Arrow Asset Management Pty Ltd v Sportsworld Group plc

Factual Background

1. One Pro Investment was incorporated on 6 November 2015. Mr Zhijian Zhao is its sole director and shareholder.
2. One Pro Chatswood was incorporated on 1 June 2016. Mr Zhao is its sole director and One Pro Investment is its sole shareholder.

Facility Deed

1. On 17 November 2023, Mr Zhao signed the Facility Deed as sole director and secretary of One Pro Chatswood.
2. Clause D2 of the Facility Deed provided that, subject to the terms of the deed, Jituo agreed to make available to One Pro Chatswood a facility with a limit of $8m. Clause D3 provided that One Pro Chatswood was entitled to draw advances on a progressive basis up to this limit.
3. By Clause D11 of the Facility Deed, One Pro Chatswood agreed to grant, as security, a mortgage to Jituo over a property located at 15 Help Street, Chatswood, New South Wales (the Chatswood Property). One Pro Chatswood is the registered proprietor of the Chatswood Property.
4. Clause D4 of the Facility Deed provided that on the "Termination Date", One Pro Chatswood must repay to Jituo the aggregate of the Advances outstanding and the balance, if any, of the secured money. The Termination Date was defined as the earlier of (a) the date on which the facility is terminated by Jituo, or (b) the date which is three months after the initial advance drawdown.

$4m Drawdown Notice

1. On 20 November 2023, One Pro Chatswood's solicitors, Tahota Law, sent an email to Jituo's solicitors, AHD Lawyers, attaching a drawdown notice of the same date in an amount of $4m. This notice specified a drawdown date of 21 November 2023, and stated that payment of $4m should be made into a nominated bank account in the name of One Pro Investment and ending in the numbers 1907 (the One Pro 1907 Account).
2. On 21 November 2023, Tahota Law received an email from AHD Lawyers confirming that Jituo had made the $4m advance pursuant to the drawdown notice.
3. On 21 November 2023, the amount of $4m was paid into the One Pro 1907 Account, with the payee name being stated as "Tuwin Lawyers". No other payment in the same amount was received in the One Pro 1907 Account in November 2023.

$4m Payment

1. There was evidence that APEA funded the $4m payment into the One Pro 1907 Account. On 21 November 2023, APEA deposited the amount of $4,017,527 into the trust account of Tuwin Lawyers, and Tuwin Lawyers transferred the sum of $4m into the One Pro 1907 Account.
2. In Ms Ma's affidavit accompanying the APEA Demand, she deposed as follows. 1. In around September 2023, APEA wished to transfer a large amount of funds to China. 2. In early October 2023, Ms Ma, on behalf of APEA, communicated with Mr Yanlin Dou, who stated that he could facilitate large funds transfers to China. 3. In October and November 2023, APEA sourced the funds to be transferred to China and retained Mr Michael Tu of Tuwin Lawyers to act on this transaction. 4. On around 9 November 2023, while Ms Ma was in China, she received a call from her father, Mr Ma. He was with Mr Dou and was calling on Mr Dou's mobile phone. Mr Ma stated that Mr Dou had arranged for the funds to be transferred by One Pro Investment; that he and Mr Dou were at the offices of One Pro Investment; and that he had received account details from the manager of One Pro Investment. Mr Ma asked Ms Ma to write down those account details, and proceeded to give her the details for the One Pro 1907 Account. 5. On 20 November 2023, Ms Ma instructed Tuwin Lawyers to transfer the sum of $4m, upon receipt into their trust account, to the One Pro 1907 Account. 6. On 21 November 2023, Ms Ma received confirmation from Mr Tu that the funds had been received in the Tuwin Lawyers trust account and had been transferred in accordance with her instructions. 7. In late November 2023, Ms Ma provided Mr Dou with the details of the bank account in China into which the funds of $4m were to be transferred. However, to date, the funds have not been received by APEA in the nominated account or in any other account in China.
3. It should be noted that Mr Dou, who is the central figure in Ms Ma's account, was the sole director of Jituo.
4. It was common ground at the hearing that One Pro Investment did not have knowledge of any representations made by Mr Dou to APEA and Mr Ma, including any representations concerning the transfer of funds to China. It was also common ground at the hearing that there were no dealings or discussions between One Pro and either APEA or Mr Ma.

