Re Wynyard Victoria Pty Ltd
[2022] VSC 81
•24 February 2022
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2021 00928
IN THE MATTER of WYNYARD VICTORIA PTY LTD (ACN 605 452 873)
| WYNYARD VICTORIA PTY LTD (ACN 605 452 873) | Plaintiff |
| v | |
| STEVEN KENNETH RENTOUL | Defendant |
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JUDGE: | Gardiner AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 30 July 2021, last submissions 13 August 2021 | |
DATE OF JUDGMENT: | 24 February 2022 | |
CASE MAY BE CITED AS: | Re Wynyard Victoria Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2022] VSC 81 | First Revision: 2 March 2022 |
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CORPORATIONS – Application to set aside statutory demand under ss 459G and 459J of the Corporations Act 2001 (Cth) – Loan by shareholder to company – Absence of formal written documentation – Disparity in evidence as to the terms of the loan including when it was to be repaid – Finding that there was a genuine dispute in respect of the debt claimed in the demand which warranted a conventional inter partes trial – Submissions that demand should be set aside under s 459J rejected – Demand set aside.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R Ouk (solicitor) | Ouk Legal |
| For the Defendant | Ms R McCarthy | Indigo Associates |
HIS HONOUR:
By originating process filed on 30 March 2021, the plaintiff, Wynyard Victoria Pty Ltd (‘Wynyard’) applies pursuant to s 459G of the Corporations Act (2001) Cth (the ‘Act’) to set aside a creditor’s statutory demand (the ‘demand’) dated 10 March 2021 issued to it by the defendant, Steven Rentoul and served on it on that date. Wynyard claims that the demand should be set aside pursuant to ss 459H, 459J(1)(a) and 459J(1)(b) of the Act.
The demand claims that Wynyard is indebted to Mr Rentoul for $72,694.34. The debt is described in the schedule to the demand as follows:
The company defaulted on the payments under a loan agreement dated 1 February 2019 to pay the Creditor as set out in the attached affidavit of Steven Kenneth Rentoul pursuant to a loan agreement dated 1 February 2019.
The demand was accompanied by an affidavit of Mr Rentoul affirmed 10 March 2021 which verified that the amount of the debt was due and payable to him.
In support of its application, Wynyard relies on two affidavits of its sole director, Kirbie Ellira Tate affirmed 30 March 2021 (and filed within the period of compliance with the demand) and 26 May 2021. Mr Rentoul relies on his affidavit affirmed 10 May 2021. Each party also filed two sets of written submissions.
This application concerned a loan made by Mr Rentoul who was also a 50% shareholder in the company to which the funds were advanced. While there are some contemporaneously generated written documents in respect of the subject transaction to which reference is made in these reasons, the terms of the advance were not the subject of written formal documentation. There are disparities in the evidence between Wynyard’s and Mr Rentoul’s accounts of the events giving rise to the transaction the subject of the demand including oral exchanges between Ms Tate and Mr Rentoul which I consider to be material in the context of this application.
Wynyard seeks to set aside the demand primarily on the basis that there is a genuine dispute about the existence and amount of the debt within the meaning of s 459H so that the demand ought to be set aside pursuant to s 459G. The principles applicable to the consideration of whether an applicant has established the existence of a genuine dispute are well settled and have been summarised by the Court of Appeal in this State in Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (in liq):[1]
The terms of s 459H of the Corporations Act and the authorities make clear that, on an application to set aside a statutory demand, the applicant is required only to establish a genuine dispute or offsetting claim. The applicant is required to evidence the assertions relevant to the alleged dispute or offsetting claim only to the extent necessary for that primary task. It is not necessary for the applicant to advance a fully evidenced claim. Therefore, the task faced by an applicant is by no means at all a difficult or demanding one.
In determining such an application, it is not necessary or appropriate for a court to engage in an in-depth examination or determination of the merits of the alleged dispute. This is because an application alleging a genuine dispute or offsetting claim is akin to one for an interlocutory injunction and requires the applicant to establish that there is a ‘plausible contention requiring investigation’ of the existence of either a dispute as to the debt or an offsetting claim. It is therefore not helpful to perceive that one party is more likely than the other to succeed or that the eventual state of the account between the parties is more likely to be one result than another. Further, the determination of the ‘ultimate question’ of the existence of the debt at a substantive hearing should not be compromised.
The court is required to determine whether the dispute or offsetting claim is ‘genuine’. It has been said that the criterion of a ‘genuine’ dispute requires that the dispute be bona fide and truly exist in fact and that the grounds for alleging the existence of a dispute be real and not spurious, hypothetical, illusory or misconceived. It has also been observed that the dispute or offsetting claim should have a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion. It must also have sufficient factual particularity to exclude the merely fanciful or futile. A rigorous curial approach is essential to the effective operation of the statutory scheme.
