Re Three Pillars Lynbrook Pty Ltd

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST

S ECI 2022 00080

IN THE MATTER of THREE PILLARS LYNBROOK PTY LTD (ACN 611 590 820)

THREE PILLARS LYNBROOK PTY LTD (ACN 611 590 820)	Plaintiff
v
THREE PILLARS DEVELOPMENT MANAGEMENT PTY LTD (ACN 127 441 212)	Defendant

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JUDGE:	Matthews AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	31 May 2022
DATE OF JUDGMENT:	15 September 2022
CASE MAY BE CITED AS:	Re Three Pillars Lynbrook Pty Ltd
MEDIUM NEUTRAL CITATION:	[2022] VSC 540

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CORPORATIONS — Corporations Act 2001 (Cth), s 459J(1), s 459E(2)(a), 459E(3) — Statutory Demand — Alleged failure to properly particularise or explain debt claimed — Defect in demand — Whether substantial injustice caused unless statutory demand set aside — Re Simmoll Pty Ltd [2021] VSC 693 — Condor Asset Management Ltd v Excelsior Eastern Ltd (2005) 56 ACSR 223 — LSI Australia v LSI Holdings (2007) 25 ACLC 1602 — Whether affidavit in support of demand properly verifies debt — Whether some other reason to set demand aside — Supreme Court (Corporations) Rules 2013 (Vic), r 5.2.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Ms V Bell	Mills Oakley
For the Defendant	Mr J W G Grant	SLF Lawyers

TABLE OF CONTENTS

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

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

The Statutory Demand...................................................................................................................... 4

The Application and Procedural History...................................................................................... 5

Evidence............................................................................................................................................... 7

First O’Neill Affidavit................................................................................................................... 7
Thomas Affidavit........................................................................................................................ 11
Second O’Neill Affidavit............................................................................................................ 12
Knight Affidavit.......................................................................................................................... 14

Relevant statutory provisions........................................................................................................ 14

Submissions...................................................................................................................................... 15

Plaintiff’s submissions................................................................................................................ 15
Defendant’s submissions........................................................................................................... 19

Analysis.............................................................................................................................................. 23

Application to set aside the Statutory Demand pursuant to s 459J(1)(a) of the Act......... 24
Is there a defect in the Statutory Demand?.................................................................... 24
Applicable principles........................................................................................... 24
Consideration........................................................................................................ 26

Is the defect such that substantial injustice will be caused if the Statutory Demand is not set aside?....................................................................................................................... 28
Applicable principles........................................................................................... 28
Consideration........................................................................................................ 29

Application to set aside the Statutory Demand pursuant to s 459J(1)(b)........................... 38
Applicable principles........................................................................................... 38
Consideration........................................................................................................ 40

Conclusion......................................................................................................................................... 42

HER HONOUR:

Introduction

On 24 December 2021, the Defendant served on the Plaintiff a statutory demand pursuant to s 459E of the Corporations Act 2001 (Cth) (‘Act’) (‘Statutory Demand’).

The Plaintiff applied to this Court for orders setting aside the Statutory Demand pursuant to s 459G of the Act on a number of bases, being that the Statutory Demand contains a defect such that the Plaintiff will suffer injustice unless the Statutory Demand is set aside; or, in the alternative, there is some other reason to set aside the Statutory Demand (‘Application’). While the Plaintiff initially sought to challenge the Statutory Demand on the ground that it had an offsetting claim against the Defendant which exceeds the quantum of the amount claimed in the Statutory Demand, this ground was no longer pressed by the Plaintiff by the time of the hearing before me.

For the reasons which follow, the Application will be granted and the Statutory Demand set aside.

Background

The Statutory Demand and Application arise in the context of a residential housing development project in Lynbrook, Victoria (‘Development’).

The corporate and financial arrangements for undertaking the Development were fairly characterised by the parties as complex and ‘fluid’. In a general way, the Development was undertaken as a joint venture between entities associated with David O’Neill (‘O’Neill’), Terry Knight (‘Knight’) and Ryan L’Huillier (‘L’Huillier’) on the one hand; and entities associated with Benjamin Thomas (‘Thomas’) and Thomas Hoogenbosch (‘Hoogenbosch’) on the other.

Thomas and Hoogenbosch are or were at the relevant times the directors and controlling minds of a group of companies, several of which are relevant to the present application. Relevantly, these include:

(a) the Plaintiff, Three Pillars Lynbrook Pty Ltd, from its incorporation on 31 March 2016 until 7 May 2020;

(b) the Defendant, Three Pillars Development Management Pty Ltd;

(c) Edgepoint Homes Pty Ltd (‘Edgepoint’), a construction company;

(d) Small & Co Pty Ltd (‘Small & Co’), a development marketing company which marketed the Development to the public; and

(e) Core Projects (Vic) Pty Ltd (‘Core Projects’), a real estate services company which provided real estate agency services for the Development.

Further, Thomas was at the relevant times the director and controlling mind of BLT Assets Pty Ltd (‘BLT’), an entity apparently operated for the purpose of receiving and distributing project finance for Thomas. Hoogenbosch had a similar company, Silva Alta Pty Ltd (‘Silva Alta’).

For their part, O’Neill, L’Huillier and Knight have been directors of the Plaintiff from 24 May 2017 to present. As best I can gather, O’Neill, L’Huillier and Knight were directors at all relevant times of other entities used to carry out property development projects, including TDR Investments Pty Ltd (‘TDR Investments’) and TDR Project Management Pty Ltd (‘TDR Project Investments’).

On 31 May 2016, Three Pillars Property Group Pty Ltd (another company owned and controlled by Thomas and Hoogenbosch, which has since been deregistered) executed a contract of sale for the purchase of the property at 44S Olive Road, Lynbrook, in respect of which the Development was to be undertaken. The contract of sale contained a purchase price of $4,189,237. On the same day, Three Pillars Martha Cove Pty Ltd (another company owned and controlled by Thomas and Hoogenbosch) paid the deposit of $400,000 under the contract of sale.

Shortly thereafter, on 31 July 2016, the Plaintiff was nominated as purchaser under the contract of sale as trustee for the Three Pillars Lynbrook Unit Trust (‘Trust’), with the Trust established as a special purpose vehicle for the purposes of the Development. The Plaintiff company was appointed as trustee of the Trust for the purposes of the Development. On 14 July 2017, the Plaintiff completed settlement of the contract of sale.

Shortly prior to this, by written agreement dated 1 June 2016, the Plaintiff engaged the Defendant to provide development management services in respect of the Development (‘Development Management Agreement’), pursuant to which the Defendant agreed to provide, amongst other things, the following services:[1]
[1]Affidavit of Benjamin Laurence Thomas sworn on 25 March 2022, [36].

(a) procuring architectural working drawings and engineering drawings in respect of the Development and ensuring that such drawings were fit for purpose;

(b) procuring town planning and building permits in respect of the Development;

(c) procuring full marketing drawings and finished boards in respect of the Development and ensuring that such drawings were fit for purpose;

(d) preparing a project plan for the completion of the Development;

(e) providing periodic updates to stakeholders as to the progress of the sales, marketing and other project related works in relation to the Development;

(f) consulting with and directing contractors and consultants in relation to the Development;

(g) ensuring the Development was undertaken in a timely manner; and

(h) assessing risk and implementing mitigation strategies to mitigate risks to the Development.

It is noted at this point that at the time the Plaintiff and Defendant entered into the Development Management Agreement, Thomas and Hoogenbosch were directors of both entities, and O’Neill, L’Huillier and Knight were directors of neither.

Although the full picture of the funding of the Development was not made clear in this proceeding (nor was it required to be), it is evident that the Development drew upon several lines of equity finance from O’Neill, L’Huillier and Knight (and their entities) and from Thomas and Hoogenbosch (and their entities), and apparently from other persons; as well as from loans and other forms of finance from a variety of sources. The Development was principally completed by 7 May 2020, at which time Thomas and Hoogenbosch resigned as directors of the Plaintiff.

The Statutory Demand

The Statutory Demand was served on the Plaintiff on 24 December 2021 and the Application served on the Defendant on 14 January 2022. No issue was taken with service in either respect.

The Statutory Demand is dated 22 December 2021, with paragraphs 1 and 2 stating:

The company owes Three Pillars Development Management Pty Ltd (ACN 127 441 212) … (“the creditor”) the amount of $165,000.00, being the amount of the debt described in the Schedule.
Attached is the affidavit of Thomas Cornelius Hoogenbosch dated 22 December 2021, verifying that the amount of the debt is due and payable by the company.

I will refer to the amount of $165,000 as described in the Statutory Demand as the Debt, and the accompanying affidavit of Thomas Cornelius Hoogenbosch dated 22 December 2021 as the Hoogenbosch Affidavit.

The Schedule to the Statutory Demand is in the following terms:

SCHEDULE

Description of the debt

Amount of the debt

Manager remuneration payable to the company from the creditor

$165,000.00

Total Amount

$165,000.00

The Hoogenbosch Affidavit defines the Plaintiff as the ‘debtor company’, and the Defendant as the ‘creditor’. Significantly in the context of this Application, the Hoogenbosch Affidavit deposes that Hoogenbosch is a director of the creditor

in respect of a debts [sic] totalling $165,000.00 owed by Three Pillars Lynbrook Pty Ltd (ACN 611 590 820) for remuneration payable to the company from the creditor.

The balance of the Hoogenbosch Affidavit is in the standard form. There are no exhibits, annexures or attachments. In particular, there was no invoice for the Debt enclosed with the Statutory Demand or Hoogenbosch Affidavit.

