine dispute bears the onus of establishing, on the balance of probabilities, that such a dispute exists.[4] The Court of Appeal in Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (in liq)[5] summarised the principles applicable in applications to set aside statutory demands as follows:[6]
47.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.
48.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.
49.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.
50.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.
51.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.
[4]IMO Speedy Loans Pty Ltd [2014] VSC 273, [17] citing Farid Assaf, Statutory Demand and Winding up in Insolvency (LexisNexis Australia, 2nd ed, 2012).
[5][2015] VSCA 330 (‘Malec’).
[6]Ibid, [47]–[51] (citations omitted).
Offsetting claims are dealt with in s 459H of the Act which provides:
(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.
…
(5) a genuine claim that the company has against the respondent by way of counterclaim, set-off or cross-demand (even if it does not arise out of the same transaction or circumstances as a debt to which the demand relates).
The principles in relation to what constitutes an offsetting claim are well known and settled.
In TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd,[7] Dodds-Streeton JA referred to the principles that are to be taken into account in determining a genuine dispute and offsetting claim. Her Honour said:[8]
As the terms of s 459H of the Corporations Act and the authorities make clear, the company is required, in this context, only to establish a genuine dispute or off-setting claim. It is required to evidence the assertions relevant to the alleged dispute or off-setting claim only to the extent necessary for that primary task. The dispute or off-setting claim should 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. As counsel for the appellant conceded however, it is not necessary for the company to advance, at this stage, a fully evidenced claim. Something ‘between mere assertion and the proof that would be necessary in a court of law’ may suffice…
[7](2008) 66 ACSR 67 (Dodds–Streeton JA, Neave JA agreeing, [1] and Kellam JA agreeing, [2]).
[8]Ibid, 79 [71] (Dodds-Streeton JA).
For a statutory demand to be set aside by reason of an offsetting claim, the offsetting claim must be genuine.[9] The authorities make clear that the threshold to establish a genuine offsetting claim is not high, and the Court should hesitate to resolve legal questions other than straightforward ones of this character.[10] For the court to be satisfied as to genuineness, the plaintiff must establish:
(a)that the claim ‘has sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion’;[11]
(b)by evidence, that the offsetting claim has been made in good faith and not merely constructed in response to the pressure represented by a statutory demand.[12]
[9]Malec (n 5), [49] (citations omitted); In2Ply Pty Ltd v Amerind Pty Ltd (in liq) (recs and mgrs apptd) (2014) 32 ACLC 14–075, 939–940 [31] citing Diploma Construction (WA) Pty Ltd v KPA Architects Pty Ltd [2014] WASCA 91.
[10]Malec (n 5), [47] (citations omitted).
[11]Malec (n 5), [49] (citations omitted).
[12]Ligon 158 Pty Ltd v Huber (2016) 117 ACSR 495, 499.
In Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd[13] (‘Britten-Norman’), the New South Wales Court of Appeal identified some further principles applicable to establishing an offsetting claim:
(a)section 459H requires the Court to be satisfied that there is a ‘serious question to be tried’, or ‘an issue deserving of a hearing’ as to whether the company has such a claim against the creditor;[14]
(b)the claim must be made in good faith with good faith understood to mean that the offsetting claim was arguable on the basis of facts that were asserted ‘with sufficient particularity to enable the Court to determine that the claim is not fanciful’;[15]
(c)there must be evidence that satisfies the Court that there is ‘a serious question to be tried’, or ‘an issue deserving of a hearing’, or a ‘plausible contention requiring investigation’ of the existence of either a dispute as to the debt or an offsetting claim;[16]
(d)evidence sufficient to satisfy this test, given the time period in which the affidavit must be filed, cannot and need not conclusively prove the claim or otherwise be incontrovertible or substantially non‑contestable;[17]
(e)hearsay evidence may be admissible provided evidence of the source of the hearsay is adduced (see s 75 Evidence Act);[18]
(f)the Court’s concern is to determine whether there was plausible evidence to establish the existence of a genuine dispute, not whether the evidence was disputed or even likely to be accepted on a final hearing of any such claim;[19]
(g)the specified limits of the Court’s examination are the ascertainment of whether there is a ‘genuine dispute’ and whether there is a ‘genuine claim’. It is often possible to discern the spurious, and to identify mere bluster or assertion. But beyond a perception of genuineness (or the lack of it) the Court has no function.[20]
[13](2013) 85 NSWLR 601.
[14]Ibid, [30] (citations omitted).
[15]Ibid.
[16]Ibid, [36].
[17]Ibid.
[18]Ibid, [37].
[19]Ibid, [47] (citations omitted).
[20]Ibid, [48] (citations omitted).
Similar observations were made by Barrett J in Panel Tech Industries (Australia) Pty Ltd v Australian Skyreach Equipment Pty Ltd (No 2),[21] who held: [22]
Once the company shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow. The court does not engage in any form of balancing exercise between the strengths of competing contentions. If it sees any factor that, on rational grounds, indicates an arguable case on the part of the company, it must find that a genuine dispute exists, even where any case apparently available to be advanced against the company seems stronger.
[21][2003] NSWSC 896.
[22]Ibid, [18].
Additionally, the offsetting claim must be capable of being quantified for the purpose of the exercise required of the court by s 459H(2) of the Act. In calculating the ‘substantiated amount’, the following principles also apply:[23]
(a) a genuine offsetting claim ‘means a claim on a cause of action advanced in good faith, for an amount claimed in good faith’. In this context, ‘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;
(b) there must be some evidence to indicate the nature of the offsetting claim and the way in which it is calculated, including any loss which is said to arise;
(c) however, it is not necessary to particularise the offsetting claim to the last ‘dollar and cent’. The evidence need only be sufficient for the Court to make an estimate of the amount of the offsetting claim, which must be capable of being quantified in monetary terms.
[23]Re Simmoll Pty Ltd [2021] VSC 693, [15] (citations omitted).
Section 459J(1)(b) of the Act provides that:
Setting aside demand on other grounds
(1) On an application under section 459G, the Court may by order set aside the demand if it is satisfied that:
(b) there is some other reason why the demand should be set aside.
As to s 459J(1)(b) of the Act, the authorities are clear that the ‘other reason’ required by s 459J(1)(b) cannot be a defect in the demand. Something else is required. In Arcade Badge Embroidery Co Pty Ltd v DCT,[24] 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’.[25] Whilst the discretion conferred by the provision is broad, the Court should not set aside a statutory demand under s 459J(1)(b) simply because it subjectively considers it fair to do so. The Court’s power under the subsection exists to maintain the integrity of the statutory demand procedure in Part 5.4 of the Act.
[24](2005) 157 ACTR 22.
[25]Ibid, 26 [27] (Crispin P, Gray and Marshall JJ) citing Hoare Bros Pty Ltd v Commissioner of Taxation (1996) 62 FCR 302 at 317 to 318. See also Kisimul Holdings Pty Ltd v Clear Position Pty Ltd [2014] NSWCA 262, [27] (Barrett JA).
In addition, in Meehan v Glazier Holdings Pty Ltd,[26] the Court said:
It is not possible to set out fully the cases that might fall within s 459J(1)(b) nor if it were possible would it be wise to do so. The sort of case that will be covered will include gross defects in supporting affidavits and documentation and where the alleged creditor has made statements or representations relating to the statutory demand which have reasonably induced a change of the alleged debtor’s position.