The court is not required to accept uncritically every statement in an affidavit however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be, as it may not have sufficient prima facie plausibility to merit further investigation as to its truth. The court is also not required to accept uncritically a patently feeble legal argument or an assertion of facts unsupported by evidence, although this should not be read as suggesting that the applicant must formally or comprehensively evidence the basis of its dispute or off-setting claim. Except in such extreme cases, the court should not embark upon an inquiry as to the credit of a witness or a deponent whose evidence is relied on by the applicant to set aside a statutory demand.[2]
[1][2015] VSCA 330.
[2]Ibid [47]-[50] (citations omitted).
Solarite Air Conditioning Pty Ltd v York International Australia Pty Ltd[3] 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. His Honour 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]
[3][2002] NSWSC 411 (‘Solarite’).
[4]Ibid [23].
A number of authorities observe that the threshold for an applicant for establishing a genuine dispute or offsetting claim is a low one and by no means difficult or demanding.[5] In Rohalo Pharmaceutical Pty Ltd v RP Scherer SpA & Pharmagel SpA,[6] Lindgren J observed that in a summary judgment application a creditor would not be entitled to judgment if a defendant company raised a defence or cross-claim which warranted a trial and, similarly, a defence or cross-claim would not be struck out or dismissed if it raised an issue deserving of a trial. In the same way, an application to set aside a statutory demand, which is a summary procedure designed to assess whether there should be a presumption of insolvency, is no less draconian than the summary curial remedy of a judgment for debt.[7] Lindgren J, in adopting the analogy of summary judgment, observed that when applying to set aside a statutory demand the task confronting a company of establishing the ‘genuineness of a dispute or offsetting claim is no more onerous than that which it would confront if it were seeking to meet an application brought by the creditor for summary judgment’.[8]
[5]For example, see Rhagodia Pty Ltd v National Australia Bank Ltd (2008) 67 ACSR 367 [112], per Robson J; Solarite (n 3) [23], per Barrett J.
[6](1994) 15 ACSR 347, 353.
[7]Ibid.
[8]Ibid 354. See, generally, Farid Assaf, Statutory Demands and Winding Up in Insolvency (LexisNexis, 2nd ed, 2012), [5.18].
In Panel Tech Industries v Australian Skyreach (No 2),[9] Barrett J observed:
… 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.[10]
[9][2003] NSWSC 896.
[10]Ibid [18].
The Court of Appeal of this State in SpaCorp Australia Pty Ltd v Myer Stores Ltd,[11] a case concerned with an application to set aside a statutory demand on the basis of a genuine dispute, observed:
… except in a case in which it is as plain as a pikestaff that there is no debt (where bluntness may be in the interests of both sides), judges should, in general at all events, in dealing, whether at first instance or on appeal, with the question of genuine dispute, be at pains to perform the admittedly delicate task of disposing of that question without expressing a view on what we have called the ultimate question. For otherwise, on an application which resembles if it is not in law an interlocutory one, things may be said which embarrass the judge before whom the ultimate question comes.[12]
[11][2001] VSCA 89 (‘SpaCorp’).
[12]Ibid [4].
As has been mentioned, in considering these types of applications, the authorities emphasise that an application should only be refused in circumstances where the case propounded by an applicant is ‘… so devoid of substance that no further investigation is warranted.’[13] I have come to the conclusion that, while the submissions made on behalf of Mr Rentoul have much force particularly in regard to the legal issues arising for consideration, the position being contended for by Wynyard is arguable and gives rise to factual and legal questions which warrant further investigation in a conventional inter partes proceeding, where both the unresolved questions of fact and the application of relevant contractual principles can be determined after there has been cross-examination and deployment of the other procedures available in such a setting.
[13]Solarite (n 3) [23], per Barrett J.
Wynyard’s evidence
In her first affidavit, Ms Tate expressly identifies the grounds upon which Wynyard relies to set aside the demand as follows:
(a) the debt claimed in the demand was not due and payable at the date of service of the demand;
(b) the demand should be set aside by reason that Wynyard would suffer substantial injustice by way of being put under improper pressure to pay monies which were not due; and
(c) the alleged debt is not due and payable and the demand should therefore not be regarded as a statutory demand.
Paragraph 12(a) would seem to be grounded on the contention that there is a genuine dispute in respect of the debt claimed in the demand. The other grounds are based on the contention that the demand should be set aside on one or another of the grounds mentioned in s 459J. In addition to those matters, in the conclusionary section of her affidavit, Ms Tate identifies other deficiencies in the demand going to the calculation of the outstanding sum.