$2m Drawdown Notice

1. On 7 December 2023, an amount of $2m was paid into the One Pro 1907 Account. The reference for this payment was "Link Lawyers Pty Ltd From Apea via Link From Asia-Pacific En [sic]". No other payment in the same amount was received in the One Pro 1907 Account in December 2023.
2. On 8 December 2023, Tahota Law sent an email to AHD Lawyers attaching a drawdown notice issued under the Facility Deed in the amount of $2m. The drawdown notice directed that payment be made into the One Pro 1907 Account. The covering email stated as follows: "We are instructed to provide your office with the attached Drawdown Notice, in which our client acknowledges receipt of the drawdown today." That is, this second drawdown notice appears to have been issued shortly after the payment of $2m into the One Pro 1907 Account.

$2m Payment

1. There was evidence that Mr Ma funded this $2m payment. In particular, in Mr Ma's affidavit accompanying the Ma Demand, he deposed as follows. 1. In mid-late 2023, Mr Ma wished to transfer a large amount of funds to China from both himself and from APEA. 2. In late September to early October 2023, Mr Ma was introduced to Mr Dou, who said that he could assist with the transfer of large sums of money to China. 3. On around 9 November 2023, Mr Dou took Mr Ma to the Chatswood Property which Mr Dou described as the offices of "a third party … [who] could facilitate the transfers of funds to China". At this location, Mr Ma met a person whom Mr Dou introduced as "Ms Zhao, the manager of One Pro Investment Group". This person handed Mr Ma a printed slip of paper with the details of the One Pro 1907 Account. (This slip of paper was not in evidence.) Mr Ma then called Ms Ma, to relay these account details and to tell her that the funds to be transferred to China should be transferred to this account. 4. On 14 November 2023, Mr Ma entered into a contract to sell a property, with the intention that part of the sales proceeds would form part of the funds to be transferred to China. AHD Lawyers acted for Mr Ma on this sale. (As noted above, AHD Lawyers were also the solicitors for Jituo in relation to the Facility Deed.) 5. On 5 December 2023, the sale of Mr Ma's property completed and an amount exceeding $2m was deposited into the trust account of AHD Lawyers. Mr Ma instructed AHD Lawyers to transfer the amount of $2m to Link Lawyers "who subsequently, on instructions, transferred that same amount to the [One Pro 1907 Account]". 6. In late November 2023, Mr Ma provided Mr Dou with the account details of the accounts in China into which the funds of $2m were to be transferred. To date, the funds of $2m have not been received in the nominated account or in any other account in China.

April 2024: Default notice by Jituo

1. On 26 April 2024, Jituo issued a "Lender's Default Notice" to One Pro Chatswood.
2. The Default Notice referred to the Facility Deed and the security over the Chatswood Property. It stated that repayment of the amount due under the Facility Deed had not been repaid by the "Termination Date", being 20 February 2024. By the Default Notice, Jituo demanded repayment of the principal of $6m, together with interest to 26 April 2024.
3. On 3 May 2024, Tahota Law sent an email to AHD Lawyers, noting that their respective clients were in discussions as to the repayment of moneys demanded in the notice.