[26](2005) 53 ASCR 29.
Civil Procedure Act 2010 (Vic)
Before moving to the substantive issues, I wish to make some observations about the manner in which the plaintiff has conducted this litigation.
The proceeding was listed for a first directions hearing before me on 13 June 2025.
By email dated 11 June 2025, my Chambers received a joint communication from the parties attaching a proposed minute of consent order which sought to timetable the proceeding to a final hearing.
On 13 June 2025, I made orders (‘June Orders’) giving effect to the parties’ proposed minute of consent and the parties were subsequently excused from appearing before me at the directions hearing on 13 June 2025. The final hearing of the application was listed before me on 22 July 2025.
The June Orders required the defendant to file any affidavit material in opposition to the application by 4:00pm on 20 June 2025, and the plaintiff to file any affidavit material in reply by 4:00pm on 27 June 2025.
In advance of any non-compliance with the timetable set by my June Orders, the parties were, by virtue of paragraph 7 of the June Orders, required to contact my Chambers with a proposed amended timetable.
On 4 July 2025, the plaintiff purported to file three affidavits being the Moir Affidavit, the now withdrawn Wilkinson Affidavit and the Second Lee Affidavit. Additionally, the McDermott Affidavit was filed on 11 July 2025, and the Third Lee Affidavit was filed on 18 July 2025. None of these affidavits were filed in accordance with my June Orders, and no correspondence was received by Chambers to explain the plaintiff’s non-compliance.
On 18 July 2025, my Chambers issued the following correspondence to the parties which was directed at the solicitors for the plaintiff:
…
Chambers notes that your firm has purported to file the following affidavits:
(a) affidavit of Eva-Lyn Moir filed 4 July 2025;
(b) affidavit of Huw Christopher Wilkinson filed 4 July 2025;
(c) affidavit of Tiklik Lee filed 4 July 2025;
(d) affidavit of Hugh McDermott filed 11 July 2025; and
(e) affidavit of Tiklik Lee filed 18 July 2025.
Her Honour’s orders made 13 June 2025 (by consent) permitted your client to file and serve any affidavit material in reply by 27 June 2025. None of the above affidavits have been filed in accordance with her Honour’s orders and no application has been received for leave to file them out of time. Additionally, the affidavits referred to in subparagraphs (d) and (e) above have been filed after the time for the filing of written submissions.
Orders of this Court are not guidelines and require strict compliance. In the event that your client wishes to rely on these affidavits, you will need to address the non-compliance with her Honour’s orders.
…
No response was received to Chambers’ email and no explanation as to why this was the case was provided at the final hearing on 22 July 2025.
At the final hearing before me, counsel for the defendant tendered a document comprising an email exchange between PCL Lawyers, the lawyers for the plaintiff, and Colin Biggers & Paisley Lawyers, the lawyers for the defendant (‘PCL Email’).[27] The PCL Email dated 10 July 2025, which attached a copy of my June Orders, was in the following terms.
[27]Defendant’s Exhibit 1.
Dear Colleagues,
We refer to the above proceedings and the orders of 13 June 2025 (attached).
We have today received additional instructions which goes directly to the question of the calculations of the counterclaim against your client which is relied upon as a component of our client’s set-aside application.
The purpose of this communication is to notify you of our client’s intention to file further affidavit material comprising calculations as to that quantum.
Accordingly, we anticipate that you may not wish to finalise the submissions due to be filed tomorrow and are mindful of avoiding any costs complications as to same.
Accordingly, we seek your consent to propose orders for the filing of further affidavit material, and subsequent orders for the delayed filing of your client’s submissions. We anticipate this will also delay the final hearing of the matter. The affidavit is to be filed by 4pm on Wednesday 16 July 2025.
Our present view is that an affidavit in reply will likely not be necessary as the affidavit will set out the information which informs the figure contained in the Tiklik Affidavit dated 4 July 2025.
Please confirm your consent to the above adjustment to the timetable by no later than 4pm today 10 July 2025, and we will prepare orders accordingly.
Should your client be minded to refuse our proposed adjusted timetable, take note that we will be filing the affidavit material irrespective of the refusal and are of the view that as the foreshadowed affidavit goes directly to the question of quantifying the counterclaim, any application for leave to rely on the affidavit material will be granted.
We reserve our client’s rights as to same.
In Re Tarrawarra Yarra Valley Holding Pty Ltd[28] (‘Tarrawarra’), Delany J made a number of observations in relation to the operation of the Civil Procedure Act 2010 (Vic) (‘CPA’) and parties seeking to file and serve late evidence, particularly in the context of applications to set aside statutory demands. Delany J held that:
The filing and service of late evidence, particularly voluminous evidence as occurred in this case on the evening before the hearing is unacceptable. Unless exceptional circumstances exist it is inappropriate for a judicial officer to permit reliance upon such material filed blatantly outside the time fixed by previous orders. To permit reliance on such evidence is disruptive, oppressive to the Court and to the other parties and is inconsistent with the overarching obligations in the CPA.
The late filing of evidence and submissions is not consistent with the overarching obligation upon parties and legal practitioners to use reasonable endeavours to act promptly and to minimise delay imposed by s 25 of the CPA. It is disruptive to other parties to litigation when orders for the filing and service of evidence and submissions are not complied with and yet the non-complying party serves evidence and submissions out of time upon which it seeks to rely at the hearing. In the absence of an order prohibiting reliance on those materials, the responding party is placed in a very difficult position and may have no real alternative but to respond to the materials filed out of time. That process often leads to a series of ‘rounds’ of evidence and submissions. It increases the volume of materials. It increases the costs. It does not serve to narrow the issues in dispute as parties and practitioners are obliged to do by s 24 of the CPA. Because of the resulting increased volume and the disjointed nature of the materials when ’rounds’ of evidence and submissions are filed, an undue burden is imposed on judicial officers charged with hearing and determining such applications.
Pursuant to s 8 of the CPA the Court is required to seek to give effect to the overarching purpose, stated in s 7, namely to facilitate the just, efficient, timely and cost‑effective resolution of the real issues in dispute.
Orders of the Court are not guidelines. That is particularly the case in time sensitive applications such as an application to set aside a statutory demand.[29]
[28][2025] VSC 293.
[29]Ibid, [45]–[48].
I respectfully adopt the observations of Delany J.
In Amirbeaggi (Trustee), in the matter Billiau (Bankrupt) v Billiau,[30] Judge Given made the following observations in relation to the obligation on parties to comply with Court orders, which I also respectfully adopt:
Orders made by the Court, whether by consent or otherwise, must be complied with.
Any party who apprehends an inability to so comply should approach the Court in advance (and in accordance with the terms of any specific liberty to apply) proffering an explanation for the foreshadowed inability to comply. It should be a rare state of affairs indeed in which the Court is approached for dispensation after orders have been breached. In such a circumstance, an explanation is not only warranted, but essential, to explain to the Court why the orders have been breached and to seek any further indulgence. The aforementioned explanations will most appropriately be proffered by Affidavit. When exercising a liberty to apply, the terms of that liberty should be observed: it is a liberty to “apply” for relisting, not a liberty to submit alternate orders for automatic processing.[31]
[30][2023] FedCFamC2G 949.
[31]Ibid, [10]–[11].