I note that both the Schedule to the Statutory Demand, and the Hoogenbosch Affidavit, mistakenly identify the Debt as ‘payable to the company from the creditor’, where the Debt is in fact said to be payable to the Defendant (ie the creditor) from the Plaintiff (ie the company). However, no party sought to make anything of this.

The Application and Procedural History

On 12 January 2022, the Plaintiff’s solicitors wrote to the solicitors for the Defendant in respect of the Statutory Demand, and in respect of three other statutory demands issued to the Plaintiff on behalf of Edgepoint, Core Projects and Small & Co of the same date.[2] There was no response to that letter.
[2]Exhibit DBO-1 to the affidavit of Daniel Brian O’Neill affirmed 14 January 2022, pp 248-51.

The Application was made on 14 January 2022, seeking that the Statutory Demand be set aside pursuant to ss 459H(1)(b) and 459J(1)(a) and (b) of the Act. It was supported by an Affidavit of Daniel Brian O’Neill affirmed on 14 January 2022 (‘First O’Neill Affidavit’).

Section 459H(1)(b) of the Act concerns the determination of a substantiated amount of a debt where there is an offsetting claim. As noted earlier, this aspect of the Application has since been abandoned.

Section 459J of the Act concerns the setting aside of statutory demands because of defects in the demand or for ‘some other reason’. In particular, the Application under both limbs of s 459J is now put on the basis that the Statutory Demand and Hoogenbosch Affidavit do not adequately describe the Debt, such as to allow the Plaintiff to identify whether there is a genuine dispute about the existence or amount of the debt. For this reason it is helpful to outline the chronology of material filed by the parties, and then turn to that material in order.

The First O’Neill Affidavit identifies as relevant to the Application an exchange of emails on 5 and 6 November 2020 between O’Neill, Thomas, Knight and Ms Kelly Stevens (‘Stevens’), who is identified as a ‘director’ at ‘Three Pillars’, and who I understand was an officer or employee of the Defendant (‘November 2020 Emails’). The November 2020 Emails discuss an amount of $165,000.00 as an amount payable by the Plaintiff to the Defendant. It will be necessary to return to the November 2020 Emails in some detail below.

A responsive affidavit of Benjamin Laurence Thomas was sworn and filed on 25 March 2022 (‘Thomas Affidavit’).

By an Interlocutory Process filed 14 April 2022, the Plaintiff sought leave to file an amended Originating Process seeking relief under the additional ground of a genuine dispute about the existence or amount of the Debt, pursuant to s 459H(1)(a) of the Act (‘Interlocutory Process’).

The Interlocutory Process was supported by two affidavits, each also filed in respect of the Application at large and in response to the Thomas Affidavit:

(a) the Affidavit of Daniel Brian O’Neill affirmed 14 April 2022 (‘Second O’Neill Affidavit’); and

(b) the Affidavit of Terry Scott Knight sworn 14 April 2022 (‘Knight Affidavit’)

Most relevantly, the Second O’Neill Affidavit states that O’Neill only discovered the purported genuine dispute as to the Debt when preparing that affidavit. I will return to the matters raised by these affidavits later in these reasons.

The Interlocutory Process was dismissed by consent on 4 May 2022.

The Application was heard on 31 May 2022. The abovementioned affidavit material, and written outlines of submissions from both parties, were heard before me and relied on by the parties.

Evidence
First O’Neill Affidavit

The First O’Neill Affidavit primarily addresses the November 2020 Emails and the Debt in the context of the s 459H(1)(b) aspect of the Application, and the particulars of the offsetting claim on which the Plaintiff sought to rely at that point in time. The affidavit directly addresses the grounds under 459J(1) of the Act only by way of bare statements to the effect that the Statutory Demand and the Hoogenbosch Affidavit do not clearly state the nature of the Debt, refer to the source of the obligation to pay the Debt, or identify the manner of its calculation.[3]
[3]First O’Neill Affidavit, [4]–[13].

The first of the November 2020 Emails is an email of 5 November 2020 at 10:33am, from O’Neill to Thomas, Knight and Stevens, with the subject line ‘Re: TDR Project Management tax invoices issued to Lynbrook’. For present purposes, it is helpful to set this email out at length:[4]
[4]Exhibit DBO-1 to the First O’Neill Affidavit, pp 218–9.

Hi Kelly & Ben,
As per your request I have attached all the tax invoices issued from TDR Project Management Pty Ltd to [the Plaintiff]. Can I please ask why you are requesting these invoices as:
1.You should already have copies of all of these tax invoices as they were emailed to [the Defendant] as they were issued,
2. Elly’s Quicken data file print outs, at least for the period 1 July 2018 to the 31 March 2019, (bearing in mind that the last month that management fees invoices should have been issued by both parties would be for the month of November 2018), shows both parties being paid their monthly management fees albeit some are grouped and paid in the one month for this period.

The first monthly tax invoice issued was for the month of October 16 to December 16 (3 months included in one invoice) and the final monthly tax invoice was issued for the month of November 2018.
In addition to these monthly invoices, a once off directors fees tax invoice for $150K + GST = $165K was issued by both TDR and [the Defendant] also issued an invoice for the same amount as was agreed between both parties. I have attached the tax invoice issued by TDR which was issued by TDR on the 19/12/16.
Further, a payment of $100,000 to each TDR and [the Defendant] was made as agreed between both parties with TDR receiving it’s [sic] payment of $100K on the 24/7/18. I have checked Elly’s Quicbooks [sic] data file print outs provided to me by Elly for the period 1 July 2018 to the 31 March 2019 and the Three Pillars and they confirm that both TDR and [the Defendant] got their $100K payment each on the 24/7/18. These payments were allocated as interest by Elly in the data file. …

Later in the morning of 5 November 2020, Stevens responded to indicate that ‘it appears there hasn’t been an invoice issued by [the Defendant] for the $165,000.00 as agreed by both parties … Accordingly, I will arrange an invoice to be issued from [the Defendant] this week to [the Plaintiff] to be paid as part of the clean up.’[5]
[5]Ibid, p 218.

O’Neill responded to point out that an amount of $150,000.00 was recorded as paid to BLT and Silva Alta each on 30 March 2017, observing that ‘I think we may need to review all the shareholder accounts and reconcile funds in and funds out for all of them as part of the independent review’.[6]
[6]Ibid, p 217.

Stevens replied to provide an explanation of those payments made on 30 March 2017 as short term loans to a third party (referred to in the email as ‘Iconic Kirra’). Stevens also notes that $300,000 was repaid to the Plaintiff by way of six transactions taking place between 31 August 2017 and 3 October 2017, which were to be allocated to Thomas’ and Hoogenbosch’s shareholder accounts. However, Stevens reiterated that ‘that $165,000.00 including GST amount to [the Defendant] was not billed for’ and still required ‘cleaning up’.[7]
[7]Ibid, 216–17.

In reply, O’Neill repeated his view that an audit or review of all shareholder accounts would be required, stating:[8]

Thanks for the below, I think much water has flowed under the bridge now and it is my position now that I agree with you that a full audit or independent review now needs to happen on all of the shareholders [sic] accounts so that all parties are satisfied and comfortable with what has occurred and that each party is treated equally and fairly and we can move forward in confidence. This would also apply to related entities.

[8]Ibid, p 216.

O’Neill deposes to undertaking a ‘detailed reconciliation of the spreadsheet, including by reference to [the Plaintiff’s] bank statements’ following the 5 November 2020 email exchange referred to in the preceding paragraphs.[9] As I understand it, ‘the spreadsheet’ referred to by O’Neill is a spreadsheet listing the Plaintiff’s debts, liabilities and payments, containing tabs for shareholder accounts including BLT, Silva Alta and TDR.[10] It was explained in the hearing that the spreadsheet tab titled ‘LTL.01’ represents BLT’s account, and ‘LTL.02’ represents Silva Alta’s account.[11]
[9]First O’Neill Affidavit, [21].
[10]It is unclear whether this is a reference to TDR Investments or TDR Project Management. Where it is not specified or it is unclear, it is referred to as referred to in the material.
[11]Transcript of Proceedings, Re Three Pillars Lynbrook Pty Ltd (Supreme Court of Victoria, S ECI 2022 00080, Matthews AsJ, 31 May 2022), 37.27–38.06 (‘Transcript’).

On 6 November 2020, O’Neill again emailed Stevens, Thomas and Knight outlining his approach to reconciling the shareholder accounts of BLT, Silva Alta and TDR, and pointing out certain matters which O’Neill considered ought to be adjusted.[12] The 6 November 2020 email states in part:[13]
[12]Exhibit DBO-1 to the First O’Neill Affidavit, pp 241–2.
[13]Ibid, p 241.

After the email exchanges yesterday, I personally decided to do a detailed reconciliation of the shareholder accounts of BLT, Silva Alta and TDR included in your spreadsheet that you created and emailed to me previously …
The actual shareholders [sic] ending equity account balances for both BLT and Silva Alta at the 30 June 2020 are actually in deficit, not credit with each balance being in deficit by:
a. BLT in deficit by ($69,494); and
b. Silva Alta in deficit by ($152,494)
These amounts should be repaid to [the Plaintiff] which totals $221,988
However, I agree that it seems that [the Defendant] has not been paid the agreed $165,000 GST inclusive so once an invoice for $150K + GST = $165,000 is issued to [the Plaintiff] then this amount can be offset against the $221,988 above which leaves a net amount owed to [the Plaintiff] by [the Defendant] of a net amount of $56,988.