Mr Rentoul and Ms Tate each hold 50% of the issued shares in Wynyard. Wynyard operates a café and a restaurant in South Melbourne. Ms Tate states that between August 2018 and February 2019 Mr Rentoul advanced a total of $85,000 to Wynyard by three separate electronic funds transfers. The details of these transfers were as follows:
(i) on 27 August 2018, $15,000;
(ii) on 13 December 2018, $20,000;[14] and
(iii) on 13 February 2019, $50,000.
[14]The amount referred to in item (ii) was incorrectly stated to be $25,000 in Ms Tate’s first affidavit but this was later corrected in Ms Tate’s subsequent affidavit.
Ms Tate states that on or around 1 February 2019, she and Mr Rentoul verbally agreed that the first and second advances (respectively made in August and December of the previous year) along with the third advance (which was yet to be made) should be a loan by Mr Rentoul to Wynyard. It is not mentioned what terms, if any, were agreed in respect of the first two advances at the times they were made. She states that at the time when this was agreed there was no advertence to any terms and conditions as to repayment and it was agreed that the terms would be finalised at a later date. There was no agreement in writing executed by the parties nor any discussion concerning the consequences of any default in repayment. Ms Tate contests Mr Rentoul’s assertion in the schedule to the demand that a loan agreement came into existence on 1 February 2019.
Ms Tate states that on 9 May 2019 Mr Rentoul emailed Ms Tate attaching a loan repayment schedule (‘May Repayment Schedule’)[15] which provided for payments across 36 months, with interest payable of ‘about 6.15%’. She states that on or around the same date and during a discussion conducted at the restaurant, she and Mr Rentoul orally agreed that, rather than making monthly repayments in accordance with the proposed schedule, Wynyard would instead make a daily payment of $87 inclusive of applicable interest over a 36-month period with the commencement of payments conditional upon the business ‘establishing consistently well (sic) income from a decent level of evening trade’ (‘Repayment Commencement Condition’). No other terms were discussed or agreed to at that time.
[15]Exhibit KET-3 to affidavit of Kirbie Ellira Tate affirmed 30 March 2021. This is identical to Exhibit SKR‑3 to the affidavit of Steven Rentoul’s affirmed 10 May 2021.
Ms Tate contends that the agreement in respect of the loan was entered into on or around 9 May 2019 when she agreed to the May Repayment Schedule. She states that the obligation to make payments only commenced on 11 July 2019 when the Repayment Commencement Condition was satisfied and, having regard to the 36‑month term, the loan was obliged to be fully repaid by 11 July 2022.
Ms Tate states that she has maintained a schedule which records the payments made by Wynyard, the running balance and the sum outstanding as at 24 March 2020 as being $66,273.30. She states that between 11 July 2019 and 24 March 2020, repayments of $22,011, comprised of 253 daily payments, were made.
Ms Tate says that on or about 25 March 2020, when the Australian Government announced a lockdown by reason of the COVID-19 pandemic, she discussed the implications of this development for the business over the telephone with Mr Rentoul. Mr Rentoul offered, and, on the same day transferred, a further $8,500 to Wynyard’s bank account. She states that while it was understood that that transfer would be a loan, there was no discussion as to whether it was to form part of the original loan advance or whether it constituted a separate arrangement.[16] She states that in the discussion conducted on 25 March 2020, Mr Rentoul was adamant that Wynyard cease all regular payments from the business. She states that she queried with Mr Rentoul as to whether that included suspending repayments under the May Repayment Schedule, to which Mr Rentoul responded ‘yes, we can work out the details later’, a position which she accepted on Wynyard’s behalf. She states it was not discussed whether interest would continue to accrue on the principal loan while repayments were suspended.
[16]The advance of $8,500 does not form part of the claim by Mr Rentoul in the demand.
Ms Tate contends that by reason of Mr Rentoul agreeing on 25 March 2020 that payments should be suspended, the requirement to make any further repayments under the May Repayment Schedule was deferred and has not yet recommenced. She does not identify any consideration to support the agreement of 25 March 2020 to suspend payments. She states that Mr Rentoul volunteered to assist her by contacting suppliers to request a pause in Wynyard’s payment obligations.
Ms Tate states that since 25 March 2020, she and Mr Rentoul have not discussed, nor has she received, save for the demand, any written correspondence from Mr Rentoul proposing that repayments under the May Repayment Schedule be resumed, or any proposal to amend the May Repayment Schedule, notice of default or termination of the loan arrangement.
Ms Tate states that in or around January 2021 she proposed a meeting with Mr Rentoul to discuss the loan and the date for the resumption of the repayments with him however no such discussion has since taken place. She states that it is her understanding and belief that as the obligation to make repayments was suspended and that such requirement was not resumed, that there is no debt that has fallen due for payment to Mr Rentoul. She characterises the debt owed to Mr Rentoul as being ‘contingent and/or prospective’ however she does not identify the contingency upon which the loan advance would be repayable.