In this matter, not only were my June Orders not complied with, they were wilfully ignored in circumstances where one working day before the day of the hearing the plaintiff’s solicitor had determined to file material irrespective of the terms of my June Orders or any objection from the defendant and to do so in circumstances where:
(a)the Court was not informed that further material was to be filed;
(b)there was no application for leave to extend the time for compliance with or to vary my June Orders;
(c)the Court’s email sent to the parties on 18 July 2025 was simply ignored; and
(d)there was no formal application for leave made at the commencement of the hearing before me supported by affidavit or even an informal oral application.
Following the tendering of the PCL Email, I sought an explanation from the plaintiff’s counsel as to why his instructing solicitors had unilaterally seen fit to not only ignore my orders but to presuppose what the Court might do in relation to the Late Affidavit Material. I also raised concerns with counsel for the plaintiff as to other aspects of the application, including the plaintiff’s contention that the circumstances in which the judgments in the County Court of Victoria were obtained were such as to render each of those judgments liable to be set aside upon judicial review. This is a matter to which I will return in my reasons.
In response, the plaintiff’s counsel informed the Court that he had received ‘strict instructions’ to proceed,[32] but that he was only pressing the offsetting claim.[33] Counsel otherwise informed me that his instructor had sent an email to my Chambers. That email from PCL Lawyers, received at 11:05am during the course of the hearing, was in the following terms:
…
I refer to the hearing presently before the Her Honour, Associate Justice Gobbo in the above proceeding.
It has been brought to my attention by Counsel briefed in the matter that the Court seeks an explanation as to the content of my email dated 10 July 2025 sent by me to Patrick Smith of Colins Bigger’s Paisley (my 10 July email) as attached.
By way of explanation, it was not my intention to purport to bind the Court in any way.
The intention of my email was to convey that I intended to seek leave of the Court to file further affidavit material on behalf of our client, Phasegen7 Pty Ltd and had confidence in the prospects of success of that application.
I apologise to the Court for failing to properly articulate the intention of my email and inadvertently conveying that the Court would be required to follow any particular course.
Yours faithfully,
...
[32]Transcript of Proceedings (22 July 2025) 15.31–16.1.
[33]Ibid, 16.2–16.6.
Respectfully, the explanation offered by PCL Lawyers neither accords with the earlier explanation offered by counsel during the hearing, nor the explanation offered in two of the late affidavits.
As to the general explanation that was offered by the plaintiff for the late filing of its affidavit material, the plaintiff’s counsel submitted at the start of the hearing, that the issue rested with the client and not his instructors.[34]
[34]Transcript of Proceedings (22 July 2025) 1.22–1.32.
Counsel for the plaintiff further submitted that the McDermott Affidavit was filed late as the witness was uncontactable while on holiday in Italy.[35] The affidavit was purportedly witnessed electronically with the deponent in Italy. Accordingly, it must have been the case that the witness was contactable at some point in Italy. When the apparent difficulty contacting the witness became known to the plaintiff and its solicitors is unexplained. There was also no indication as to if or when this issue was made known to the defendant’s solicitors.
[35]Ibid, 2.14–2.16.
The plaintiff otherwise sought to rely on what it contended was an explanation set out at paragraph 14 of the Third Lee Affidavit, namely:
I did not provide this level of information in my first and second affidavits because I was concerned about disclosing confidential information that could be further used against the plaintiff by the defendant and its director. To a significant extent, this is still a concern that I have. My judgment about the issue was also affected by the extreme personal stress that I have experienced in relation to this matter.
If Mr Lee genuinely held a concern as to the alleged confidentiality of the matters he ultimately deposed to in the Third Lee Affidavit, there was no reason why orders could not have been sought by Mr Lee’s solicitors at the time of filing the First Lee Affidavit for confidentiality orders pursuant to r 28.05 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic). Put another way, if the only reason that material was excluded from the First Lee Affidavit was an alleged concern as to confidentiality, that material could have been included in the First Lee Affidavit and appropriate orders sought to deal with any concerns around confidentiality. This did not occur.
With no criticism of counsel, I do not accept the explanations in respect of the McDermott Affidavit or the Third Lee Affidavit. My June Orders contained a term that in the event of any non-compliance or anticipated non-compliance, the parties are, prior to the non-compliance arising, to contact my Chambers with a proposed minute of consent varying the timetabling provided for in the June Orders. This did not occur.
Save for the plaintiff’s explanations which I have set out above, and which I reject, there were no explanations offered by the plaintiff’s solicitors in respect of the late Moir Affidavit, Wilkinson Affidavit and Second Tiklik Lee Affidavit.
Additionally, I do not accept the explanation proffered by PCL Lawyers via email during the hearing. If, as alleged, it was the plaintiff’s intention to seek leave, no such application was made, even after the email from my Chambers on 18 July 2025.
As I indicated to the parties during the course of the hearing, the plaintiff’s application for leave to rely on the Late Affidavit Material is refused. I provided short reasons in Court and indicated that more fulsome reasons would be provided in my judgment. My reasons for so ruling follow:
(a)no satisfactory explanation for the delay and non-compliance with my June Orders has been provided;
(b)save for the explanation provided regarding the McDermott Affidavit, which I reject, and the matters in the final paragraph of the Third Lee Affidavit, which I also reject, there was no explanation offered at all as to why the Late Affidavit Material could not have been filed in accordance with my June Orders;
(c)the events to which the Late Affidavit Material relate date back many years and have been the subject of extensive dealings between the parties, including in relation to the entry of four County Court of Victoria judgments. In this regard, I note that exhibited to the Williams Affidavit are eight pieces of correspondence sent from the plaintiff’s solicitors to the defendant’s solicitors between 14 November 2022 and 15 August 2023, which not only acknowledge that the debts which are the subject of the Demand are due and payable but which also make representations, on instructions from the plaintiff, that the debts will be paid promptly.[36] There is not a single suggestion in any of the plaintiff’s solicitors’ correspondence of the matters now raised, at the last minute, in purported answer to the application;
(d)the Late Affidavit Material was served by the plaintiff in circumstances where it had failed to comply with my June Orders. Having been notified of the breach of my June Orders by my Chambers and invited to advise Chambers of its intention, the plaintiff did not do so. Rather, the email from Chambers went unanswered;
(e)it is self-evident from the PCL Email that the plaintiff’s solicitors chose to wilfully ignore my June Orders;
(f)there is arguably nothing so arrogant, as to ignore Court orders and communications from Chambers and to simply presume, that leave to rely on the Late Affidavit Material will be permitted, more so where there are objections from the defendant as to prejudice and in the absence of an actual application for leave being made;
(g)it is unacceptable to the Court and to the defendant to serve a substantive affidavit in the form of the Third Lee Affidavit, which comprises dense factual matters, at the last minute, one business day before the hearing, and after the exchange of written submissions. The delayed service of the Late Affidavit Material is inconsistent with the overarching obligation in s 25 of the CPA owed by the plaintiff and by legal practitioners acting on its behalf to act promptly and to minimise delay; and
(h)Delany J’s decision in Tarrawarra plainly warns of the consequences of non-compliance with Court orders, where his Honour states ‘[i]n future cases involving applications to set aside statutory demands timetabling orders will include a warning in ‘Other Matters’ that without an application by summons supported by an affidavit explaining the delay no party will be permitted to rely upon evidence or submissions filed outside the time specified in those orders’. Whilst no such warning was included in my June Orders, the risk that leave might not be granted for late material (particularly in the absence of an application for leave being made on summons and supported by an affidavit) must have been known to the plaintiff and its legal representatives, as they too must be aware of their obligations under the CPA; and
(i)finally, on 11 July 2025, the Court published a Notice to Profession (‘Notice’) dealing with applications to set aside statutory demands. Whilst the Notice only applies to applications filed after 21 July 2025, it nonetheless serves as a warning of the need for practitioners and parties to give effect to the overarching purpose of the CPA by facilitating the just, efficient, timely and cost-efficient resolution of set aside applications and specifically warns of the possibility that, in the event of non-compliance with the timetable, the Court may, of its own motion, make a self-executing or ‘unless’ order disposing of the set aside application. The Notice was published prior to the hearing before me and ought to have also served as a warning to the plaintiff and its solicitors of their respective obligations under the CPA, and should have alerted them to the need to make a formal application for leave and to do so in a timely fashion.