O’Neill states that this email was sent before he considered ‘more closely’ the reconciliation again on 13 January 2022.[14]
[14]First O’Neill Affidavit, [27].

Stevens responded shortly thereafter by stating: ‘As we have agreed to redo the whole accounting file through xero. We [sic] will be able to view accurate accounts for the company’.[15] O’Neill deposes that his impression of the November 2020 Emails overall is that he and Stevens shared the view that there was a ‘degree of confusion’ as to the accuracy of the Plaintiff’s books and financial records and that a review or audit was required in order to understand the true state of the Plaintiff’s shareholder accounts.[16] There is no evidence that any such independent review or audit was ever undertaken.
[15]Exhibit DBO-1 to the First O’Neill Affidavit, p 240.
[16]First O’Neill Affidavit, [29].

O’Neill also deposes that the Plaintiff has never received an invoice from the Defendant in the amount of $165,000.00.[17]
[17]Ibid, [28].

O’Neill further deposes to a further reconciliation undertaken on 13 January 2022, on the recommendation of the Plaintiff’s solicitors and in the course of providing instructions for the purposes of preparing the First O’Neill Affidavit, upon which he became aware of transfers of money from the Plaintiff to the Defendant in 2016 and 2018 which he was unable to account for.[18] Among these is a transfer from the Plaintiff to the Defendant dated 14 December 2016, for $100,000.00, bearing the description ‘2 X SHR TRF TO [the Defendant]’ (’14 December 2016 Transfer’).[19] In the spreadsheets exhibited to the First O’Neill Affidavit, there is a corresponding entry for 14 December 2016 titled ‘2 X SHR TRF TO [the Defendant]’, recording a debit of $50,000.00, in each of BLT and Silva Alta’s accounts.[20] These anomalous transfers are said to constitute, in part, a sum of $295,000 in total, and, it is claimed, are unsubstantiated by documentary records.[21]
[18]Ibid, [21]–[22].
[19]Ibid, [21].
[20]Exhibit DBO-1 to the First O’Neill Affidavit, pp 244, 246.
[21]First O’Neill Affidavit, [21]–[22].

O’Neill further deposes to identifying a transfer of $22,000.00 from the Plaintiff to the Defendant on 6 December 2016, and says that he suspects that this amount may have been paid ‘on account of monthly project management fees (being two months at $11,000 per month)’. However, O’Neill says that it was agreed that TDR would receive equal project management fees, such that the $22,000.00 was in excess of TDR’s receipts.[22]
[22]Ibid, [23]–[24].

These sums are said to total $317,000, which amount O’Neill deposes is the basis for the (now abandoned) offsetting claim under s 459H of that Act.

Thomas Affidavit

The Thomas Affidavit principally addresses the offsetting claim as it is put in the First O’Neill Affidavit.

Thomas provides his explanation of the transactions underlying that claim, including in respect of the 14 December 2016 Transfer. In relation to this, Thomas suggests that the transfer constituted a shareholder distribution to ‘the grouping of Hoogenbosch[‘s] and [Thomas’] interests’, which interests were described under the name ‘TPDM’ in shorthand.[23] According to the Thomas Affidavit, the Defendant has never been a shareholder in the Plaintiff or a unit holder in the Trust. It is said that while the payments underlying the offsetting claim were to the Defendant’s account, they were not for the benefit of the Defendant.[24] In that context, Thomas deposes that ‘it is common practice for Hoogenbosch and [Thomas] to use the accounts of [their] various corporate entities including the [Defendant’s] accounts as a conduit for the transfer of funds between our various corporate entities and the development entities.’[25]
[23]Thomas Affidavit, [29].
[24]Ibid, [30].
[25]Ibid, [33].

Further, Thomas deposes that the Defendant has no commercial relationship with the Plaintiff other than that which is pursuant to the Development Management Agreement.[26].
[26]Ibid, [30(b)], [38].

Relevantly, the Development Management Agreement is between the Plaintiff as ‘company’ and the Defendant as ‘manager’. It defines the ‘Fee’ as ‘that amount set out in Schedule 1’ to the agreement.[27] Schedule 1 describes the Fee in this way:

The Company shall pay to the Manager remuneration of $11,000.00 including GST per month for the duration of the project and any other amounts agreed to by all parties.

[27]Exhibit BLT-1 to the Thomas Affidavit, p 101.

Thomas also deposes to the Defendant issuing an invoice to the Plaintiff for payment of $165,000.00 on 10 November 2020 (‘Invoice’), and describes this as an amount ‘agreed by the plaintiff on 6 November 2020 to be paid’.[28] An invoice is exhibited, which describes the amount payable as ‘Director and Management Services fee as agreed in Email with Daniel O’Neill on 6/11/2020’, in the amount of $150,000.00 plus GST payable by the Plaintiff to the Defendant.[29]
[28]Thomas Affidavit, [41].
[29]Exhibit BLT-1 to the Thomas Affidavit, p 116.

Second O’Neill Affidavit

In the Second O’Neill Affidavit, O’Neill disputes certain matters contained in the Thomas Affidavit relating to the particular transactions relating to the alleged offsetting claim. O’Neill also sets out some further background and correspondence as between the parties in respect of those matters. In particular, he exhibits an email from Thomas to O’Neill dated 17 August 2016, wherein Thomas invited O’Neill to ‘have a think about the fees and structure for the Funds management’; and deposes to an agreement between Thomas and O’Neill that, inter alia:[30]
[30]Second O’Neill Affidavit, [9].

(a) the Defendant would invoice the Plaintiff for the sum of $100,000 plus GST for ‘upfront fees’ on 19 December 2016;

(b) TDR would invoice the Plaintiff for the sum of $150,000 plus GST in ‘upfront fees’ on 19 December 2016; and

(c) from January 2017, the Defendant and TDR would each issue monthly invoices in the amount of $10,000 plus GST to the Plaintiff on account of project management fees,

(‘Upfront Fee Agreement’).

By email to Ms Elly Busacca (copied to Thomas) dated 19 December 2016, O’Neill set out the above terms of the Upfront Fee Agreement, yet did not receive any reply from Thomas disputing or affirming these terms.[31]
[31]Ibid, [10].

O’Neill says that he subsequently discovered that the 14 December 2016 Transfer was in discharge of the ‘upfront fees’ in accordance with the terms of the Upfront Fee Agreement.[32]
[32]Ibid, [11]; Exhibit DBO-1 to the First O’Neill Affidavit, 225.

O’Neill deposes that he had not seen or received a copy of the Invoice until sighting the Thomas Affidavit.[33] O’Neill denies entering into any such agreement as is referenced in the Invoice,[34] and says in relation to the November 2020 Emails:[35]

While I acknowledge that as at 5 and 6 November 2020, I understood that [the Defendant] had not issued an invoice for an amount of $165,000 on the basis there was an agreement to do so, I believed this because Ms Stevens had informed me that this amount was outstanding to [the Defendant] and I did not seek to independently verify this statement. It is only during the process of instructing my solicitors, Mills Oakley, to prepare this affidavit that I discovered that, based on the matters contained in paragraphs 13-15 above in relation to the Completion Payment, [the Defendant] had no basis to claim the sum of $165,000 (including GST) from [the Plaintiff] pursuant to the Purported Agreement.

[33]Second O’Neill Affidavit, [14].

[34]Ibid, [14].

[35]Ibid, [16].

The ‘Purported Agreement’ is the agreement referred to in the Invoice. The reference to the ‘Completion Payment’ is quite opaque, as that term is not defined or otherwise used and paragraphs 13 to 15 of the Second O’Neill Affidavit, which chiefly concern the Invoice, the ‘Purported Agreement’, and the November 2020 Emails. It is possible that the reference to the ‘Completion Payment’ is intended to be a reference to the ‘Cancellation Payment’ as described in the Knight Affidavit, which I address immediately below.[36]
[36]Second O’Neill Affidavit, [9].

Knight Affidavit

The Knight Affidavit principally concerns a previous development project in Mooroolbark, Victoria, in which the Defendant and a company associated with Knight and O’Neill were involved. Knight deposes to the circumstances in which his own company, Knight Investments Pty Ltd, became entitled to a payment of an amount of $45,000 from a company associated with Thomas and Hoogenbosch (‘Cancellation Payment’).[37] Knight also deposes to an agreement between Thomas, Hoogenbosch and himself whereby the Cancellation Payment would be levied through the then‑newly commenced Development in Lynbrook.[38]
[37]Knight Affidavit, [7]–[18].
[38]Ibid, [19].

Knight then deposes to his understanding, informed by O’Neill and with reference to the email dated 19 December 2016, that O’Neill and Thomas had entered into the Upfront Fees Agreement; and says that TDR’s entitlement to an additional $50,000 in upfront fees over the Defendant’s entitlement is referable to the Cancellation Payment which was ‘rounded up’.[39]
[39]Ibid, [20]–[21].

Relevant statutory provisions

Section 459G of the Act provides that a company may apply to the Court for an order setting aside a statutory demand served on the company. Such an application must be made within the ‘statutory period’, which at the time of service of the Statutory Demand in question was 21 days (‘Statutory Period’).

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

459J 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:
(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.

The principles applicable to these statutory provisions will be considered later in these reasons.