Ms Tate states that it was not a term of the loan that Mr Rentoul could require immediate repayment of any outstanding amount at his discretion. In addition, she states that the amount demanded clearly exceeds the actual balance due and payable and seeks to characterise this as a defect that will cause substantial injustice to Wynyard by reason of it being pressured to pay the amount claimed by the date for compliance with the demand.
Ms Tate also complains that the demand does not attach any schedule which details the calculation of the balance claimed and that the composition of the alleged debt is not particularised.
Ms Tate states that the amount claimed in the demand does not reflect:
(a) what was agreed with Mr Rentoul regarding suspension of repayments;
(b) the outstanding principal sum under the loan as at the date of the demand of which she contends to be $66,273.30;
(c) the aggregate of daily repayments of $87 which would have otherwise been due had she and Mr Rentoul not agreed to suspending repayments between the date that repayments were allegedly suspended on 25 March 2020 and the date of the demand, 10 March 2021 (inclusive), $30,537; or
(d) the interest that would have accrued on the outstanding principal sum during the period when payments were suspended until the date of the demand.
Mr Rentoul’s evidence
In his affidavit in opposition to Wynyard’s application, Mr Rentoul confirms that he is a 50% shareholder in Wynyard. He states that the demand relates to a loan to Wynyard at the request of Ms Tate in August 2018. At that time, he was a 33% shareholder and Ms Tate asked him if he would consider increasing his investment in Wynyard to enable it to open a restaurant adjacent to the premises from which the café operated. Mr Rentoul exhibits an email from Ms Tate of 26 July 2018 which presented several scenarios as to how such a restaurant business could be funded, which included Mr Rentoul increasing his shareholding.
Mr Rentoul says that after some discussion he agreed to invest $180,000 in Wynyard to enable it to commence operating a restaurant. He states that in return he received a further 17% of the shareholding in Wynyard, taking his holding to 50%.
Mr Rentoul states that at the same time, which I infer from the context to be in or about August 2018, Ms Tate requested that he invest further funds. Mr Rentoul indicated that he could only make additional advances by way of loan to Wynyard as the source of the funds was Mr Rentoul’s wife’s credit facility with Bank of Queensland. Mr Rentoul states that he could only advance the funds if he was paid the interest which was accruing on that facility to enable repayments to be made to service the facility. He deposes that Ms Tate agreed to this and that on that basis he agreed to lend Wynyard $85,000.
Mr Rentoul deposes that on a date which is not specified he presented Ms Tate with a document (‘February Repayment Schedule’) in spreadsheet format which contained the following information in its header:
Loan Amount
$85,000
Annual Interest Rate
6.15%
Loan Period in Years
3
Number of Payments Per Year
12
Start Date of Loan
1/2/19
Although the February Repayment Schedule does not bear a date it mentions a start date of 1 February 2019. It identifies monthly dates for payment, a running balance and other amounts including interest accruing on the amount outstanding. The document does not require payments to be made for the months of March through to June 2019, although interest was accruing during that period; the first instalment was due on 1 July 2019 and consisted of a payment of $1,827, comprised of $444.62 interest and an appropriation of $1,382.38 towards repayment of the principal. Thereafter, the schedule requires a payment of $2,610 per month until the final payment of 1 July 2022, when a payment of $2,335.40 was required to discharge the loan. The February Repayment Schedule has the handwritten annotation “Steve loan” and the handwritten date “11/7/19” inscribed adjacent to where the first payment appears but the author of that annotation is not identified. Mr Rentoul does not state the date he provided this document to Ms Tate but I infer from the context it appears to be some time prior to May 2019, by reason that he next speaks in his affidavit of a discussion he had with Ms Tate in May 2019, where he raises the issue that no repayments had been made.
Mr Rentoul does not elaborate as to any conversation taking place on the occasion of presenting the February Repayment Schedule to Ms Tate, in particular as to whether she agreed to it.[17]
[17]In her affidavit in reply, Ms Tate states that prior to sighting Mr Rentoul’s affidavit, she had never seen that document.
Mr Rentoul states in or around May 2019, he had a discussion with Ms Tate concerning the failure by Wynyard to make repayments. He states that Ms Tate proposed that he accept payment of the sum of $87 a day, equating to 6.15% per annum principal and interest. Ms Tate said to him that it would be easier for Wynyard to make a daily payment to ensure that the loan was repaid on time. Mr Rentoul states that he agreed to this and sent her an email with the May Repayment Schedule. The May Repayment Schedule notes a loan of $85,000, a monthly interest rate of 0.51% (which approximates the 6.15% annual interest mentioned in the February Repayment Schedule) and a loan period of three years with 12 payments per year of $2,591.65.