[36]Affidavit of Andrew Price Williams filed 20 June 2025, [9]–[14].
There is a further issue which emerged in relation to the Late Affidavit Material. Each of the late affidavits were witnessed by a solicitor from PCL Lawyers and contained the following statement:
This affidavit was electronically witnessed by audio-visual link and signed in accordance with the Electronic Transactions Act 2000
No other endorsement was contained in the Late Affidavit Material other than the following statement attesting to the capacity of the witness:
An Australian legal practitioner authorised under section 19(1) of the Oaths and Affirmations Act 2018 to take an affidavit.
Such statement is inconsistent with the legislation referred to at paragraph 48 above, which relies on the Oaths and Affirmations Act 2018, a Victorian statute. The Electronic Transactions Act 2000 is New South Wales legislation. For a document to be validly witnessed under that legislation, it must state that it was witnessed in accordance with s 14G of the Electronic Transactions Act 2000 (NSW). None of the Late Affidavit Material carries the correct indorsement as none refers to s 14G. In any event, all of the Late Affidavit Material purports to have been witnessed in Melbourne. Accordingly, the New South Wales legislation can be of no relevance.
Additionally, the Victorian equivalent of the Electronic Transactions Act 2000 (NSW) is the Electronic Transactions (Victoria) Act 2000 (Vic). The Victorian statute deals with electronic transactions not oaths, affirmations, affidavits and statutory declarations. The relevant Victorian legislation is s 27(1A) of the Oaths and Affirmations Act 2018 (Vic), which provides that:
(1A) If an affidavit has been signed and sworn or affirmed by a deponent by audio visual link and the authorised affidavit taker has used a scanned or electronic copy of the affidavit for the purposes of complying with the requirements of section 26, the authorised affidavit taker, in addition to any other requirements of this section, must state that—
(a) the affidavit was signed and sworn or affirmed by the deponent by audio visual link; and
(b) the authorised affidavit taker has used a scanned or electronic copy of the affidavit and not the original in completing the jurat requirements under subsection (1).
Whilst s 29 of the Oaths and Affirmations Act 2018 (Vic) provides that inadvertent non-compliance with the provisions of Part 3 of the legislation that does not materially affect the nature of the affidavit will not necessarily affect the validity of the affidavit, here the reference to the wrong legislation was entirely unaddressed. Given my ruling as to the admissibility of the Late Affidavit Material, I was not required to determine whether the manner in which the affidavits were purportedly witnessed constituted ‘inadvertent non-compliance’ or whether that non-compliance was minor. However, were I required to do so, I would have found that the omission materially affected the nature of each of the affidavits, with the effect that none of the Late Affidavit Material constituted validly sworn admissible evidence before me. This is because:
(a)any suggestion that there was mere inadvertence by referencing the Electronic Transactions Act 2000 (NSW) in lieu of the Electronic Transactions (Victoria) Act 2000 (Vic) is no answer. The relevant legislation is the Oaths and Affirmations Act 2018 (Vic); and
(b)where affidavits are sworn under s 27(1A) of the Oaths and Affirmations Act 2018 (Vic), the authorised affidavit taker must also state that the affidavit was signed and sworn or affirmed by the deponent by audio visual link and that they used a scanned or electronic copy of the affidavit and not the original in completing the jurat requirements. These requirements are expressed as being mandatory. These matters were not contained in any of the Late Affidavit Material. Moreover, none of these issues were addressed by the plaintiff’s solicitors.
I turn now to deal with the substantive matters.
Plaintiff’s evidence and submissions
In the first instance, the plaintiff made its application on the basis that:
(a)it had an offsetting claim which exceeded the debt in the Demand within the meaning of s 459H(1)(b) of the Act; and/or
(b)it would be unjust for the defendant to enforce its Demand in circumstances where the subject of the debt was based on a defective judgment debt, that being ‘some other reason’ within the meaning of s 459J(1)(b) of the Act.[37]
[37]Plaintiff’s Outline of Submissions filed 4 July 2025 (‘Plaintiff’s Outline’).
In its written outline, the plaintiff also sought to amend its originating process so as to formalise its reliance on s 459H(1)(b) of the Act, in addition to s 459J(1)(b), and relied on:
(a)the First Lee affidavit which it said sufficiently disclosed the intention to rely on s 459H(1)(b) despite reference to that section being omitted from the relief sought in the originating process; and
(b)the principles in Kezarne Pty Ltd v Vital Security System Pty Ltd[38] (‘Kezarne’).
[38](1996) 20 ASCR 560.
The defendant did not oppose the plaintiff’s application for leave to amend its originating process to include reliance on s 459H(1)(b) of the Act. Leave was granted to the plaintiff to do so.
Offsetting claim
In support of its alleged offsetting claim, the plaintiff advanced the following arguments:
(a)its claim was based on confidentiality obligations that were contained in a series of professional service agreements (‘PSAs’) (the same agreements under which the defendant procured its judgment debts) executed in around April 2021 and a separate non-disclosure agreement executed in or around 25 August 2021 (‘NDA’); and
(b)the plaintiff relied on its prima facie case that the defendant, through its director, Mr Williams, shared confidential information within the meaning of clauses 9.1 and 22.1 of the PSAs (‘Confidential Information’) by sharing with various third parties the fact that engineers had not been paid.[39]
[39]Plaintiff’s Outline, [8], [10].
Clause 9.1 of each PSA is in the following terms:
9.1 Disclosure and control of Confidential Information
(a) The Consultant must keep the Confidential Information confidential.
(b) The Consultant must not use or disclose to any person the Confidential Information except:
(i) to the extent necessary to perform the Consultant’s obligations under the Agreement;
(ii) is authorised in writing by PG7;
(iii)as required by Law, provided that the Consultant must give prior written notice to PG7 of the proposed use or disclosure and the relevant information to be disclosed and give PG7 a reasonable opportunity to challenge the proposed use or disclosure in a court of law or other appropriate body; or
(iv) when required (and only to the extent required) to the Consultant’s professional advisers and provided the Consultant ensures those professional advisers are bound by the confidentiality obligations imposed on the Consultant under this clause 9.1.