Submissions
Plaintiff’s submissions

The Plaintiff framed its application as consisting of two limbs. In respect of the first limb, the Plaintiff submits that the Statutory Demand and Hoogenbosch Affidavit, taken together, do not describe the Debt in such a way as to enable it to make an assessment, within the Statutory Period, of whether a genuine dispute existed as to the existence or amount of the Debt. It is said that this failure of description in the Statutory Demand constitutes a ‘defect’ for the purposes of s 459J(1)(a) of the Act, which causes ‘substantial injustice’ if the Statutory Demand is not set aside. For the second limb, the Plaintiff contends that the failure of description in the Hoogenbosch Affidavit and its failure to comply with Form 7 of the Supreme Court (Corporations) Rules 2013 (Vic) (‘Corporations Rules’) and failure to verify the Debt as required by s 459E(3)(a) of the Act constitutes ‘some other reason’ for the setting aside of the Statutory Demand pursuant to s 459J(1)(b).[40]
[40]Re Essential Media and Entertainment Pty Ltd [2020] NSWSC 990 (‘Essential Media’), citing Re MK Group Phoenix Pty Ltd [2014] NSWSC 1467. See also Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452 (‘Spencer Constructions’).

The Plaintiff points to the description of the Debt in the Statutory Demand, as ‘Manager remuneration payable to the company from the creditor’, and to its description in the Hoogenbosch Affidavit as ‘remuneration payable to the company from the creditor’. The Plaintiff submits that neither the Statutory Demand nor the Hoogenbosch Affidavit properly articulate the nature of the Debt, its legal basis, or the manner of its calculation. In oral submissions, Counsel for the Plaintiff elaborated on this submission, stating that, by way of example, neither the Statutory Demand nor the Hoogenbosch Affidavit contain details of the time period over which the alleged remuneration was incurred, the identity of the individuals who undertook the works said to give rise to the entitlement to remuneration, or the rate at or basis upon which remuneration was to be charged. The Plaintiff submits that it was open for the Defendant at that point in time to identify the invoice that it relied on in respect of the debt, however it failed to do so.

Further, the Plaintiff says that there is no reference to any time period to which the Debt relates, nor is there an explanation as to how the figure was calculated or the basis on which the Debt was ascertained. As a result, the Plaintiff submits that it was left in a position where it was unable assess whether there was a genuine dispute as to the existence or amount of the debt or even if the debt claimed remained due and payable.

The Plaintiff submits that it was only when the Thomas Affidavit was filed on 25 March 2022 by the Defendant in reply that the Plaintiff was informed that the amount the subject of the demand was said to be a ‘Director and Management Services fee as agreed in Email with Daniel O’Neill on 6/11/2020’, and where Thomas deposed that ‘[t]he [Defendant] was only ever a service provider to the [Plaintiff], and it had no other relationship with the [Plaintiff] other than what comprised the [Development Management Agreement]’. In light of this description of the Debt, the Plaintiff submits that it is telling, and fatal to the Defendant’s case in this proceeding, that the Defendant did not refer to the Development Management Agreement in the Statutory Demand or within the timeframe of the Statutory Period.

The Plaintiff submits that as a result of only being alerted to the alleged basis of the Debt at the time at which the Thomas Affidavit was filed, it was precluded from challenging the Statutory Demand within the Statutory Period on the bases that (a) there is a genuine dispute as to the debt claimed, and (b) there is no debt due and payable, and is now barred from doing so as a result of the principle in Graywinter.[41]
[41]Graywinter Properties Pty Ltd v Gas & Fuel Corp Superannuation Fund (1996) 70 FCR 452 (‘Graywinter’). In this regard, I note that the Court of Appeal in this State recently considered the relevant principles as to the identification of what disputes or claims are supported by an affidavit filed within the Statutory Period in Sceam Constructions Pty Ltd v Clyne (2021) 64 VR 404, tracing the origins and development of what has become known as the Graywinter principle.

The Plaintiff submits that given the Development was operated by the parties in an agile manner and without formal documentation of all the commercial agreements between the parties involved, the circumstances necessitated an even clearer explanation of the nature of the debt and an explanation as to how it was calculated. It is said that, given the context, the need for detail in these respects is greater than might ordinarily be the case.

In oral submissions, Counsel for the Plaintiff took the Court through several examples of the parties verbally agreeing to things, which were said to illustrate the parties’ relationship as ‘fluid’, ‘complex’ and ‘only occasionally documented’.

The Plaintiff also says that the evidence indicates that while the Upfront Fee Agreement was clearly documented in the email from Thomas to O’Neill dated 17 August 2016, it remains the case that there was subsequent confusion on the part of both parties as to the amount actually due and payable. The Plaintiff submits that this state of confusion is apparent from the November 2020 Emails, and relies on the emails summarised and extracted at paragraphs 33-35, 39, 41, 51-54 above. The Plaintiff’s Counsel framed the state of affairs as ‘a mess, quite frankly’.[42]
[42]Transcript, 31 May 2022, 13.18-19.

The Plaintiff submits that there is absolutely no evidence that the audit referred to in the email dated 6 November 2020 was ever undertaken. Similarly, the Plaintiff says that while the reconciliation referred to by O’Neill relates to shareholder accounts and the Plaintiff’s bank account, there is nothing to suggest that O’Neill reconciled the liability or outstanding fees that were owed to the non-shareholding entities, such as the Defendant. What O’Neill did, it is submitted, is review a balance statement belonging to the Plaintiff and identify numerous payments that had been made by the Plaintiff.

The Plaintiff submits that in this regard this case is analogous to Business to All Australia Pty Ltd v North East Developments Pty Ltd (recs and mgrs apptd),[43] a case involving a statutory demand which claimed a sum owing under a lease but which did not specify the nature of the amount claimed by identifying any specific provision of the lease, and where the impugned statutory demand purported to claim as a debt the entire period of the lease (notwithstanding its earlier termination).
[43][2011] NSWSC 668.

The Plaintiff also relies on the approach adopted by Hetyey AsJ in Re Simmoll Pty Ltd,[44] asserting that, in that case, his Honour was dealing with a case in which the debt identified in the impugned statutory demand was significantly more detailed than the description provided by the Statutory Demand in this proceeding. Similarly, the Plaintiff asserts that the Statutory Demand in this case is even more vague and ambiguous than the statutory demand at the heart of the dispute between the parties in Re Simmoll.
[44][2021] VSC 693 (‘Re Simmoll’).

The Plaintiff submits that, having regard to the authorities, the Statutory Demand required it to do exactly what the authorities state that the recipient of a statutory demand should not be required to do: that is, the Plaintiff was required to speculate on the basis of the creditor demand.

Further, the Plaintiff says that without understanding that the Defendant’s claim was based on the 6 November email, the Plaintiff was unable to identify that there was a genuine dispute as to whether or not the amount was in fact due and payable which, it is said, constitutes both a substantial injustice as well as ‘some other reason’ for the purposes of s 459J of the Act.

The Plaintiff submits that the substantial injustice was heightened by the fact that the solicitors for the Plaintiff wrote to the Defendant’s solicitors during the Statutory Period following service of the Statutory Demand and identified the deficiencies in the Statutory Demand, to which no response was received.

Defendant’s submissions

The Defendant accurately contends that the Plaintiff’s case boils down to two bases. The first basis is that the Statutory Demand should be set aside pursuant to s 459J(1)(a) of the Act because the description of the Debt is defective and substantial injustice will ensue unless the Statutory Demand is set aside. The second basis on which the Statutory Demand should be set aside is pursuant to s 459J(1)(b), as there is some other reason why as to the demand should be set aside, namely that the Hoogenbosch Affidavit does not adequately verify the Debt.

The Defendant submits that that Plaintiff seeks to challenge the Statutory Demand on the aforementioned bases despite it not raising a genuine dispute about the Debt until after the Defendant filed its responsive evidence, a turn of events that the Plaintiff seeks to ascribe to the inadequacy of the description of the Debt. This characterisation is rejected by the Defendant.

The Defendant submits that the Court does not need to delve into the complexity of the structure or the history of the matter. This is because the Development was complete by May 2020, by which time Thomas and Hoogenbosch had resigned as directors of the Plaintiff, following which a reconciliation of accounts is said to have occurred in November 2020.

The Defendant submits that, in the circumstances of this case, the Debt was sufficiently described and verified in the Statutory Demand. But in any case, it is submitted, the Plaintiff has not suffered substantial, let alone any, injustice arising from the manner in which the Debt is described.

The Defendant submits that the description of the Debt in the Hoogenbosch Affidavit, being ‘[m]anager remuneration payable to the company from the creditor’ alongside the figure $165,000 was sufficient to enable a reasonable person in the shoes of the director of the debtor company to identify the general nature of the debt to a sufficient degree that the director can assess whether or not there is a genuine dispute as to the existence or amount of the debt or an offsetting claim. The Defendant submits that this is so when regard is had to the context and, more specifically, the following circumstances:

(a) the Defendant had been a special purpose vehicle for a subdivision and land development which had been completed in May 2020;

(b) the Defendant’s only commercial role in relation to that venture had been as development manager;

(c) there was no dispute that the Defendant had been entitled to, and had been paid remuneration by way of, management fees for its services; and

(d) the fact that there had already been a form of reconciliation in November 2020, during the course of which O’Neill, a director of the Plaintiff and a chartered practising accountant, had, on his own evidence, undertaken a ‘detailed reconciliation of the shareholder accounts … including reconciling the transactions in the spreadsheets against the Three Pillars bank accounts’, agreeing that the Defendant ‘has not been paid the agreed $165,000 GST inclusive’.[45]

[45]First O’Neill Affidavit, Exhibit DBO-1, pp 240–2, 243–6.

The Defendant submits that O’Neill was able to identify the source of the Debt, as his email of 6 November 2020 confirms an extant upfront fee payable to the Defendant in respect of management fees.