The February Repayment Schedule said to have been provided to Ms Tate did not require any payments to be made until 1 July 2019 however Mr Rentoul does not explain why the discussion over non-payment of the loan took place in May 2019. I observe that it appears to be consistent with Ms Tate’s evidence that, initially, no payments were required.
Mr Rentoul denies that there was ever any discussion to the effect that Wynyard would only repay the daily loan repayment upon achievement of the Repayment Commencement Condition, i.e., the business ‘establishing consistently well (sic) income from a decent level of evening trade’.
Mr Rentoul disputes Ms Tate’s evidence that no other terms were discussed or agreed between himself and Wynyard. He states that he made it clear to Ms Tate that the funds loaned came from his wife’s line of credit with Bank of Queensland and were required to be promptly repaid in order to avoid paying interest on that facility. He states that Ms Tate only began repayments on 11 July 2019 because he had raised the failure to make repayments with her following their meeting in May.
Mr Rentoul denies he had a discussion with Ms Tate to the effect that the repayments should be suspended. He states that while there was a period of time during the COVID-19 lockdown that Wynyard did not trade, it was not a significant period. He states that Wynyard continued to trade on a take-away basis, with the assistance of his wife working at no cost in the month of July 2019. Mr Rentoul says he assisted when requested by Ms Tate to contact suppliers and creditors in order to seek extended payment terms whilst at the same time allowing the company to continue to trade.
Mr Rentoul states that he raised the issue of repayment of the loan on a number of occasions. Ms Tate’s response was that she would need to make enquiries with Wynyard’s bookkeeper.
Mr Rentoul denies that any meeting was arranged by Ms Tate with him in January 2021 to discuss the loan and the resumption of repayment of the loan. He says that if Ms Tate had offered to meet her to discuss repayment of the loan he would have obliged her in that regard.
Mr Rentoul asserts the amount due and payable by Wynyard as at the date of the demand is correct, that the loan has been in default for some time and his wife’s Bank of Queensland account has been incurring interest.
Mr Rentoul exhibits a spreadsheet of how the amount claimed in the demand is comprised. The spreadsheet notes the advance, monthly payments made, interest accruing and a running balance. The spreadsheet notes that as of March 2021, the debt stood at $72,694.34, the amount claimed in the statutory demand.
Mr Rentoul states that he has had difficulty gaining access to the books and records of Wynyard and also voices concerns as to the solvency of the company. These matters are of no relevance to the determination of this application, which is one confined to the determination of whether there is a genuine dispute in respect of Mr Rentoul’s demand or that the demand should be set aside under s 459J.
Ms Tate’s affidavit in reply
In her affidavit in reply, Ms Tate says that it was only after the advances of August and December 2018 and February 2019 that the total sum of the loan reached $85,000. As such, she says that, contrary to Mr Rentoul’s implication that the funds were advanced in a singular tranche, the loaned amounts were made over a period of several months.
Ms Tate states that Wynyard’s accounting records reveal that the amount further invested by Mr Rentoul by way of subscription of shares in the company was $127,997, not $180,000.
Ms Tate deposes that she was only made aware by Mr Rentoul that he was drawing on a line of credit at around the time he made the third advance in February 2019 and that prior to this she had been unaware of the source of the loan funds.
Ms Tate denies that she was ever presented with the February Repayment Schedule referred to by Mr Rentoul in his affidavit and states that she only received the May Repayment Schedule.
Ms Tate deposes that the February Repayment Schedule differs from the May Repayment Schedule in that the former:
(a) contains a ‘Start Date of Loan’ of 1 February 2019 whereas the May Repayment Schedule does not include a start date;
(b) has no provision for payments in February 2019, March 2019, April 2019, May 2019 and June 2019, has payments starting in July 2019 and has an annotation ‘11/7/19’ beside the row for payment number 5 which Ms Tate states is consistent with the position deposed to in her first affidavit that the agreed start date of the repayments was 11 July 2019; and
(c) provides for a total monthly repayment amount of $2,610 whereas the May Repayment Schedule has a monthly repayment amount of $2,591.65.
As to the ‘Start Date of Loan’ of 1 February 2019 appearing in the February Repayment Schedule, Ms Tate states that this is clearly incorrect because as at that date, the third advance of $50,000 was yet to be made to Wynyard (and was not made until 13 February 2019).
Ms Tate states that there was no loan agreement in existence as of 1 February 2019, as Wynyard and Mr Rentoul had not agreed on any key terms (including the term, repayment period, interest rate to be charged, consequences of default, penalty interest rate and/or termination) for there to be such an agreement. She re‑affirms that material terms were only agreed on or around 9 May 2019 and again varied by agreement with regards to a repayment suspension on 25 March 2020 as she outlined in her first affidavit.