Confidential Information was defined in clause 22.1 of each PSA as follows:
Confidential Information means all Information:
(a) treated by the Owner, the Client or PG7 as confidential;
(b) disclosed by, or on behalf of, the Owner, the Client or PG7 to the Consultant or of which the Consultant becomes aware, whether before or after the Commencement Date; and
(c) which is confidential under common law principles, except to the extent the information:
(i) is created by the Consultant (whether alone or jointly with any third person) independently of the Owner, the Client or PG7 and without reference to any information disclosed by, or on behalf of the Owner, the Client or PG7; or
(ii) is public knowledge (otherwise than as a result of a breach of confidentiality by the Consultant, a secondary subcontractor or any of their permitted discloses)
The evidence in support of the alleged offsetting claim as set out in the First Lee Affidavit was in the following terms:
(a)the plaintiff has a counterclaim which it plans to commence against the defendant, and which is grounded in a number of non-disclosure obligations owed to the plaintiff by the defendant that the defendant breached. As a result of those breaches, the plaintiff lost access to extremely significant grant funding that it would have had access to but for the defendant’s breaches;
(b)the confidentiality obligations arose under six PSAs executed in the period 23 April 2021 to 19 February 2022, each of which contained an identical clause 9.1(a) requiring that ‘the consultant must keep the Confidential Information confidential’ and an identical definition of ‘Confidential Information’ in clause 22.1;
(c)the confidentiality obligations also arose under the separate NDA;
(d)the defendant breached its obligations by contacting various third parties and informing them about the progress of the Project in a manner that tended to bring the Project into disrepute; and
(e)as a result of the breaches, the plaintiff lost the ability to obtain grant funding that it would have otherwise secured if not for the defendant’s breach.[40]
[40]First Lee Affidavit, [9]–[14].
As at the date of the final hearing before me, no claim seeking damages for the alleged breach of either the PSAs, nor the NDA had been commenced.
As to the quantification of the plaintiff’s alleged offsetting claim, the plaintiff’s evidence in the First Lee Affidavit was silent as to the value of the alleged offsetting claim. Similarly, the First Lee Affidavit was silent as to the grant funding that was allegedly lost and the circumstances in which this occurred.
In its written outline, the plaintiff submitted that it was difficult to quantify the value of the alleged offsetting claim by virtue of it being a claim for damages, as opposed to a claim for a liquidated debt, and relied on the principles in Karimbla Construction Services Pty Ltd v Alliance Group Building Services Pty Ltd[41] (‘Karimbla’).
[41][2003] NSWSC 617.
Drawing on the principles in Karimbla, the plaintiff submitted in its written outline that the value of the plaintiff’s offsetting claim was ‘around $16,000,000.00’, and that the amount claimed was ‘not fictious or merely colourable’, that it is a plausible contention requiring the procedures that would be made available in fulsome litigation of the matter.[42] That submission is attributed to the Second Lee Affidavit, though no paragraph reference is provided. No such evidence is contained in the Second Lee Affidavit or elsewhere. Indeed, the figure of $16,000,000.00 does not appear anywhere in the plaintiff’s evidence. I reject that submission. However, I observe that in order for the figure of $16,000,000.00 to have been included in the plaintiff’s submissions, it must have been conveyed by Mr Lee to his legal representatives by at least 4 July 2025, when the plaintiff’s submissions were filed. That being the case, the failure to either notify the defendant that day, of the intention to file material in support of that alleged figure (or some other figure), to include it properly in Mr Lee’s evidence in reply, to seek to vary my June Orders, or make an application for leave to file material out of time is inexplicable.
[42]Plaintiff’s Outline, [14].
The only figures said to support the alleged offsetting claim are those in the table set out at paragraph 10 of the Third Lee Affidavit, which are alleged to be a ‘fair estimation of the plaintiff’s likely earned revenue’. The total of the likely revenue contained in the table is $63,360,000.00. Notwithstanding that I refused leave for the plaintiff to rely on the Third Lee Affidavit, I observe that likely revenue is not a measure of likely profit. Revenue is not a fair measure of the value of any offsetting claim, which must necessarily take into account operating costs and expenses. The plaintiff’s evidence does not address profit in a cogent manner. Mr Lee’s evidence is that ‘[he] [has] used revenue in [his] calculations and not profit because [he] understand[s] that costs of the Project will still be roughly the same now as they would have been had funding become available at an early stage.’[43] There is no evidence setting out the alleged costs of the Project and from which profit might be carefully or accurately deduced.
[43]First Lee Affidavit, [12].
Despite my ruling disallowing the Late Affidavit Material, counsel for the plaintiff nonetheless repeatedly pressed, on instruction, that I should hear the plaintiff’s submissions in relation to that material.[44] The submissions counsel was instructed to put were to the following effect:
[44]Transcript of Proceedings (22 July 2025) 16.20–19.15, 20.16–20.19, 24.18–25.12, 26.10–26.18, 28.2–28.3, 30.15–30.17.
(a)Mr Lee deposed in the Third Lee Affidavit to his belief that, if not for the conduct of the defendant and its director, the Project would have received funding by 6 March 2022;[45]
[45]Ibid, 28.6–28.18.
(b)the defendant disclosed the Confidential Information by sharing with various third parties the fact that engineers had not been paid;[46]
[46]Ibid, 19.12–19.15; Affidavit of Hugh McDermott filed 11 July 2025, [3].
(c)the Owner is identified in each PSA as ‘N/A’, the client was identified as the plaintiff, Phasegen7 Pty Ltd, and the Consultant was a consultant of the defendant company;
(d)the plaintiff only relied on clause 9.1(a) of the PSA,[47] and the fact of non-payment was information treated by the plaintiff as confidential;
(e)the evidence in support of non-payment being treated as Confidential Information was in the McDermott Affidavit. I note that the only reference in the McDermott Affidavit which refers to the disclosure of information (confidential or otherwise) appears in oblique terms at paragraph 3, which is extracted below:
On or about December 2021, I became aware of issues between Huw and Drew and learned that Huw was separating his business interests from Drew. Shortly thereafter, I experienced an increased effort by Drew to directly engage with me and occasionally with a direct report who was overseeing our Australia market. Drew was frequently requesting calls with me which I patiently accommodated in most instances. It was during this time that Drew began making disparaging comments about Phasegen7 and complained of money PG7 and Huw owed him for work on PG7, references to PG7 employee and contractor issues allegedly caused by Huw, references to engineers working for PG7 that had gone unpaid because of Huw, and other similar complaints. During this time Drew also was asserting that he was due compensation from ESS for “introductions” to prospects in Australia, and that PG7 would be a customer of ESS although no deals or even proposals generated for said opportunities.
(f)Mr Lee’s belief that the plaintiff would have received funding by 6 March 2022 was said to arise from paragraph 8 of the Third Lee Affidavit and by reference to the memorandum of understanding between the plaintiff and an entity called ‘JGT Energy’ (‘MOU’) exhibited to the First Lee Affidavit.[48] The MOU is dated 20 January 2022 and provides that funding will be released within 45 days of the signing of that agreement. Based on the document being signed on 6 March 2022, Mr Lee deposes in the Third Lee Affidavit to his projection that the Project would have begun to earn revenue by 6 January 2023. From there, he extrapolates out the projected revenue at paragraph 10 of the Third Lee Affidavit, where he provides what he says is a ‘fair estimation of the plaintiff’s likely earned revenue’, which totals $63,360,000.00;
(g)Mr Lee’s belief is otherwise based on what he says in the First Lee Affidavit;
(h)from the matters set out at sub-paragraphs (a) to (g) above, the plaintiff’s counsel asked the Court to infer that there had been a breach by the defendant in disclosing the Confidential Information, and to then infer that, because of that breach, there was a refusal to provide funding in accordance with the anticipated funding that Mr Lee refers to in paragraph 8 of the Third Lee Affidavit. From those inferences, the Court was asked to conclude that the plaintiff had a genuine offsetting claim in the form of a damages claim against the defendant, and that the value of that claim exceeded the amount claimed in the Demand;[49] and
(i)finally, it was submitted that the figures Mr Lee had used in the Third Lee Affidavit for estimating revenue were referable to those that were publicly available from the Australian energy market operator.[50]
[47]Transcript of Proceedings (22 July 2025) 27.4–27.10.