June 2024: First set of statutory demands made and withdrawn

1. On 7 June 2024, the solicitors for APEA and Mr Ma sent a letter to One Pro Investment demanding repayment of $6m, comprising the $4m Payment and the $2m Payment. On the evidence before the Court, this was the first communication from either APEA or Mr Ma to One Pro Investment in relation to either of those payments.
2. On 14 June 2024, APEA issued a creditor's statutory demand to One Pro Investment, claiming the amount of $4m as due and payable. The accompanying affidavit of Ms Ma identified that this amount had been paid by APEA into the trust account of Tuwin Lawyers on 21 November 2023, and transferred to One Pro Investment on the same day.
3. Also on 14 June 2024, Mr Ma issued a creditor's statutory demand to One Pro Investment, claiming the amount of $2m as due and payable. The accompanying affidavit of Mr Ma identified that this amount had been paid by Link Lawyers into the One Pro 1907 Account on 7 December 2023.
4. Accordingly, these June 2024 statutory demands claimed the same debts as those claimed to be owing in, respectively, the APEA Demand and the Ma Demand, which were served in August 2024. However, the affidavits accompanying the June 2024 statutory demands did not contain any reference to Mr Dou, let alone reference to any representations made by him, and did not refer to any intention or understanding that the moneys would be transferred to China.
5. In her affidavit in support of APEA's June 2024 statutory demand, Ms Ma deposed as follows (emphasis added): "I am, the person who, on behalf of [APEA], had dealings with the debtor company [One Pro Investment] and caused the funds transfer giving rise to the Debt to be made to the debtor company."
6. That is, Ms Ma positively asserted that she had engaged in "dealings" with One Pro Investment on behalf of APEA. However, as noted above, it was common ground at the hearing that there had not in fact been any dealings or discussions between One Pro Investment and APEA.
7. On 5 July 2024, One Pro Investment filed two applications in this Court seeking orders setting aside the June 2024 statutory demands.
8. On 12 August 2024, APEA and Mr Ma withdrew the June 2024 statutory demands. On 16 August 2024, orders were made by consent that each of the proceedings in relation to those statutory demands be discontinued, with APEA and Mr Ma to pay One Pro Investment's costs of those proceedings.

August 2024: Second set of statutory demands issued

1. On 21 August 2024, the APEA Demand and the Ma Demand were served on One Pro Investment.
2. On 11 September 2024, being 21 days after service of the APEA Demand and the Ma Demand, One Pro Investment commenced these proceedings. The application was therefore brought within time: s 459G(2) of the Act.

September 2024: Caveat Proceeding commenced

1. On 19 July 2024, each of APEA and Mr Ma lodged caveats in respect of the Chatswood Property. The estate or interest claimed was a "Mortgage" and the details supporting the claim were as follows: "Mortgage held on resulting or constructive trust for caveator".
2. On 23 August 2024, APEA and Mr Ma were served with lapsing notices in respect of these caveats.
3. On 13 September 2024, being two days after the commencement of the present proceedings, APEA and Mr Ma commenced, by the filing of a Summons, another proceeding in the Equity Division of this Court (the Caveat Proceeding).
4. The defendants to the Caveat Proceeding are One Pro Chatswood, One Pro Investment and Jituo.
5. The relief sought by APEA and Mr Ma in the Caveat Proceedings includes declarations that: 1. Mr Ma holds a mortgage over the Chatswood Property by way of a resulting trust or alternatively by way of a constructive trust in the amount of $2m; and 2. APEA holds a mortgage over the Chatswood Property by way of a resulting trust or alternatively by way of a constructive trust in the amount of $4m.
6. On 4 October 2024, Mr Ma and APEA filed Points of Claim in the Caveat Proceeding. The Points of Claim include the following allegations. 1. In about mid to late 2023, Mr Ma and APEA intended to transfer funds to China. 2. In about October and November 2023, Mr Dou represented to APEA and Mr Ma that he could facilitate the transfer of funds to China and that, if APEA and Mr Ma transferred an amount of $6m to the One Pro 1907 Account, an equivalent sum would be transferred to a bank account in China nominated by APEA and Mr Ma. 3. In accordance with this representation, APEA caused the sum of $4m to be paid into the One Pro 1907 Account in November 2023, and Mr Ma caused the sum of $2m to be transferred to that account in December 2023. 4. No funds were received in China in any account nominated by APEA or Mr Ma. 5. One Pro Investment has asserted that the sums of $4m and $2m represent funds that were advanced under the Facility Deed between Jituo and One Pro Chatswood. 6. Under the terms of the Facility Deed, Jituo agreed to lend to One Pro Chatswood an amount of up to $8m, and One Pro Chatswood granted or agreed to grant Jituo a mortgage over the Chatswood Property and granted a charge over that property. 7. Mr Ma and APEA were not aware of the Facility Deed. 8. The sums of $2m and $4m which were paid by Mr Ma and APEA respectively "were paid without consideration; and … are monies had and received by [One Pro Investment]". 9. One Pro Investment "is liable to repay the sums of $2,000,000.00 and $4,000,000.00 to [Mr Ma] and [APEA] respectively in debt as restitution". 10. By reason of the above matters, the charge and further, or alternatively, the mortgage held by Jituo are held by it on a constructive or resulting trust for Mr Ma and APEA.
7. On 31 October 2024, One Pro Investment and One Pro Chatswood served their Points of Defence in the Caveat Proceeding. One Pro Investment and One Pro Chatswood either do not admit or deny the majority of the allegations made in the Points of Claim. In particular, One Pro Investment and One Pro Chatswood: 1. "say that the funds received [of $2m and $4m] were pursuant to the Facility Deed"; 2. "deny that those sums are monies had and received by [One Pro Investment]"; 3. "deny [One Pro Chatswood and One Pro Investment] owe any debt to [Mr Ma and APEA]"; 4. "deny [Mr Ma and APEA] have any right to restitution from [One Pro Chatswood and One Pro Investment]"; and 5. "say that the existence of the Facility Deed … is a complete answer to" the claim for restitution.
8. Evidence has been filed by the parties in the Caveat Proceeding. The evidence filed by Mr Ma and APEA includes affidavits of Mr Ma and Ms Ma, as well as affidavits of their solicitor; and the evidence filed by One Pro Investment and One Pro Chatswood includes an affidavit of Ms Nan Zhao, as well as a solicitor's affidavit. Ms Zhao is the general manager of One Pro Investment and is the daughter of Mr Zhao, who is the sole director and shareholder of One Pro Investment.
9. The affidavits of Mr Ma and Ms Ma in the Caveat Proceeding cover the same matters as their affidavits accompanying, respectively, the Ma Demand and the APEA Demand, including: their discussions with Mr Dou regarding the transfer of funds to China; Mr Dou's proposal that the moneys be transferred via One Pro Investment; the provision by "Ms Zhao" of the account details for the One Pro 1907 Account; the transfer of the sums of $4m and $2m into lawyers' trust accounts and, from there, into the One Pro 1907 Account; and the demands made for repayment of those sums and One Pro Investment's failure to repay those amounts.
10. In her affidavit in the Caveat Proceeding, Ms Zhao deposed to the entry by One Pro Chatswood into the Facility Deed; the issue of the drawdown notices in the amounts of $4m and $2m pursuant to the Facility Deed, which directed that payment be made to One Pro Investment; and the receipt of the payments in the One Pro 1907 Account. Further, Ms Zhao denied that she had any dealings or discussions with Mr Ma or APEA or their representatives at any time, explaining that she was in Hong Kong at the time when Mr Ma is said to have been taken to the Chatswood Property and to have been introduced by Mr Dou to "Ms Zhao, the manager of One Pro Investment Group" (in oral address, the Defendants confirmed that there was "no contest" in respect of this evidence by Ms Zhao).