Ms Tate further denies that Wynyard started making repayments on 11 July 2019 because Mr Rentoul had complained about its failure to make repayments of the loan. She states that, except for the demand, she has not received any written or verbal demand for repayments to commence or requiring repayment of any principal sum under the loan. Instead, she refers to her first affidavit where she stated that the first repayment was made because that was when Wynyard’s turnover was of such a level as to activate the Repayment Commencement Condition. In that regard, she states that Wynyard’s total sales in the month of May 2019 were $125,469.69 whereas in the month of July 2019 total sales had reached $139,080.09.
Ms Tate further maintains that the conversation did take place in which Mr Rentoul was adamant about suspending the repayments.
Ms Tate denies that at the time when Mr Rentoul loaned Wynyard a further $8,500 in March 2020, he raised the question of resumption of repayment of the daily loan repayments.
In her affidavit in reply, Ms Tate continued to dispute that:
(a) the amount due and payable for the loan as at the date of the statutory demand is correct and that Wynyard has been in default of the loan; and
(b) the calculation of the amount owing under the loan is accurate.
In the remainder of her affidavit in reply, Ms Tate addresses matters concerning access to the books of the company which have no relevance to this application.
Differences in the positions of parties
As I have mentioned, the evidence points to material disparities in the positions of the parties as to the factual background of this matter. The starting point is the statutory demand which claims Wynyard is indebted to Mr Rentoul for $72,694.34 pursuant to a loan agreement of 1 February 2019. Ms Tate in her evidence states that Mr Rentoul advanced $85,000 by three separate transfers in August 2018, December 2018 and February 2019. Mr Rentoul’s evidence is that he agreed to lend Wynyard $85,000. He speaks of it as a singular advance, but the evidence seems clear that it consisted of three advances in the months of August and December 2018 and February 2019.
Mr Rentoul’s contention is that, on a date which he does not specify, but which appears to be in or about February 2019, he provided a document setting out a schedule of payments providing for payment of the loan over three years. While it seems that the advances made in August and December 2018 were loans instanter in that the balance of the evidence is that the parties did not advert as to when such funds were repayable, Mr Rentoul’s evidence suggests that subsequently, probably in February 2019, an agreement was struck that the funds advanced were to be repayable in instalments over three years.
Ms Tate’s evidence is that no agreement was struck on 1 February 2019 and, in particular, no oral or written terms and conditions as to repayment were agreed upon and that the terms would be finalised at a later date. Ms Tate denies ever having received the February Repayment Schedule.
Prior to the apparent acceptance of the May Repayment Schedule, Ms Tate contends that the parties had not, at the time of the advances, agreed upon terms and conditions for the loan by which I take it to mean there was no agreement as to how long the loan would be for, what interest rate would apply if any and how often instalments would be payable.
It would seem to be uncontroversial that on or about 9 May 2019 Ms Tate received the May Repayment Schedule sent to her by Mr Rentoul providing for payments across 36 months with interest payable of 0.51% per month, i.e., approximately 6.15%, the same annualised rate appearing on the February Repayment Schedule. Ms Tate’s evidence is that at about the same time, she and Mr Rentoul agreed that Wynyard would make the repayments in the May Repayment Schedule but rather than being made monthly could be made by payments of $87 per day inclusive of interest over a 36-month period. Before then the evidence appears to be that the advances were loans simpliciter and repayable on demand. It seems clear that the parties agreed that Wynyard could make daily instead of monthly repayments.
The May Repayment Schedule does not identify dates for payment but otherwise bears close similarities to the earlier document; it contains the same term, three years, as that appearing in the February Repayment Schedule; the monthly interest charges and running balances are practically identical but there is no four‑month moratorium on repayments which appears in Mr Rentoul’s February Repayment Schedule.
The parties are at odds about the Repayment Commencement Condition contended for by Ms Tate as to the obligation for repayments under the May Repayment Schedule commencing after a certain level of trade had been achieved but Wynyard commenced making payments in July 2019 (which I note is the month mentioned in the February Repayment Schedule at which Wynyard was obliged to pay the first instalment). There then ensued a period between July 2019 and March 2020 where there were some 253 repayments made and accepted by Mr Rentoul, consistent with the May Repayment Schedule and the agreement by Mr Rentoul to accept daily instalments.
Absent the Repayment Commencement Condition, which Ms Tate asserts was agreed to, the entirety of the loan would have been repayable by 9 May 2022 but by reason of that condition, full repayment would be payable on 11 July 2022. I note that neither party contended that there were any other conditions, and in particular, any provisions agreed to in respect of default in payment by Wynyard.
Consideration
Genuine Dispute
Wynyard alleges that there is a genuine dispute regarding certain elements of the loan agreement under s 459H(1)(a) of the Act such that the statutory demand should be set aside.