[48]Ibid, 28.6–28.18.
[49]Ibid, 28.27–29.17.
[50]Ibid, 31.15–31.24.
Some other reason
In its written outline, the plaintiff also submitted that it was unjust for the defendant to prosecute its judgment debts, contending that the judgment debts on which the defendant relied are defective and liable to be set aside upon judicial review. The plaintiff relied on the reasoning as set out in the letter of its solicitors dated 14 December 2022, and said that it sufficiently disclosed its intention to impugn the judgment debts obtained in the County Court of Victoria.[51]
[51]Plaintiff’s Outline, [15]–[17].
As noted earlier in my reasons, during the course of my exchange with counsel for the plaintiff I raised with him the correspondence authored by PCL Lawyers on behalf of the plaintiff, sent between April 2023 and August 2023, and exhibited to the Williams Affidavit, in which PCL Lawyers advised that the plaintiff intended to make payment of the adjudications. Those adjudications were subsequently registered in the County Court of Victoria, and the County Court judgments are the basis of the sums claimed in the Demand. The judgments were obtained between 31 August 2023 and 7 September 2023, and were served on the plaintiff’s solicitors, PCL Lawyers, in September 2023. There has been no application made to set those judgments aside. In that context, I expressed some concern that both the plaintiff and its lawyers were now putting a contrary position to the Court, namely, that the judgments were ‘defective and liable to be set aside upon judicial review’ despite the plaintiff previously advising, via PCL Lawyers, that it intended to make payment on the adjudications. Upon taking instructions, counsel for the plaintiff informed me that the plaintiff wished only to proceed on the basis that the plaintiff has an offsetting claim, and that the plaintiff did not press the argument that the statutory demand should be set aside for other reasons.[52]
[52]Transcript of Proceedings (22 July 2025) 16.2–16.6.
Defendant’s evidence and submissions
Before addressing the above issues, the defendant contended in its written outline, that there was a threshold question as to the admissibility of significant parts of the plaintiff’s evidence. The defendant contended that the plaintiff ought to be confined to arguments concerning only:
(a)a setting off (described as a ‘counterclaim’ in the First Lee Affidavit) relating to an alleged breach of confidence by the defendant in informing third parties about the ‘progress’ of the Project and thereby causing a lost opportunity to secure ‘grant funding’; and
(b)‘significant issues underlying the adjudications’ founding the four County Court of Victoria judgments.[53]
[53]Defendant’s Outline of Submissions filed 11 July 2025 (‘Defendant’s Outline’).
The defendant contended that the Moir Affidavit and Wilkinson Affidavit did not address the two issues raised in the First Lee Affidavit and were wholly irrelevant,[54] relying on the well-known principles in Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund[55] (‘Graywinter’).
[54]Ibid, [4]–[5].
[55](1996) 70 FCR 452 (‘Graywinter’).
Additionally, in response to the plaintiff’s alleged offsetting claim, the defendant advanced the following arguments:
(a)many of the issues referred to in the materials filed by the plaintiff simply did not refer to grounds raised in the First Lee Affidavit,[56] and relied again on the principles in Graywinter and Sceam Construction Pty Ltd v Clyne;[57]
[56]Defendant’s Outline, [6]–[10].
[57](2021) 64 VR 404 (‘Sceam’).
(b)to the extent that the plaintiff sought to raise a second ground in respect of s 459(J)(1)(b), namely, that the defendant represented that the relevant engineering services could be paid after the Project finalised its funding, this matter was not raised in the First Lee Affidavit and cannot be raised now;[58]
[58]Defendant’s Outline, [21]–[28].
(c)paragraph 13 of the First Lee Affidavit is inadmissible as it is hearsay evidence in that it did not state the source of the deponent’s belief. It should not be admitted into evidence, or if it is, its use should be given limited weight pursuant to ss 135 and 136 of the Evidence Act 2008 (Vic);[59]
(d)neither the First Lee Affidavit nor Second Lee Affidavit include any evidence or statement that the defendant informed any particular person about the debts owed by the plaintiff at all, despite what the plaintiff asserts in paragraph 10 of its written submission;[60]
(e)without saying what information the defendant actually imparted to a third party, the allegation that it was confidential must be regarded as of no import;[61]
(f)the plaintiff also predicates the breach of confidentiality claim on the two-page NDA exhibited to the First Lee Affidavit. The NDA is said to have been made on 25 August 2021. Mr Williams denies executing it. Putting that to one side, as to the alleged NDA, the defendant said:
(i)it does not, on its face, refer to the Project;
(ii)the information referred to as confidential in recital B and clause 1 does not appear to include information regarding debts (current or future) and in any event, clause 5(a) says the parties have no obligations to keep information confidential if the information is already known to them;[62]
(g)Mr Lee’s attempts to evidence the fact that Mr Williams at least knew of the grant funding on 16 April 2021 entirely missed the mark. The relevant letter from Mr Williams referred to funding, not ‘grant funding’, and those two things are entirely different;[63]
(h)as to paragraph 14 of the First Lee Affidavit where reference is made to a lost opportunity caused by the breach of confidentiality, the defendant said that Mr Lee does not say who controlled the funding in question, whether that person, or those persons, learned of the alleged comments made to third parties about the progress of the Project, and what if anything the plaintiff did to address any aspects of the situation at all. As a result, the defendant said that the statements in the First Lee Affidavit do not evidence a claim of ‘sufficient objective existence and prima facie plausibility’ and Mr Lee’s statements add up to nothing more than a spurious claim.[64]
[59]Ibid, [11]–[14].
[60]Ibid, [15].
[61]Ibid, [16].
[62]Ibid, [17].
[63]Ibid, [18].
[64]Ibid, [19]–[20].
The defendant, in its written submissions, also addressed the underlying adjudications and County Court of Victoria judgments, and the contention that these were liable to be set aside on judicial review. As this ground was abandoned by the plaintiff, I need not say anything further as to these submissions.
Analysis
Admissibility
Dealing first with the Graywinter argument raised by the defendant, Sundberg J held that a genuine dispute on which the party relies must be identified in the supporting affidavit, observing that where the supporting affidavit did not meet the minimum requirements, the absence of jurisdiction could not be overcome by the filing of a supplementary affidavit after the expiration of the statutory period.[65] Sundberg J described the minimum requirements of an affidavit filed in support of s 459G(3) of the Act in the following terms:
(a)the affidavit ‘must, as a minimum, contain a statement of the material facts on which the applicant intends to rely to show a genuine dispute’;
(b)the affidavit ‘may read like a pleading’ and need not detail, in admissible form, all the evidence that supports the contention of a genuine dispute; and
(c)neither a mere assertion that there is a genuine dispute nor a bare claim that the debt is disputed is sufficient.[66]
[65]Graywinter (n 55).