Genuine Dispute?

1. One Pro Investment did not dispute that a liability in restitution, arising from a failure of consideration or a mistake, can constitute a "debt" within the meaning of s 459E(1) of the Act: see Arrow Asset Management Pty Ltd v Sportsworld Group Plc [1999] NSWSC 1207 at [16]-[23]; and HL Diagnostics Pty Ltd v Psycadian Ltd [2005] WASC 234 at [26]-[31].
2. However, One Pro Investment contended that there was a genuine dispute between the parties as to the existence of the claimed liability in restitution which is the subject of each of the APEA Demand and the Ma Demand, and sought to set aside the demands on that basis.

Relevant principles

1. The relevant principles were not in dispute.
2. In Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452 at 464; [1997] FCA 681, the Full Court of the Federal Court observed that a genuine dispute must be bona fide and truly exist in fact, and that the grounds for the dispute must be real and not spurious, hypothetical, illusory or misconceived.
3. The threshold to establish a genuine dispute is not high. The task faced by a company in challenging a statutory demand on the genuine dispute grounds "is by no means at all a difficult or demanding one": CGI Information Systems v APRA Consulting Pty Ltd [2003] NSWSC 728 at [16] (Barrett J).
4. In Panel Tech Industries (Australia) Pty Ltd v Australian Skyreach Equipment Pty Ltd (No 2) [2003] NSWSC 896 at [18], Barrett J said that: "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."
5. In Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd (2013) 85 NSWLR 601; [2013] NSWCA 344, the Court of Appeal reviewed the relevant authorities and observed (at [36]) that "there must be evidence that satisfies the court that there is 'a serious question to be tried'", or "an issue deserving of hearing", or a "plausible contention requiring investigation".
6. In Ligon 158 Pty Ltd v Huber [2016] NSWCA 330 at [8], Barrett JA (McColl and Meagher JJA agreeing) endorsed the following summary of the applicable principles (based on Black J's judgment in Re Wollongong Coal Ltd [2015] NSWSC 1680 at [9]-[22]): "(1) A dispute is 'genuine' if it is not 'plainly vexatious or frivolous' or 'may have some substance' or 'involves a plausible contention requiring investigation'. A genuine dispute requires that it be bona fide and, to that effect, be premised on sufficiently particularised grounds that are 'real and not spurious, hypothetical, illusory or misconceived' and which demonstrate the dispute's 'objective existence' and 'prima facie plausibility'. (2) The test is governed by principles analogous to those which underpin an application for an interlocutory injunction or summary judgment. The court must, however, guard against setting the threshold too low for that is liable to defeat the legislative purpose of the section. (3) The task faced by a company challenging a statutory demand on the genuine dispute ground is by no means at all a difficult or demanding one. Once the company shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow and the demand will be set aside. A finding to the contrary could only be arrived at if the contentions advanced are so devoid of substance that no further investigation is warranted. (4) The function of the court is merely to determine the existence of a genuine dispute. While this neither requires nor invites it to weigh or assess the merits of the dispute, the court will not exceed its legitimate function by having regard to evidence which bears upon whether the asserted dispute is genuine."

Genuine dispute - "uncontradicted" evidence?

1. APEA and Mr Ma put their respective claims for restitution on two alternative bases, namely, either a total failure of consideration or mistake. The factual matters relied upon to establish those claims were those set out in the supporting affidavits of, respectively, Ms Ma and Mr Ma.
2. As regards the claim based on mistake, this was put as follows in written submissions (emphasis added): "The debt which arises in this case is one for money had and received, on the basis that the transactions, being payments by APEA and Mr Ma of the relevant funds, were made under mistake. That mistake was, first, the erroneous belief that One Pro [Investment] was part of a scheme under which it would, in return for the payment, transfer funds to the defendants in China, and second, 'sheer ignorance' of the [Facility] Deed between Jituo and One [Pro] Chatswood, and that the payments were purported by Jituo to be in satisfaction of liabilities under it. An additional unjust factor is the total failure of basis of the transaction, by the absence of any true intention to transfer on the part of One Pro [Investment]."