In this regard, the Defendant contends that, even if there could be said to be a defect in the demand, this case is analogous to Sandos Painting Pty Ltd v Southern NSW Maintenance Pty Ltd,[46] where Emmett J found that correspondence preceding the demand had made clear to the debtor the basis of the amount claimed, notwithstanding this basis was not made explicitly clear in the relevant demand.
[46][2007] FCA 975, [31] (‘Sandos’).

The Defendant further submits that even if the Court concludes that there is a defect in the Statutory Demand, it should not accept the Plaintiff’s claim that it has suffered substantial injustice because, in truth, there was nothing new revealed by the Invoice exhibited to the Thomas Affidavit. The Defendant says that while the Thomas Affidavit provides a modicum more detail than the Statutory Demand, O’Neill (and by extension the Plaintiff) had already been sufficiently put on notice by the Statutory Demand to identify the email referred to in the Invoice. The Defendant submits that it is unclear as to why the Plaintiff was unable to undertake the analysis and raise the dispute in reply within the 21 day timeframe.

The Defendant also contends that the Plaintiff seeks to use s 459J of the Act as a ‘back door’ to ventilate a dispute as to the existence of the Debt, and that the Court should not entertain such an argument. The Defendant submits that the Plaintiff has sought to raise the issue of genuine dispute out of time.

In oral submissions, Counsel for the Defendant drew attention to the letter sent by the Plaintiff’s solicitors on 12 January 2022, which is said to foreshadow the receipt of instructions from the Plaintiff to seek to challenge the Statutory Demand on the basis that there is a genuine dispute as to the amount of the debt owed, and pointed out that no genuine dispute about the amount was raised. The Defendant’s Counsel also submitted that O’Neill’s evidence fails to explain why on 13 January 2022 he was unable to identify that the payment of the up-front fees should have been a payment recorded as a payment on account of the Debt. On this basis, the Defendant urged the Court to infer that it was open to O’Neill to identify, at the time at which he received the Statutory Demand, the grounds that he now seeks to raise in the Second O’Neill Affidavit.

It follows, submits the Defendant, that the Court should not accept any protestations of substantial injustice because any arguments along these lines do not reflect the way in which this Application has been conducted by the Plaintiff. This is because the Plaintiff has made a strategic decision at an early stage to focus on description of the Debt as contained in the Statutory Demand.

The Defendant also submits that if the Court is satisfied that the Debt was adequately described in the Demand and / or the Plaintiff did not suffer significant prejudice by reason of any defect, the Court should not be satisfied that there is ‘some other reason’ to set aside the Statutory Demand pursuant to s 459J(1)(b) of the Act.

The Defendant submits that the Hoogenbosch Affidavit complies with s 459E of the Act because it properly verifies the Debt, which is consistent, it is said, with the Debt as described in the Statutory Demand.

The Defendant submits that the Hoogenbosch Affidavit is sufficient for the purposes of Form 7 of the Corporations Rules. The Defendant also submits that, to the extent that the description of the Debt as contained in the Hoogenbosch Affidavit is inadequate for the purposes of Form 7 of the Corporations Rules, then this constitutes a defect of a lesser magnitude vis-à-vis the cases in which the Court has found another reason to set aside a statutory demand by reason only of a defective accompanying affidavit.

The Defendant submits that the decision to set aside a statutory demand on the basis of s 459J(1)(b) of the Act must be supported by some sound positive ground or good reason which is relevant to the purposes for which the power exists. In this respect, the Defendant relies on Portrait Express (Sales) Pty Ltd v Kodak (Australasia) Pty Ltd[47] for the proposition that, if the Court were to consider that the Statutory Demand itself is not defective, or is not defective to such a degree that it caused substantial injustice to the Plaintiff, then the Court should not be satisfied that there would be another reason of appropriate seriousness to independently set aside the Statutory Demand.
[47](1996) 132 FLR 300 (‘Portrait Express v Kodak’).

Rather, the Defendant urged the Court to adopt a ‘global’ approach to assessing the Statutory Demand and the Hoogenbosch Affidavit, and relied on the cases of Panel Tech Industries (Aust) v Australia Skyreach Equipment[48] and Plate Impressions Pty Ltd v JRL Consortium Group Pty Ltd.[49]
[48](2003) 200 ALR 321.
[49][2016] QSC 274.

The Defendant further submits that, having regard to these cases and the surrounding circumstances in which the Statutory Demand and Hoogenbosch Affidavit were issued, it is clear that the Plaintiff was able to identify the true battleground of any dispute in relation to the Statutory Demand. The Defendant submits that this is plain from the November 2020 Emails.

Analysis

The parties were largely in agreement as to the principles that apply in cases of this type. Rather, the contest concerned the application of those principles to the facts of this case.

As set out above, when filing the Application the Plaintiff originally relied on three grounds to set aside the Statutory Demand: pursuant to s 459H(1)(b) of the Act, the existence of an offsetting claim; pursuant to s 459J(1)(a), a defect in the Statutory Demand; and pursuant to s 459J(1)(b), some other reason why it should be set aside. By the time the Application was heard, the Plaintiff no longer relied on s 459H(1)(b) of the Act.

Application to set aside the Statutory Demand pursuant to s 459J(1)(a) of the Act

In order to succeed on its application to set aside the Statutory Demand pursuant to s 459J(1)(a) of the Act, the Plaintiff must establish two things, that:

(a) there is a defect in the Statutory Demand; and

(b) because of the defect in the Statutory Demand, substantial injustice will be caused unless the Statutory Demand is set aside.

Is there a defect in the Statutory Demand?
Applicable principles

The principles applicable to s 459J of the Act were recently summarised by Hetyey AsJ in Re MHC Pathology Pty Ltd,[50] where his Honour observed:[51]

The case law makes clear that subparas (a) and (b) of s 459J(1) are mutually exclusive. The only source of power to set aside a demand on the basis of a defect is found in s 459J(1)(a) and not s 459J(1)(b). In other words, the provisions do not overlap.
The term “defect” as it appears in s 459J is given a wide and inclusive definition by s 9 of the legislation and may encompass an irregularity, a misstatement of an amount or total, a misdescription of a debt or other matter, or a misdescription of a person or entity. But the expression “defect” in s 459J does not imply any degree of proportionality or distinguish between defects which are major or minor in nature. Even significant defects in a demand are to be determined under s 459J(1)(a).
The question of whether substantial injustice will arise unless the demand is set aside depends on the nature of the particular defect identified and the surrounding circumstances. The requisite injustice must be experienced by the debtor company itself, but the concept cannot be treated as a proxy for disciplining a creditor who has failed to adhere to the form of the demand.
…
[T]he 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, 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”. 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. The Court’s power under the sub-section exists to maintain the integrity of the statutory demand procedure in Pt 5.4 of the Corporations Act and to counter its subversion.

[50](2020) 356 FLR 222.

[51]Ibid, 243–5 (citations omitted).

A statutory demand will contain a defect where the impugned statutory demand is so vague or ambiguous such that it fails to identify, to a reasonable person in the shoes of a director of the debtor company, the general nature of the debt to a sufficient degree to enable the director to assess whether there is a genuine dispute as to the existence or amount of the debt or an offsetting claim.[52] A statutory demand is required to unambiguously put the debtor company on notice of the matters required by the legislation, including the nature of the debt, a statement that the debt is due and payable, and an explanation as to how the amount claimed is composed or calculated.[53]
[52]LSI Australia Pty Ltd v LSI Holdings Ltd (2007) 25 ACLC 1602, [54] (‘LSI’). See also Blayney Wholesale Foods Pty Ltd v BIS Cleanaway Ltd [2008] NSWSC 1146, [33].
[53]Re Simmoll, [29] (citations omitted).

While a measure of vagueness or ambiguity may not necessarily constitute a defect in the demand, it is accepted that an important factor will be the degree of vagueness or ambiguity and its impact on the perception and understanding of a reasonable reader.[54]
[54]LSI, [52].

As noted above, s 459J(1)(a) and (b) are mutually exclusive. This requires a short explanation. They are mutually exclusive in the sense that if the defect is in the statutory demand itself, s 459J(1)(a) applies and not s 459J(1)(b). Section 459J(1)(b) relates only to cases where there is a reason other than the existence of a defect in the demand. Accordingly, if the case is one where a defect in the demand is alleged, it can only be set aside if substantial injustice would be caused unless it was so set aside.[55] If there is any other defect alleged, such as a defect in relation to the demand rather than in the demand itself, then the demand may only be set aside if ‘some other reason’ for setting it aside exists.[56]

Consideration

[55]Kalamunda Meat Wholesalers Pty Ltd v Reg Russell & Sons Pty Ltd (1994) 13 ACSR 525, 529 (‘Kalamunda Meat Wholesalers’). See also Spencer Constructions.

[56]Spencer Constructions (1997) 76 FCR 452.

There is clearly a defect in the Statutory Demand in that the schedule describes the debt as ‘payable to the company [ie the Plaintiff] from the creditor [ie the Defendant]’. Clearly, the Defendant did not intend to claim that it owed the Debt to the Plaintiff. As noted in paragraph 20 above, no party sought to make anything of this defect, at least on its own. Therefore, unless it impacts on my consideration of the defect relied upon, I do not consider this defect in and of itself to be a basis to set aside the Statutory Demand in this case.

The Plaintiff contends that the Statutory Demand does not properly articulate the nature of the Debt, its legal basis, or the manner of its calculation. The same criticism is made of the Hoogenbosch Affidavit.

All that is said in the Statutory Demand is that the Debt is for ‘manager remuneration’. The source of the obligation for such a payment is not stated and no information is given so as to assist in identifying what that may be. How the amount claimed is calculated is not stated; it is simply listed as $165,000. There is no other information provided. The Hoogenbosch Affidavit does not assist in this regard, as it provides nothing extra in terms of the nature of the debt or the manner of its calculation.