Wynyard submits that the disputed issues giving rise to a genuine dispute include:
(a) commencement date of the loan agreement;
(b) terms of loan agreement, particularly including consequences of default;
(c) whether the alleged debt was due and payable at the date of the demand;
(d) the quantum of the debt; and
(e) whether the parties agreed to suspend the requirement to make further repayments on 25 March 2020.
Mr Rentoul contended on an application of the principle described and discussed in the decision of Ogilvie v Adams,[18] that the loan was repayable on demand and that to the extent Wynyard had contended that the position was subsequently varied in that regard was not sustainable as Wynyard was not able to point to any consideration moving to Mr Rentoul. In Ogilvie, Fullagar J stated:
Where there is a loan of money simpliciter (i.e. with nothing at all said as to repayment), the money is repayable instanter. Where there is a loan of money and the borrower contracts to repay on demand, again the money is repayable instanter …
The common law has always regarded the fact of indebtedness as a continuing detention by the debtor of the creditor’s money, and this whether the creditor brought an action of debt or an action in indebitatis assumpsit. Therefore if A lends money to B, then instantly B is detaining A’s money. In order to prevent a cause of action for recovery arising in A instantaneously on paying the money, the parties must expressly contract out of that situation by words clearly inconsistent with that situation. The courts have long since settled it that a mere statement or agreement that the money is repayable on demand (or request or at call) is not sufficient to contract out of that situation where all else that is known of the terms of the contract is that A has paid money to B by way of loan.[19]
[18]Ogilvie v Adams [1981] VR 1041 (‘Ogilvie’).
[19]Ibid 1043.
In this instance, Mr Rentoul has contended that the loan agreement was formed on 1 February 2019. In his demand, Mr Rentoul claims that the monies are owing by reason of an agreement made on 1 February 2019 but aside from the respective repayment schedules, both composed by him, there is no formal documentation to which reference can be made.
The evidence of the parties is to my mind most unclear in relation to the nature of the agreement between the parties. On Mr Rentoul’s version of events he deposes that Ms Tate agreed to a schedule of payments to discharge the loan. Mr Rentoul states that the February Repayment Schedule was proposed by him apparently in or about February 2019 and that schedule does not contemplate any payment being made by Wynyard in the first several months. Mr Rentoul contends that the advance was a loan simpliciter payable on demand but I do not understand how he can maintain that position if he contends that the terms of the loan were for repayment by instalments over three years, i.e., that he could not require repayment of the advance on demand.
After May 2019, there ensued a period between July 2019 and March 2020 where some 253 repayments were made by Wynyard and accepted without demur by Mr Rentoul. Those payments by Wynyard and the acceptance of them by Mr Rentoul are consistent with an agreement to pay by instalments.
The variance in the factual positions contended for by the parties which, absent implausibility in respect of Wynyard’s position is, in my view, not capable of resolution in an application of this character.
The February Repayment Schedule, of which Mr Rentoul is the author, contemplates repayments commencing in or about July 2019, which is somewhat consistent with Wynyard’s position that payments were not to commence for several months; the May Repayment Schedule does not identify dates for payment of instalments but, as of May 2019, no repayments had been made so one might assume that the instalments identified are prospective and Wynyard would be obliged to commence making repayments at the earliest from May 2019. Neither party has alluded to Mr Rentoul’s rights in the event of default.
Whatever the position may have been prior to the communications in May 2019, Wynyard has, in my view, a plausible basis for contending that as of May 2019, it had an agreement that it could repay the advance over three years with the final instalment being due in 2022. As such, Wynyard has a plausible contention which warrants further investigation as to the terms of the loan and in particular whether, as Mr Rentoul would have it, it is a loan simpliciter and payable on demand. Mr Rentoul does not cast his claim in terms of him being entitled to call up the balance of the loan prior to expiry of the term of the loan by reason of non-payment of instalments, rather the claim made in the demand was that the loan was repayable on demand.
As such, I consider that it is plausibly arguable, at the time the statutory demand was issued on 10 March 2021, that with reference to the repayment schedules, the loan was not one repayable on demand. It is not at all clear on the evidence when the contract in respect of the advances was formed and I regard the factual scenario as presented in the evidence as being so unclear that the subject transaction should be the subject of a conventional inter partes trial. In such a proceeding, the legal and factual questions which it is not possible to resolve in the present forum can be explored. This would include the question which Mr Rentoul seeks to agitate that the variations said by Wynyard to have been agreed to suspend repayments were not supported by consideration.
As the Court of Appeal observed in SpaCorp, once the Court has determined that a genuine dispute has been established, it should refrain from expressing a view as to the likely outcome of any subsequent conventional inter partes proceeding.[20]
[20]SpaCorp (n 11) [39], per Ormiston JA.