3. As regards the claim based on total failure of consideration, the Defendants submitted that: "the basis or purpose for which the monies were paid, the understanding on which the monies were paid, [was] that One Pro, the plaintiff, would transfer the equivalent sum into accounts in China, or facilitate their transfer into China…"
4. The Defendants contended that there was a "failure of basis or failure of consideration … because it's common ground that [One Pro Investment] never intended to transfer those funds or facilitate the transfer of the funds".
5. In contending that there could be no genuine dispute about a restitutionary claim put on either of those grounds, APEA and Mr Ma relied on the "uncontradicted evidence" of Mr Ma and Ms Ma regarding the conversations with Mr Dou and regarding their lack of knowledge of the Facility Deed, submitting as follows (emphasis added): "At the time the defendants advanced the funds, they believed that One Pro [Investment] would, in turn, transfer equivalent funds to them in China, as part of an arrangement organised by Dou. They were also unaware of the existence of the [Facility] Deed and Jituo, or that Jituo was planning to purport that the payments were made in satisfaction of liability under the [Facility] Deed. There is no genuine dispute about those matters."
6. I accept that the evidence of Ms Ma and Mr Ma is "uncontradicted", in the sense that there is no affidavit evidence filed on behalf of One Pro Investment which contains a denial that Mr Dou made the representations set out in Ms Ma's or Mr Ma's respective affidavits, or a denial that Ms Ma and Mr Ma in fact had the purpose or understanding which they depose to having had at the time that the $4m Payment and the $2m Payment were made.
7. Plainly, One Pro Investment could not lead any affidavit evidence to that effect in circumstances where (as is common ground) One Pro Investment was not aware of any of the representations made by Mr Dou to the Defendants, and did not have any dealings, at the time of the payments or otherwise, with Ms Ma or Mr Ma.
8. However, it does not follow that there is no genuine dispute about such matters.
9. One Pro Investment submitted that there was "a serious question to be tried'" or "an issue deserving of hearing", or a "plausible contention requiring investigation" (Britten-Norman) regarding the credibility of the accounts given by Ms Ma and Mr Ma in their affidavit evidence and regarding whether, in particular, the $4m Payment and the $2m Payment were made on the basis of some mistake, as a result of the representations made by Mr Dou. In that regard, One Pro Investment referred to the following matters. 1. First, there is no evidence of any contemporaneous document recording, or referring to, any intention on the part of Mr Ma or APEA to transfer moneys to China (for example, there was no written communication with either Tuwin Lawyers or Link Lawyers referring to any such intention). 2. Secondly, there is no evidence of any contemporaneous document recording or referring to any communication between Mr Dou and either Mr Ma or APEA (for example, there are no meeting invitations and no emails). 3. Thirdly, if APEA and Mr Ma understood and intended that the $4m Payment would be, upon receipt, transferred by One Pro Investment to a bank account in China, and APEA and Mr Ma were aware that this had not occurred, there is no explanation as to why Mr Ma proceeded to make a further $2m Payment into the same account more than two weeks after the earlier payment. 4. Fourthly, there is also no explanation on the evidence as to why, if APEA and Mr Ma understood and intended that the sum of $6m was being paid into the One Pro 1907 Account so that One Pro Investment could transfer this amount to their nominated bank account(s) in China, they delayed in raising any issue with One Pro Investment when they failed to receive this amount in China. On the evidence before the Court, there was no communication from either APEA or Mr Ma to One Pro Investment until around six months after the payments were made, when a demand was made by a solicitor's letter dated 7 June 2024 for repayment of the $4m Payment and $2m Payment (and this correspondence made no reference at all to any arrangement for the moneys to be sent to China).
10. In setting out those matters, I do not intend to, and do not, express any view about the credibility of the accounts given by Mr Ma or Ms Ma in their affidavit evidence. Rather, having regard to the matters outlined above, I accept One Pro Investment's submission that there is a serious question to be tried, or an issue deserving of hearing, or a plausible contention requiring investigation, as to whether those accounts should be accepted and, accordingly, as to whether APEA and Mr Ma in fact laboured under the mistake, or in fact had the understanding and intention, on which their claim in restitution is based.