In Re Simmoll, Hetyey AsJ said of the statutory demand in that case:[57]

In my view, the demand in question is vague and ambiguous because it fails to explain to a reasonable person in the position of the director of the plaintiff the general nature of the alleged debt in order for that person to ascertain whether there is a genuine dispute about the debt or an offsetting claim. The legal basis of the debt claimed is unclear. There is no reference to any alleged agreement by which the plaintiff was to refund the defendant in respect of any overpayment for works invoiced in advance or the mechanism by which such a refund was to be calculated. Nor is there any reference to a specific provision within the building contract which gives rise to such an entitlement.

[57]Re Simmoll, [30].

The Statutory Demand in this case suffers from the same vices. It does not give any information which would allow a reasonable person in the position of director of the Plaintiff to understand the nature of the Debt or its legal basis, and it does not state how the Debt has been calculated.

As was said by Hetyey AsJ in Re Simmoll, ‘the plaintiff should not be expected to guess what the demand relates to or the source of the obligation to pay it.’[58] That is exactly what the Plaintiff in this case would have had to do when it received the Statutory Demand. The expression ‘manager remuneration’, without more, simply does not enable the Plaintiff to identify the source of the obligation, as it is vague. It is potentially ambiguous due to the existence of the expression ‘payable to the company from the creditor’, although it is likely that the Plaintiff would have been able to identify that the obligation to pay the Debt was meant to be the other way around.
[58]Ibid, [34].

From the affidavits subsequently filed by the parties, it seems to me that there could be three potential sources of the purported obligation: the Development Management Agreement, the Upfront Fee Agreement, and the November 2020 Emails. It is unreasonable to expect that the Plaintiff would be able to identify those as being relevant and to assess which of them was relied upon. The Defendant issued the Statutory Demand: the onus was on it to ensure that it complied with the statutory requirements and that it sufficiently identified the debt claimed in the manner required by the authorities. It did not do so.

The matters subsequently relied upon by the Defendant, such as the Invoice, the Development Management Agreement or the November Emails, are not mentioned in the Statutory Demand or the Hoogenbosch Affidavit at all. Therefore, they cannot be used to say that the Statutory Demand is not defective, as they do not assist in providing an understanding of the demand at the time it was served.[59] Further, none of these matters were referred to by the Defendant in correspondence in the period after the Statutory Demand was served and the expiry of the Statutory Period and therefore cannot be relied upon as ‘curing’ the defect since that did not occur during the Statutory Period.
[59]Ibid, [30].

I do not accept the Defendant’s submissions that the Statutory Demand does not contain a defect. In particular, I do not accept that the matters referred to in paragraph 79 above meant that the Debt was sufficiently described.

Accordingly, I am satisfied that there is a defect in the Statutory Demand as it does not identify the nature of the Debt, the source of the obligation to pay it, or the manner of its calculation. I shall refer to this as the Debt Description Defect.

Is the defect such that substantial injustice will be caused if the Statutory Demand is not set aside?
Applicable principles

As to the question of whether the gravity of the defect in question is of such a quality that substantial injustice will be caused unless the statutory demand is set aside, in Condor Asset Management Ltd v Excelsior Eastern Ltd[60] Barrett J stated that the question must:[61]

be addressed in context; and it is clear that a defect will not be productive of “substantial injustice” if the demand, viewed in the light of what the company already knows or ought reasonably be expected to know, contains sufficient information to assess its liability for the amounts demanded.

[60](2005) 56 ACSR 223 (‘Condor’).

[61]Ibid, [24]–[25].

In Condor, Barrett J also observed:[62]

Fundamental, in these circumstances, is the proposition that the company on which the demand is served must be able to identify with precision the debt - or each and every one of the several debts - upon which a statutory demand is based. Failure to provide the means of such identification means that the company is denied the ability even to begin to consider whether s 459H(1)(a) [the “genuine dispute” ground] provides a ground for challenge. The company in that position suffers severe prejudice; and that prejudice must, of its nature, mean that there will be, in terms of s 459J(1)(a), 'substantial injustice' unless the demand is set aside.

Consideration

[62]Ibid, [28].

Finding that the Statutory Demand contains a defect, being the Debt Description Defect, is a necessary step in determining whether to set aside the Statutory Demand, but it can only be set aside if the Plaintiff establishes that the Debt Description Defect will cause a substantial injustice if the Statutory Demand is not set aside.

In summary, the Plaintiff contends that the Debt Description Defect has caused substantial injustice because as a result of that defect it was unable to identify whether there was a genuine dispute as to the Debt. This is said to constitute a substantial injustice as it would mean that it could not make a valid application to set aside the Statutory Demand on the ground of a genuine dispute pursuant to s 459H(1)(a) of the Act within the Statutory Period.

In summary, the Defendant says that the Debt Description Defect (if it was a defect) did not prevent the Plaintiff from identifying the source of the Debt, relying on the 6 November 2020 email where he is said to have confirmed an upfront fee payable to the Defendant in respect of management fees. The Defendant relies on other matters which I will discuss in turn.

The key question in this case in respect of substantial injustice being whether in fact the Debt Description Defect did not allow the Plaintiff to identify whether there was a genuine dispute about the Debt, it is helpful to have regard to what the Plaintiff was able to do within the Statutory Period.

On 12 January 2022, which was two days before the Statutory Period expired, the Plaintiff’s solicitors, Mills Oakley, sent a letter to the Defendant’s solicitors, SLF Lawyers, in respect of four statutory demands (including the subject Statutory Demand) which had been served on 24 December 2021 on the Plaintiff in respect of debts said to be owed by Edgepoint, Small & Co, Core Projects and the Defendant.[63] In that letter (’12 January Letter’), Mills Oakley set out, in some detail, reasons why each of the demands were liable to be set aside and demanded that they be withdrawn, failing which the Plaintiff would file applications to set them aside.
[63]First O’Neill Affidavit, [31]; Exhibit DBO-1, pp 248–251.

Before turning to consider the 12 January Letter, it is worth emphasising the timing of the service of the statutory demands, including the demand the subject of this proceeding. The demands were served on 24 December 2021 by express post at the registered office of the Plaintiff, being its accountant’s office,[64] the day before Christmas. While there is no evidence about whether anyone was present at the accountant’s office on that day, and the evidence is that the Plaintiff became aware of it on or about 29 December 2021 when an employee from the accountant’s office informed it that four express post envelopes had been received,[65] it would not be unreasonable to infer that the Statutory Demand may not have come to anyone’s attention until some time after Christmas and on 29 December 2021. Like many judicial officers, I am unenthused by statutory demands being served at a time designed to coincide with the Christmas/New Year period when many offices are unattended. In the context where the alleged debt is ultimately said to be based on an email sent over 12 months prior to the issuing of the Statutory Demand and where there is no explanation given for the timing of service of the Statutory Demand, it is reasonable to be somewhat cynical as to the purpose behind that timing.
[64]First O’Neill Affidavit, [4]–[5]. O’Neill deposes that he does not know when the demands were delivered to the accountant’s office, but for the purposes of dealing with the demands, he instructed Mills Oakley to assume that it was on 24 December 2021 being the next business day after the date of the letter enclosing the Statutory Demand, that letter being dated 23 December 2021.
[65]First O’Neill Affidavit, [4].

In Re Pierotte & Fanani Pty Ltd,[66] Black J in the Supreme Court of New South Wales stated:

While the Courts have expressed a distinct lack of enthusiasm for the service of creditor’s statutory demands which are calculated to arrive after parties or their legal representatives are on Christmas leave, there is no general principle that creditor’s statutory demands cannot be served in December, … The timing of service of the demands is nonetheless relevant, because the fact that the 21 day period in which they could be set aside ran into the Christmas and New Year period reduced the opportunity that would otherwise have been available to the Plaintiffs to explore the relevant issues in correspondence, before filing an application to set aside the demands.

[66][2018] NSWSC 457, [40].

In the context of an application under s 459S of the Act where it was relevant to consider whether there had been a sufficient explanation for the debtor company’s failure to apply to set aside the statutory demand, Black J stated:[67]

In the present case, it seems to me that that question must be addressed in the relevant circumstances. Here, the creditor’s statutory demand was served immediately prior to the Christmas vacation. It is also relevant to note that the transactions which gave rise to the relevant demand had occurred some years before, and the question why it became necessary or desirable to serve a creditor’s statutory demand in the week prior to Christmas was largely unexplained. I think I am entitled to recognise that, at that time, the attention of persons who might receive such documents may be diverted and that their lawyers are less likely to be available than they would be at other times. That is not to say that some different test applies to whether leave should be granted under s 459S of the Corporations Act when statutory demands are served at that time. It is, however, to recognise that the factual circumstances of that situation are different to the position where a demand is not served at a time giving rise to the particular challenges of the Christmas vacation.

[67]Re Pioneer Cryogenics Pty Ltd (2015) 108 ACSR 461, 465, [12]. See, also, Eventcepts Pty Ltd v Creative Talent Management Pty Ltd [2017] VSC 457, [4] (per Gardiner AsJ).

It is trite to say that the requirements for an application to set aside a statutory demand being made within the Statutory Period are strict and unforgiving: the authorities have established that the Court does not have any ability to extend it and no allowance is made for weekends or public holidays occurring within the Statutory Period. A statutory demand served in the Christmas/New Year period is almost destined not to come to the attention of the debtor company in a prompt manner, and it is also quite likely that the company’s legal advisors may also be on leave at the time. In that context, a statutory demand which does not clearly set out the nature of the debt, the source of the legal obligation to pay it and the manner of its calculation places the recipient of the demand in an even more difficult situation as they realistically have much less than the 21 day period in which to deal with the demand, get advice, and decide whether and on what basis to make an application to set it aside.