[66]Ibid, 459.
In Sceam, the Court of Appeal, in considering the application of what was well understood to be the Graywinter principle, stated:[67]
[38]Standing back from all that has been written in the authorities, it is important to bear firmly in mind that what is critical is the language in the legislation. It requires an affidavit supporting the application to be filed with the Court within the statutory period. In the context of a claim to set aside the statutory demand on the basis that there is a genuine dispute as to the existence or amount of the demand, pursuant to s459H(1)(a), the affidavit must support the application by providing the basis for establishing that there is a genuine dispute. Establishing the genuineness of the dispute requires material showing, or from which it can be inferred, that there is a real dispute. Most commonly this will be done by the deponent describing the dispute. That description will delineate the scope of the dispute which may be relied upon to set the demand aside. Where the dispute is based purely on the construction of a written agreement between the parties, the support requirement may be satisfied by exhibiting the agreement without more. But, for example and without being prescriptive, if something beyond the written terms is to be relied upon, then it is highly likely that this will need to be raised in the affidavit and more than mere assertion will be necessary. Ultimately, what is required to satisfy the support requirement must be assessed in the context of the particular application that is made.
[39]In our opinion, while various forms of language are used in the authorities, their effect is the same. Whether the terms ‘fair notice’ or ‘fairly alert’ are used or whether it is said that the ground must be raised ‘expressly, by necessary inference or by a reasonably available inference’, the outcome turns on whether the affidavit supports the application. In their context, we do not understand the Victorian authorities referred to above to have used the terms ‘fair notice’ and ‘fairly alert’ in a procedural fairness sense. Rather, in substance and properly understood, those phrases have been used as a shorthand for the lengthier phrase ‘expressly, by necessary inference or reasonably available inference’. That phrase requires that the grounds for resisting the statutory demand appear in the affidavit. The phrases ‘fair notice’ and fairly alert’ convey the same requirement. And in several of the cases using that terminology, the Court has used both phrases, in a context indicating that it considered that they conveyed the same requirement. The language of ‘fair notice’ or ‘fairly alerts’ has been directed towards the need for the affidavit to show that there is a real dispute, so as to properly be regarded as an affidavit that supports the application to set aside the statutory demand.
…
[43]Finally, we note that Graywinter itself concerned an affidavit that did not state any material facts to show that there was a genuine dispute; it contained mere assertions, and thus was not an affidavit ‘in support’ of the application. However, in other cases a supporting affidavit has been filed that does identify a genuine dispute on a particular basis, but the party seeking to set aside the statutory demand later seeks to rely on a different genuine dispute, identified in an affidavit filed outside the statutory time period. It is clear from the authorities that an affidavit filed within time that does not identify the dispute later sought to be relied upon is not a ‘supporting affidavit’ in so far as the different genuine dispute is concerned, and that the party concerned is not permitted to rely on that different genuine dispute if it was not identified in the supporting affidavit filed within the statutory time period. That is, the particular ‘genuine dispute’ on which an applicant seeks to rely must be identified in the supporting affidavit filed within time; it is not sufficient to identify one genuine dispute in the supporting affidavit, and then to identify a different genuine dispute in later affidavits filed out of time and at the hearing of the application.
[67]Sceam (n 57) [38]–[39], [43] (citations omitted).
I refused leave for the plaintiff to rely on all of the Late Affidavit Material. As previously stated, the Wilkinson Affidavit was withdrawn by the plaintiff.
Had that not been the case, and had I been required to determine whether, on an objective analysis, what was sought to be agitated in the Late Affidavit Material departed from what was raised in the First Lee Affidavit, such that any fresh grounds raised in these affidavits should not be permitted to be raised by the plaintiff, the submission by counsel for the defendant would have been of considerable force.
I would have been bound to accept counsel for the defendant’s submission that the material facts raised in opposition to the plaintiff’s application to set aside the statutory demand were limited to those raised in the First Lee Affidavit, being:
(a)an alleged set-off relating to an alleged breach of confidence by the defendant in informing third parties about the ‘progress’ of the Project and thereby causing a lost opportunity to secure ‘grant funding’; and
(b)alleged issues underlying the adjudications founding the four County Court of Victoria judgments.
Neither of these matters were addressed by the Moir Affidavit. Were I required to, I would have accepted counsel for the defendant’s submission and ruled that the Moir Affidavit offended the Sceam principle and was wholly irrelevant. Had the Wilkinson Affidavit not been withdrawn, I would have similarly ruled in respect of this affidavit.
Additionally, the only paragraphs of the McDermott Affidavit that went to the alleged breach of confidence were paragraphs 3 and the second to fourth sentences of paragraph 6. The balance of that affidavit either offends the Sceam principle, or it contains irrelevant and inadmissible speculation. Save for the passages I have identified, I would have excluded the McDermott Affidavit.
To the extent that objection was taken in relation to the Second Lee Affidavit and the Third Lee Affidavit, again, had I been required to determine their admissibility, I would have accepted counsel for the defendant’s submission that:
(a)paragraph 13 of the First Lee Affidavit, where Mr Lee deposed that the defendant breached its obligations by contacting various third parties and informing them about the progress of the Project in a manner that tended to bring the Project into disrepute, was hearsay in that Mr Lee had failed to state the source of his knowledge and had not said who of the defendant imparted any information; and
(b)little to no weight should be afforded to that evidence.
As to the Third Lee Affidavit, had I been required to determine whether it offended the principles in Graywinter and Sceam, I would have been bound to accept the defendant’s criticisms of that affidavit as they correctly state the law.
In Re Geitonia Pty Ltd,[68] Black J considered where a ground of dispute on which a company relied only arose after the expiry of the statutory time in which to make an application under s 459G of the Act, remarking:[69]
… It seems to me that to set aside a creditor’s statutory demand, on a ground which was not raised within the 21 day period specified in s459G of the Corporations Act, even in circumstances that it could not have been raised, would be outside the statutory jurisdiction conferred on the Court under that section and would involve a significant departure from the appellate authorities that have endorsed the Graywinter principle. Although that result is plainly disadvantageous to [the plaintiff company] in some respects, that disadvantage is to some extent mitigated by the fact that [the plaintiff company] will be entitled to raise this ground, without leave, in opposition to a winding up application based on a failure to comply with the Demand.
[68][2016] NSWSC 1243.
[69]Ibid, [30]. See also Galaxy Coins and Bullion Pty Ltd v Deputy Commissioner of Taxation (2018) 340 FLR 319, 332 [65].
Respectfully, I adopt Black J’s reasoning.
Accordingly, even if I had not disallowed the Late Affidavit Material, that material would have been inadmissible having regard to the principles in Sceam.
Offsetting claim
Concerning the alleged offsetting claim, the evidence filed on behalf of the plaintiff is not sufficient to establish that there is a serious question to be tried. I am not satisfied that the evidence, which at best consists of general assertions and no direct evidence in support of the claimed breach of confidence, satisfies the criteria discussed in Britten-Norman. My view would not have been altered even if I had had regard to the Late Affidavit Material.