Genuine dispute - Facility Deed

1. In their written submissions, the Defendants stated as follows (emphasis added): "Importantly, there is no contest that the plaintiff is liable for a debt of $6,000,000 by reason of the transfers. The only dispute is whether the plaintiff is liable to Jituo under the [Facility] Deed, or rather, whether the plaintiff is liable to the defendants. In circumstances where there is no genuine contest that the defendants were unaware of the existence of the [Facility] Deed at the time at which they made the relevant payments, the liability can only be to the defendants."
2. As this statement acknowledges, there is a dispute between the parties regarding whether One Pro Investment received the sums of $4m and $2m pursuant to the terms of the Facility Deed. The Defendants: 1. referred in their submissions to the "purported" Facility Deed and to the "purported" payments pursuant to that deed; 2. made submissions to the effect that the Facility Deed was not validly executed; and 3. made submissions to the effect that the terms of the Facility Deed were, from the perspective of Jituo, uncommercial (since, in respect of an $8m facility, the interest rate was only 0.1% per annum and no fees were payable, such that Jituo would have made a significant loss on the transaction).
3. I am satisfied that there is a genuine dispute about these matters. In particular, there is a serious question to be tried, or an issue deserving of a hearing, or a plausible contention requiring investigation, as to whether the Facility Deed was a binding arrangement between the parties for the provision of finance by Jituo to One Pro Chatswood, and whether the payments made into the One Pro 1907 Account constituted advances made under, and repayable pursuant to, the terms of that facility.