Given the strictness of these requirements, however, all I can do is take it into account as a factual circumstance of the Plaintiff’s situation when considering the question of substantial injustice if there is a defect in the statutory demand.

In respect of the Statutory Demand, the 12 January Letter relevantly states:

The basis upon which the alleged ‘manager remuneration’ has been charged, together with the calculations that are said to support the quantification of the [Debt] are entirely unclear. Neither the [Statutory Demand] nor the [Hoogenbosch Affidavit] said to verify it identify the legal basis for the debt claimed or contain any particulars of the how the [sic] ‘remuneration/manager remuneration’ has been calculated. For example, there are no details of the time period over which the alleged remuneration was incurred, the identity of the individuals that undertook the work said to give rise to the entitlement to remuneration, or the rates at or basis upon which remuneration was to be charged.
We are instructed that [the Plaintiff] has not at any time been provided with any agreement between it and [the Defendant] relating to ‘manager remuneration’, or any request for payment pursuant to any such agreement.
As a result, [the Plaintiff] considers that the [Statutory Demand] does not put [the Plaintiff] on notice in an ‘unambiguous way’ of the matters the Act requires in relation to the [Debt] …
…
Finally, and although we are yet to obtain fulsome instructions in light of the Christmas and New Year break and our recent engagement, we expect to receive instructions that [the Plaintiff] also disputes the existence of the [Debt] pursuant to sections 459E(1) and 459H of the Act.[68]

[68]Exhibit DBO-1, pp 249–50.

Other than a brief email from SLF Lawyers to Mills Oakley later on 12 January 2022 to say that it was seeking instructions and intended to reply by 5.00pm the following day to the 12 January Letter, the evidence does not disclose any response, let alone a substantive response, to the 12 January Letter before the expiry of the Statutory Period.[69]
[69]First O’Neill Affidavit, [33]; Exhibit DBO-1, pp 259–66.

The 12 January Letter was presumably prepared and sent based on the Plaintiff’s instructions to that point in time and signalled that fulsome instructions had not yet been obtained. By this letter, the Defendant was clearly on notice as to the Debt Description Defect and, in particular, that the Plaintiff said that it had not at any time been given an agreement between the parties relating to manager remuneration or request for payment pursuant to any such agreement.

True it is that the Plaintiff saying there is a defect does not make it so. However, the Defendant could have chosen to supplement its material within the Statutory Period but did not do so. The Defendant does not have to do so, but it is therefore at risk of the consequences if the Statutory Demand is found to be defective.

The First O’Neill Affidavit was affirmed on 14 January 2022, the last day of the Statutory Period.

It does not refer to or exhibit the Development Management Agreement or the Upfront Fee Agreement.

O’Neill deposes that on 13 January 2022 (after the 12 January Letter was sent), he undertook a reconciliation of a spreadsheet regarding shareholder accounts. He says that he did this on the recommendation of Mills Oakley and in the course of providing instructions for the purposes of his affidavit. In doing so, he referred to the November 2020 Emails. He then makes a series of statements about various payments made to the Defendant or entities associated with Thomas and Hoogenbosch which he says were not properly made and which he relied upon as an offsetting claim by the Plaintiff.[70]
[70]First O’Neill Affidavit, [30].

It is clear on the face of the First O’Neill Affidavit that his reliance on the November 2020 Emails is due to him having conducted some sort of reconciliation in November 2020 and then again on 13 January 2022.[71] He refers to his 6 November 2020 email in respect of the Defendant not having been paid the agreed ‘$165,000 GST inclusive’ and says that once an invoice is issued for it that can be offset against the amount once the reconciliation is done.[72] He also deposes that the Statutory Demand did not enclose an invoice and it is unclear to him how the Defendant has calculated the Debt.[73] He says that no invoice for it has been issued to the Plaintiff.[74]
[71]Ibid, [21].
[72]Ibid, [27].
[73]Ibid, [28].
[74]Ibid, [28].

The Defendant says that the Plaintiff had enough information within the Statutory Period to identify the Debt, as O’Neill correctly went to the November 2020 Emails and exhibited them to the First O’Neill Affidavit. In particular, the Defendant says that O’Neill identified the Debt in his email of 5 November 2020.

I do not accept this submission: the 5 November 2020 email from O’Neill refers to ‘management fee invoices’ in the context of ‘monthly management fees’, but it goes on to state that in addition to these monthly invoices, a ‘once-off directors [sic] fees tax invoice for $150K + GST = $165K’ was issued by both parties.[75] The subsequent email on the same date from Stevens says that it appeared that there had not been an invoice issued by the Defendant for the $165,000. This is what O’Neill was referring to in his 6 November 2020 email.
[75]Emphasis added.

An amount referred to in the November 2020 Emails, sometimes not described yet crucially referred in one of them as a “once-off directors fee”, which happens to coincide with the amount of the Debt claimed but not accurately, let alone clearly, its description, does not amount to the Plaintiff having identified within the Statutory Period what the Debt relates to. Nor do I accept that there was enough in the November 2020 Emails to enable the Plaintiff to uncover what the Debt related to.

I accept the Plaintiff’s submission that the arrangements between the parties were complex, poorly or not at all documented in some respects, and often comprised transactions between various of their respective entities without particular regard to which entity within the relevant ‘camp’ was entitled to the payment.[76] This context only serves to amplify the point that the Statutory Demand was vague and ambiguous in the way it described the Debt.
[76]By way of example, see Thomas’ description of this as described in paragraph 47 above.

To the extent that the First O’Neill Affidavit does deal with the basis for the Debt, which I do not think it does, in effect it is guessing at the basis for the Debt based on the figure in the November 2020 Emails being the same as that claimed in the Statutory Demand.

The Defendant relies on Sandos for the proposition that the correspondence preceding the Statutory Demand had made clear to the Plaintiff the basis of the Debt.[77] In making this submission, the Defendant did not identify the correspondence it relied upon, but it can only be the November 2020 Emails since there is no other correspondence in evidence other than the 12 January Letter, which clearly does not set out the basis of the Debt. However, it is important to note that in Sandos, the correspondence referred to was exchanged roughly two weeks before the statutory demand in that case was served. In this case, the November 2020 Emails were exchanged over 13 months prior to the Statutory Demand being served, and for the reasons set out above, can hardly be said to have explained or clearly explained the basis of the Debt.
[77]See paragraph 81 above.

The Plaintiff’s evidence is that it did not have and its officers had not seen the Invoice prior to sighting the Thomas Affidavit.[78] O’Neill’s evidence was not challenged on this point nor was he not cross-examined at the hearing, and I have no reason not to accept his evidence in this regard.
[78]First O’Neill Affidavit, [28]; Second O’Neill Affidavit, [14].

Even if the Invoice had been received by the Plaintiff, it is of little assistance, as it describes the amount payable as $150,000 plus GST for ‘Director and Management Services fee as agreed in Email with Daniel O’Neill on 6/11/2020’.[79] Thus it simply refers one back to the November 2020 Emails, which chain of correspondence I have already said does not unambiguously and clearly identify the basis for the fee. In other words, at best the November 2020 Emails could be described as an acknowledgment of a debt rather than as an agreement giving rise to a debt.
[79]Exhibit BLT-1, p 116 to the Thomas Affidavit.

The Defendant submitted that the critical background was O’Neill’s acknowledgment of the debt in his 6 November 2020 email as that was the matter identified in the Statutory Demand. I do not accept this submission as it is based on a false premise: the email was not identified in the Statutory Demand. There is no mention of it in the description of the Debt, either in the Statutory Demand or the Hoogenbosch Affidavit.

The Defendant also says that as at 13 January 2022, O’Neill appreciated that the battleground between the parties would be in the reconciliation of the November 2020 Emails. That is only partly true: I accept that O’Neill appreciated at the time of the First O’Neill Affidavit that an offsetting claim would be based on the transactions described in those emails, but I do not accept that he appreciated, or had enough information to appreciate, whether there was a genuine dispute about the Debt.

The Defendant also submitted that the statement in the 12 January Letter that Mills Oakley expected to receive instructions that the Plaintiff disputed the Debt shows that Mills Oakley were also alive to the possibility of a dispute and that the Plaintiff had been able to identify within the Statutory Period whether it wished to raise this ground for setting aside the Statutory Demand. I do not accept this submission: clearly, by the time the Application was filed, the Plaintiff had not raised this ground. That is consistent with the Plaintiff not being able to raise this ground because it did not know what the Debt was for.

Even now, after all of the evidence that has been adduced in this proceeding and the submissions made on behalf of the parties, the source of the legal obligation for the payment of the Debt and the manner of its calculation is not clear. In oral submissions, Counsel for the Defendant took me through the terms of the Development Management Agreement, in particular the fee of $11,000 including GST per month and any other amounts agreed to by all parties, stating that the amount acknowledged by O’Neill in the November 2020 Emails is referable to this agreement. It was said that the Development Management Agreement provides context and shows that there is something sitting behind the agreement in the November 2020 Emails. The problem with this submission is that it reveals nothing about how the amount of $150,000 (or $165,000 if GST is included) was arrived at in the context of the Development Management Agreement.