Despite the written submission at paragraph 10 of the plaintiff’s outline, which contended that the defendant, through its director, shared the Confidential Information by sharing with various third parties the fact that engineers had not been paid, the plaintiff’s evidence does not clearly establish that the defendant informed any particular person about the debts owed, or that in so doing, the funding which would otherwise have been granted, was terminated or withdrawn. This was not asserted in either the First Lee Affidavit or Second Lee Affidavit. The McDermott Affidavit does no more than recount, in the vaguest terms, an alleged discussion where non-payment was mentioned.
Moreover, in paragraph 14 of the First Lee Affidavit, Mr Lee did not identify who controlled the funding in issue, whether that person or persons learned of the generalised comments alleged to have been made which were set out in the McDermott Affidavit, and/or what, if anything, the plaintiff did in response. Paragraph 14 of the First Lee Affidavit is no more than a mere assertion.
Additionally, the Court was not taken to any authorities for the proposition that the fact that the plaintiff was indebted to the defendant was a matter that would fall within the definition of Confidential Information. When asked at the hearing, counsel for the plaintiff stated that the plaintiff does not rely on common law principles, and relies specifically on the clause 22.1 definition of ‘Confidential Information’, and in particular, the first limb, that is, all information ‘treated by the Owner, the Client or [the plaintiff] as confidential’. Nowhere in the First Lee Affidavit does Mr Lee directly state that he regarded the fact of non-payment or information regarding debts (current or future) as ‘Confidential Information’ within the meaning of clause 22.1 and/or 9.1(a).
To the extent that the plaintiff, in its written outline, also predicates the breach of the NDA, I accept counsel for the defendant’s submission that the information referred to as confidential in recital B and clause 1 does not appear to include information regarding debts (current or future), and clause 5(a) says the parties have no obligations to keep information confidential if the information is already known to them.
Counsel for the defendant otherwise helpfully drew to the Court’s attention that there was a flaw in the plaintiff’s evidence that funding would have been received by 6 March 2022, pursuant to the MOU between the plaintiff and ‘JGT Energy’. Exhibited to the First Lee Affidavit at pages 179 to 191 is, what Mr Lee described in his evidence, as ‘true copies of two agreements which demonstrate the significant grant funding that the plaintiff was going to secure if not for the defendant’s conduct’. Yet, at page 183 appears a ‘supplementary agreement’, followed by a separate memorandum of understanding between the plaintiff and an entity called ‘EIPC’. The relationship between these documents is not explained in Mr Lee’s evidence, despite both JTG Energy and EIPC offering an identical amount of funding in the sum of US$250,000,000.00.
Moreover, counsel for the defendant identified that the supplementary agreement between the plaintiff and ‘EIPC’ is dated 15 September 2022, which post-dates the alleged breach of confidentiality said to give rise to a damages claim set out at paragraph 8 of Third Lee Affidavit.
Plainly, to the extent that Mr Lee deposes that he believed funding would have been received by 6 March 2022, there are two fundamental issues with that statement in that the provenance and relationship between the documents exhibited at pages 179 to 191 of the First Lee Affidavit are unexplained and the supplementary agreement between the plaintiff and ‘EIPC’ is dated after 6 March 2022, when the breach of confidence is alleged to have occurred.
In those circumstances, I am unable to accept the plaintiff’s submission that there is a genuine offsetting claim arising from the alleged breach of confidentiality.
I accept counsel for the defendant’s submission that the statements in the First Lee Affidavit concerning the alleged breach of confidentiality do not demonstrate a claim of ‘sufficient objective existence and prima facie plausibility’. I further accept, as the defendant would contend, that the evidence (including the Late Affidavit Material) demonstrates, that the plaintiff’s alleged offsetting claim which it seeks to raise has been manufactured in response to the pressure of the Demand.
In applications under s 459H of the Act, a pragmatic approach is taken as to what is required in order to particularise the offsetting claim. A company is not required to particularise the claim to the last dollar and cent.[70] However, failing to adduce sufficient evidence to convince the Court that the claim is genuine will mean that the Court will ascribe a nominal value to it.[71]
[70]Elm Financial Services Pty Ltd v MacDougal [2004] NSWSC 560, [19].
[71]Jesseron Holdings Pty Ltd v Middle East Trading Consultants Pty Ltd (1994) 13 ACSR 455, 463.
In Karimbla, Barrett J explained this broadbrush approach in the following terms:[72]
Despite this clear need, according to the terms of the legislation, to quantify an offsetting claim in money terms, it is not necessary that the party seeking to have the statutory demand set aside should particularise the amount of the claim to the last dollar and cent. Particularly where the claim is of an unliquidated kind, there may be various ways of approaching the issue of assessment of damages and there may be elements of the assessment that are, of necessity, based on broad estimate. It is sufficient that there be, on the evidence, a plausible and coherent basis for asserting a claim to a sum which, despite elements of uncertainty as to details of calculation, can be seen to be, in any event, greater than the amount of the debt the subject of the statutory demand.
[72]Ibid, [28].
Even if I were to give any weight to the alleged offsetting claim, which I do not for the various reasons identified, I do not consider that the evidence as to the quantum of that claim has a plausible and coherent basis. The calculations in the Third Lee Affidavit are speculative revenue figures in relation to which there is no evidence before the Court as to profit or indeed likely profit. Based on the evidence before me, I am not convinced that the claim is genuine, or that I could safely ascribe a value to it.
Finally, the evidence in the Williams Affidavit disclosed that not less than eight letters and emails were written by the plaintiff’s solicitors regarding payment of the adjudications which were entirely silent as to the existence of the alleged offsetting claim. Not only was the alleged offsetting claim not formally raised by the plaintiff’s solicitors until after the Demand was served, it was never foreshadowed in any of the plaintiff’s solicitors’ prior dealings with the defendant or its solicitors. I am not satisfied for the purposes of this application that it is raised in good faith.
Accordingly, I am unconvinced that the plaintiff has a genuine offsetting claim.
Finally, by its written submission, the plaintiff raised a second ground in respect of s 459(J)(1)(b) of the Act, asserting that the defendant represented that the relevant engineering services could be paid after the Project finalised its funding. It was also on this basis that the plaintiff contended that the adjudications, which led to the County Court of Victoria judgments, were liable to be set aside under judicial review.
What is contemplated by s 459J(1)(b) is a discretion of broad compass which extends to conduct that may be described as unconscionable, an abuse of process, or which gives rise to substantial injustice.[73]
[73]Hoare Bros Pty Ltd v Commissioner of Taxation (1996) 62 FCR 302, 317–318.
I need not consider this ground, as it was abandoned by the plaintiff. However, had I been required to do so, I would have been unconvinced that the Demand should be set aside on the basis that the County Court of Victoria judgments were attendant with any risk such that they ought to be the subject of judicial review. No ‘risk’ was identified, no application was made to set aside the judgments and, as I have referred to earlier, the plaintiff, via its solicitors, had sent multiple emails and letters in which the debts which were the subject of the adjudications and ultimately the County Court of Victoria judgments, were acknowledged and in respect of which the plaintiff agreed to make payment. I do not consider that this ground was responsibly open to the plaintiff to raise.
Conclusion
In view of the above matters, the plaintiff has not discharged its onus in demonstrating the existence of an offsetting claim or claim under s 459J(1)(b) of the Act in response to the Demand issued by the defendant.
Pursuant to s 459L of the Act, I will dismiss the plaintiff’s application and hear the parties on the formulation of appropriate orders, including as to costs.
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