Genuine dispute - significance of Caveat Proceeding

1. In the Caveat Proceeding, APEA and Mr Ma have pleaded, as against One Pro Investment, the same claims in restitution as are asserted in the APEA Demand and the Ma Demand. Further, they have pleaded that these claims arise from the same facts as are set out in the affidavits accompanying the APEA Demand and the Ma Demand. One Pro Investment has put those matters in issue.
2. One Pro Investment referred to the decision of Barrett AJA in In the matter of Zarzar Pty Ltd [2017] NSWSC 93. In that case, the following situation arose: 1. on 28 June 2016, a statutory demand was served by the defendant, Evton, on Zarzar; 2. on 6 July 2016, Zarzar filed its application to set aside the statutory demand; 3. on 16 August 2016, Evton asserted the claim which was the subject of the statutory demand by way of a claim for set-off in its defence to proceedings brought by Zarzar in the Local Court; 4. on 6 September 2016, Evton brought a cross-claim in the Local Court in relation to the alleged indebtedness which was the subject of the statutory demand; and 5. on 12 September 2016, Zarzar joined issue in respect of that indebtedness.
3. Barrett AJA held that the maintenance by Evton of the statutory demand, after the date when a claim in respect of the same alleged indebtedness was asserted in the Local Court, was an abuse of process. At [22], his Honour made the following observations: "While there is no explicit rule precluding parallel resort by a creditor to both the statutory demand procedure and debt recovery proceedings, the reality is that it is an abuse of the statutory demand process to continue to press and rely on a demand while at the same time suing for the relevant debt or debts. This is because the two procedures have different objectives. The aim in serving a statutory demand is not to recover the debt (although eliciting payment may become a welcome by-product) but to obtain the benefit of a presumption of insolvency through non-compliance with the demand. The aim of recovery proceedings, by contrast, is to compel payment and obtain monetary satisfaction. The same reasoning holds good, in my view, when the alleged indebtedness is asserted by the putative creditor by way of set-off defence in proceedings commenced by the alleged debtor. Again, the putative creditor abandons its stance of waiting for the expiration of a statutory period in order to obtain a presumption of insolvency (or, as an alternative, to obtain voluntary payment by the debtor in the meantime) in favour of positive assertion of the right to be paid as a means of obtaining recovery by way of reduction of a liability."
4. One Pro Investment also relied on the decision of Brereton J in In the matter of DCL Construction Group Pty Ltd [2017] NSWSC 839. In that case, a statutory demand was issued claiming an amount due under a loan agreement in circumstances where there was a pending proceeding seeking declarations that the relevant loan arrangements were valid and subsisting and seeking judgment for the amount said to be due under those arrangements. Brereton J found that there was a genuine dispute as to the existence of the debt, and continued as follows (at [13]): "The conclusion that the statutory demand must be set aside is supported by a parallel line of reasoning. It is an abuse of the statutory demand process to engage it while contemporaneously suing for the relevant debt [citing, inter alia, Zarzar at [22]]. If anything, that is accentuated in a case where, as here, pleadings and evidence have been exchanged, and no admission of the debt has emerged. If [the creditor] believed that there was no defence, the proper course was to apply for summary judgment in the Equity proceedings - a course which, given the issues and the evidence, would not likely have succeeded."
5. In In the matter of Modern Wholesale Jewellery Pty Ltd [2017] NSWSC 236, Black J quoted (at [30]) the observations of Barrett AJA in Zarzar at [22] which are set out above. His Honour said (at [31]) that there was substantial force in those observations and continued as follows (emphasis added): "It also seems to me that there is also a further reason why the contemporaneous, or near contemporaneous, commencement of contested proceedings in respect of a debt and the service of a creditor's statutory demand in respect of that same debt may amount to an abuse of the creditor's statutory demand procedure such that the demand should be set aside under s 459J of the Corporations Act. That course has the potential, as this case amply demonstrated, to multiply the costs incurred by the parties, since a recipient who contests the debt will then be required, potentially within similarly short periods, both to file a Defence in the substantive proceedings, or otherwise face the risk of default judgment, and to bring an application to set aside the creditor's statutory demand in this Court or the Federal Court of Australia. Issues may then arise, as they have here, as to whether two proceedings should proceed in parallel or one should be deferred until the other has been heard. That course will inevitably increase the costs incurred by the parties, but also involves the risk that scarce hearing time in the Courts, which is funded by the community and largely not by the parties, will be devoted to resolving the procedural difficulties which that course has created."