What is described as the Upfront Fee Agreement by O’Neill was not referred to by the Defendant, and it is not clear how this fits, if it does, with the Development Management Agreement. The Defendant did not submit that the Upfront Fee Agreement was the source of the legal obligation for the Debt and it is not entirely clear from the Second O’Neill Affidavit that it was a binding agreement, as O’Neill says he set out the terms of it in an email which he never received a reply to affirming or disputing those terms.[80] In any event, the descriptions for at least some of the amounts in the Upfront Fee Agreement are difficult to reconcile with the description of the Debt in the Statutory Demand and the amounts do not obviously correlate.
[80]See paragraph 52 above.

For all of these reasons, I do not accept the Defendant’s submission that O’Neill could have identified, within the Statutory Period, the grounds the Plaintiff seeks to rely on in the Second O’Neill Affidavit. This is particularly so when one takes into account the effect of the timing of service of the Statutory Demand, on Christmas Eve, as set out above.

This confusion and lack of clarity is exacerbated by the circumstances described in paragraph 132, which I have accepted. It is, as Counsel for the Plaintiff submitted, a mess.

I do not accept the Defendant’s submission that the Plaintiff’s arguments based on s 459J of the Act are a ‘back door’ attempt to rely on a dispute as to the existence of the Debt, as the Plaintiff did not raise the issue of genuine dispute within the Statutory Period.

It is clear from the authorities, including those referred to above, that a defect in a statutory demand which has the effect of not allowing the debtor company to identify whether there is a genuine dispute about the debt is a basis for setting aside the statutory demand under s 459J(1)(a) of the Act where it will cause substantial injustice if not set aside. This is not a ‘back door’ way of relying on s 459H(1)(a) as a basis for setting aside the statutory demand. Rather, the authorities recognise that it is a legitimate basis on which to mount an argument in favour of setting aside a statutory demand under s 459(1)(a).

I accept the Plaintiff’s submission that the Debt Description Defect will cause substantial injustice if the Statutory Demand is not set aside, as the Plaintiff is now precluded from relying on s 459H(1)(a) of the Act as a ground for setting it aside by reason of the Debt Description Defect. This constitutes a substantial injustice in the circumstances of this case. In this regard, I agree with Barrett J that a company denied the ability to consider whether s 459H(1)(a) provides a ground for challenge ‘suffers severe prejudice’ which by its very nature means that there will be substantial injustice if the demand is not set aside.[81] If the Statutory Demand is not set aside and the Plaintiff does not pay the Debt, then the Plaintiff will ‘also suffer the substantial injustice of having a presumption of insolvency raised against it in any future winding up proceeding’[82] based on a failure to meet the Statutory Demand.
[81]Condor, [28]; see paragraphs 109 and 110 above.
[82]Re Simmoll, [34].

Application to set aside the Statutory Demand pursuant to s 459J(1)(b)

Having found that the Statutory Demand ought be set aside pursuant to s 459J(1)(a) of the Act, it is not necessary for me to consider the alternative ground relied upon by the Plaintiff, being s 459J(1)(b). However, I will say something brief about it.

Applicable principles

As noted above, s 459J(1)(b) is mutually exclusive to s 459J(1)(a).[83] Accordingly, the ‘some other reason why the demand should be set aside’ refers to a reason not otherwise indicated by the Act as a ground for setting aside a statutory demand, namely a defect in the statutory demand.[84]
[83]Kalamunda Meat Wholesalers (1994) 51 FCR 446, 450. See also paragraph 95 above.
[84]Spencer Constructions (1997) 76 FCR 452, 459.

The Court should not act under this provision unless the decision to do so is supported by ‘some sound or positive ground or good reason which is relevant to the purposes for which the power exists’, as statutory demands should stand unless there are reasons of ‘appropriate seriousness’ for setting them aside.[85]
[85]Portrait Express v Kodak (1996) 132 FLR 300.

In Meehan v Glazier Holdings Pty Ltd, Young CJ in Eq stated that:[86]

Although the wording of s 459J(1)(b) of the Corporations Act appears wide, its context and history requires reading it down to encompass in general terms only cases where the Court is satisfied that injustice will be caused unless the demand is set aside because of a defect relating to, but not in, the demand … 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. A judge is not at liberty to set aside a demand under s459(J)(1)(b) merely because he or she is subsequently subjectively considers it fair to do so.

[86][2005] NSWCA 24, [60]–[61].

Section 459E(3) of the Act provides that a statutory demand relating to a debt that is not a judgment must be accompanied by an affidavit which (a) verifies that the debt (or the total amounts of the debts) is due and payable by the debtor company and (b) complies with the rules. I shall refer to the affidavit required by s 459E(3) as the ‘accompanying affidavit’.

Relevantly, r 5.2 of the Corporations Rules contemplates that the accompanying affidavit must ‘be in accordance with Form 7 and state the matters mentioned in that Form’. Paragraph 1 of Form 7 requires the deponent of the accompanying affidavit to specify the amount of the debt or debts owed by the debtor company to the creditor. It also requires the deponent to ‘state [the] nature of [the] debt, or debts, ensuring that what is stated corresponds with the description of the debt, or debts, to be given in the proposed statutory demand, with which … [the] affidavit is to be served on the debtor company’. Rule 1.7(1) of the Corporations Rules provides that a document is drawn in accordance with a prescribed form ‘if the document is substantially in accordance with the form required or has only such variations as the nature of the case requires’.

Consideration

In this instance, the ‘some other reason’ relied upon by the Plaintiff is the alleged defects in the accompanying affidavit, being the Hoogenbosch Affidavit. It is said that the Hoogenbosch Affidavit does not comply with s 459E(3) of the Act and that it does not comply with the Corporations Rules, in that it is not in accordance with Form 7.

There is no contest in this case that an accompanying affidavit was required, as the Debt is not for a judgment debt.

On a plain reading of s 459E(3)(a), the verification required in the accompanying affidavit is that the debt (or total of the debts) is due and payable. It is not some ‘at large’ concept of verification of the debt.

In this instance, the Hoogenbosch Affidavit contains a statement that the Debt is ‘due and payable by the debtor company’. Therefore, I do not accept that it does not comply with s 459E(3)(a) of the Act.

As noted above, Form 7 relevantly requires that the accompanying affidavit state the nature of the debt, ensuring that what is stated corresponds with the description of the debt to be given in the proposed statutory demand.

The Hoogenbosch Affidavit refers to ‘a debts [sic] totaling [sic] $165,000.00 owed by [the Plaintiff] for remuneration payable to the company from the creditor’.

Thus the Hoogenbosch Affidavit contains the same obvious errors referred to earlier regarding the debt being payable to the Plaintiff from the Defendant, of which the parties did not seek to make much, if anything.

Leaving this aside, the description of the debt in the Hoogenbosch Affidavit differs from that given in the Statutory Demand, in these ways:

(a) the Statutory Demand does not refer to the Debt being debts totalling $165,000 but rather reads as if it is a single debt; whereas the Hoogenbosch Affidavit refers to ‘a debts’ totalling $165,000; and

(b) the Statutory Demand describes the Debt as ‘manager remuneration’ whereas the Hoogenbosch Affidavit refers to the debts as being for ‘remuneration’.

In oral submissions, counsel for the Defendant stated that ‘remuneration’ is not inaccurate but accepted that it was highly general, submitting that ‘being one step in generality removed from the description of demand is not inconsistent with the demand itself’.[87]
[87]Transcript, 41.27–31. I note for the record that the Transcript records counsel as saying that ‘remuneration is not an accurate, although I would accept that it is highly general …’. I consider ‘an accurate’ to be a transcription error, as ‘inaccurate’ is more in keeping with the submission Counsel was making.

I do not accept that the description of the debt in the Hoogenbosch Affidavit corresponds with the description of the debt in the Statutory Demand. Further, describing it as ‘remuneration’ does not state the nature of the debt/s as required by Form 7.

That being the case, the next question is whether this constitutes some other reason of appropriate seriousness such that the Statutory Demand ought be set aside. In the circumstances of this case, I consider that it does justify setting aside the Statutory Demand. This is because the nature of the debt is not otherwise set out, elsewhere in the Hoogenbosch Affidavit or in the Statutory Demand itself. That brings about the appropriate seriousness: for example, if the nature of the debt was not set out in the accompanying affidavit but it was set out in the statutory demand, it may well be that the defect in the affidavit is not sufficiently serious so as to warrant the demand being set aside. Similarly, if a failure in the description of the debt in the accompanying affidavit corresponding with the description of the debt in the statutory demand does not cause confusion or lead to ambiguity, then it may well not be sufficiently serious to justify the demand being set aside. In this case, I am satisfied that the Hoogenbosch Affidavit’s failure to correspond with the Debt as described in the Statutory Demand is a defect in the accompanying affidavit of appropriate seriousness to warrant the demand being set aside, since it leads to the same sort of prejudice or substantial injustice as set out above. In other words, the defect in the Hoogenbosch Affidavit is ‘some other reason’, of sufficient seriousness because nothing else accompanying it, being the Statutory Demand, adequately describes the nature of the debt.

Conclusion

For these reasons, the Statutory Demand will be set aside.

The parties are directed to confer on an appropriate form of order to give effect to these reasons, including as to costs. The parties should provide my Chambers with proposed consent orders (if agreement is reached) by 27 September 2022. If agreement is not reached, then each party’s proposed form of order and a short written submission of no more than three pages should be sent to my Chambers by the same date, in which case the proceeding will be listed for 30 September 2022 for the making of orders.

Description of the debt	Amount of the debt
Manager remuneration payable to the company from the creditor	$165,000.00
Total Amount	$165,000.00

[2022] VSC 540

15 September 2022