I do not consider that the contentions of Wynyard as being so devoid of substance that no further investigation is warranted. I would regard it as being quite unsafe to make a finding that the position it puts is not arguable such as to give rise to a presumption that it is insolvent if it does not pay the debt claimed. I would find there is a genuine dispute in respect of the debt claimed in the demand.
There was some suggestion in the parties’ submissions that I should descend into an analysis as to aspects of quantum of the claim demanded but I do not consider it as appropriate to do so in these circumstances and both the question of when the advance is due and payable and what the quantum stands can be decided in a conventional inter partes proceeding.
Ms Tate does not present any evidence which would support the basis of Wynyard’s submissions in reply that Mr Rentoul should be estopped from departing from the assumption that the repayments were suspended on an application of the principle of equitable estoppel described by Brennan J (as his Honour then was) in Walton Stores (Interstate) v Maher.[21] I do not consider that Wynyard in its 21 day affidavit has expressly or by available inference raised an estoppel argument which is capable of being agitated in this application. On a fair reading of the affidavit, I do not consider that it can be gleaned that such a position would be taken. The relevance of Mr Rentoul accepting payments is however brought to bear in my decision that there is a genuine dispute arising as to the contractual position generally. His acceptance of payments over a relatively lengthy period of time is somewhat consistent with Ms Tate’s version of the terms of the loan.
[21](1988) 164 CLR 387, 428-9.
Section 459J
Wynyard contended that the demand contains a number of defects including that the demand was in respect of what it described is a contingent debt and that the demand did not comply with the form prescribed by the joint operation of s 459(2)(e) and Form 509H of the Act.
Because of my finding that the demand should be set aside on the basis that Wynyard has established a genuine dispute in respect of the terms of the advance the subject of the claim of the demand, it is not strictly necessary to deal with the balance of these submissions but I will briefly deal with each submission in turn.
The first of these contentions is that the demand was defective and ought be set aside under s 459J(1)(a) of the Act on the basis that the debt demanded is a contingent debt and that contingency is yet to arise. I accept Mr Rentoul’s submission in this regard that this is really another way of contending that there is a genuine dispute surrounding whether the debt demanded is presently due and payable. Because I have decided that the circumstances surrounding the formation of the contract in respect of the advances are unclear and warrant further investigation, I have considered there is a genuine dispute that arises in respect of that issue. The issue is not, in my view, properly characterised as a defect of the type that Wynyard contends for under s 459J(1)(a) (or alternatively under s 459J(1)(b)).
Secondly, Wynyard also contended that the demand was defective, as when it was served the prescribed form of demand had reverted to the pre-existing 21 day period statement in the body of the demand warning the recipient of the demand of the period within which it was required to make an application to set aside the demand. The demand in this case contained a statement that the period of compliance with the demand was six months, the period prescribed for demands being served during the peak of the COVID-19 lockdowns.[22] Wynyard’s submission in this regard is in my view without merit. Wynyard, presumably because its lawyers were aware of the reversion to the 21 day period, made a timely application within the 21 day period which applied at the time of service of the demand. No conceivable prejudice of the type contended for by Wynyard could arise under either head of s 459J(1).
[22]See Part 2 of Sch 12 of the Coronavirus Economic Response Package Omnibus Act 2020 (Cth) which replaced the reference to 21 days for compliance of a statutory demand with a new ‘statutory period’. The ‘statutory period’ is defined in s 9 of the Act as the ‘prescribed period’. The prescribed period was temporarily set as six months by reg 5.4.01AA of the Corporations Regulations 2001 (Cth).
Wynyard contended that Mr Rentoul’s calculation of the debt claimed attracted the jurisdiction to set it aside under s 459J. Its basis for contending this was as follows:
(a) assuming that a calculation was properly to be made on the basis of aggregate daily repayments of $87, the demanded sum was incorrectly calculated and should have been $30,537; and
(b) issuing a debt with ‘scant details of the loan, how the quantum was calculated, or the terms giving rise to the claimed debt and to the claim ... constitutes a defect rendering the demand liable to be set aside under s 459J(1)(a).’
By reason of my finding that there is a genuine dispute as to the terms by which the advance was made these matters fall away.
For the same reasons, the submission that the demand should be set aside it imposed ‘improper pressure’ on Wynyard to pay a debt which was otherwise not payable or risk winding up proceedings is rejected. Such would no doubt be the attitude of any applicant to set aside a statutory demand where it considers that it had genuine disputes in respect of the debt claimed and that service of the demand was an attempt to apply some type of improper commercial pressure. The mechanism for the resolution for that issue is of course the application to set aside the statutory demand which is what has occurred in this application.
I will order that the statutory demand dated 10 March 2021 which was served on the plaintiff by the defendant be set aside. Costs would normally follow the event but if the parties wish to press for a different order they should file and exchange a submission on this question which is not to exceed three pages by 5:00pm on 4 March 2022.
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