6. His Honour held (at [32]) that: "It seems to me that some other reason to set aside a creditor's statutory demand is established where, as here, the course adopted by a creditor that issues a creditor's statutory demand is likely to force the party that receives it to the cost and inconvenience of overlapping proceedings, one brought on the basis that there is no genuine dispute as to the debt, and the other directed to determining such a dispute. It seems to me that these matters, together with the other matters to which I will refer below, require that the First Modern Demand be set aside for some other reason under s 459J of the Corporations Act."
7. APEA and Mr Ma submitted that One Pro Investment's submissions regarding the Caveat Proceeding "rest on a misapprehension", contending as follows: "The caveats assume that Jituo holds any security interest in the property of One [Pro] Chatswood on constructive trust. The maintenance of the caveats do not constitute any money claim, including any claim for the restitutionary debts sought in the present claim, or any alternative or overlapping form of relief."
8. The Defendants further submitted that a proceeding commenced by a caveator in response to a lapsing notice can be seen as a defensive step in response to the action taken by the property owner.
9. I do not make any finding that the maintenance of the Ma Demand and the APEA Demand after the commencement of the Caveat Proceeding was an abuse of process. One Pro Investment did not, in its originating process, in the materials filed in support of its application, or in its written or oral submissions, advance any contention that the statutory demands should be set aside as an abuse of process.
10. However, that does not mean that the Caveat Proceeding is of no relevance to the determination of the application. As One Pro Investment submitted, the fact that, in the Caveat Proceeding, issue has been joined and evidence has been filed regarding the same factual and legal matters as underlie the debts claimed in the statutory demands supports the conclusion that there is a genuine dispute about the existence of those debts.
11. In response, the Defendants contended that these factual and legal matters were pleaded merely by way of "background" in the Caveat Proceeding.
12. I do not accept this submission. The Points of Claim is a short document of two pages. The only material facts pleaded are (a) the events leading to the $4m Payment and the $2m Payment, including the intention of APEA and Mr Ma to transfer funds to China, the representations made by Mr Dou and the provision of the details of the One Pro 1907 Account; (b) the failure to transfer the $6m to China or to return the funds to APEA and Mr Ma; (c) the terms of the Facility Deed; (d) the lack of any knowledge on the part of APEA or Mr Ma of the Facility Deed; and (e) the lack of any contractual relationship between, on the one hand, Mr Ma and APEA and, on the other, One Pro Investment or One Pro Chatswood.
13. These are not "background" matters, but are pleaded as the basis of the legal claims made in the Points of Claim, namely that: 1. One Pro Investment is liable in restitution to repay the amount of $2m to Mr Ma; 2. One Pro Investment is liable in restitution to repay the amount of $4m to APEA; and 3. "in the premises of the matters stated above", the mortgage over the Chatswood Property which was granted to Jituo is held: 1. on constructive or resulting trust for Mr Ma in the amount of $2m, and 2. on constructive or resulting trust for APEA in the amount of $4m.
14. In the Points of Defence filed in the Caveat Proceeding, each of those claims is denied by One Pro Investment and One Pro Chatswood.
15. No steps have been taken by Mr Ma and APEA in the Caveat Proceeding to strike out the Points of Defence, either in whole or in part.
16. Instead, extensive evidence has been filed in respect of the issues raised in the Points of Claim and the Points of Defence, and the matter is proceeding to a hearing in respect of those issues.

Genuine dispute - conclusion

1. Having regard to the matters set out above, I am satisfied that there is a genuine dispute about the existence of the debt claimed in each of the APEA Demand and the Ma Demand.
2. In particular, there is a serious question to be tried, or an issue deserving of hearing, or a plausible contention requiring investigation, regarding: 1. whether APEA and Mr Ma in fact laboured under the mistake, or in fact had the understanding and intention, on which their claim in restitution is based; 2. whether the Facility Deed was a binding arrangement between the parties for the provision of finance by Jituo to One Pro Chatswood, and whether the payments made into the One Pro 1907 Account constituted advances made under, and repayable pursuant to, the terms of that facility; and 3. whether, in respect of the $4m Payment and the $2m Payment, One Pro Chatswood is liable to Jituo pursuant to the terms of the Facility Deed or One Pro Investment is liable to APEA and Mr Ma in restitution.
3. It follows that One Pro Investment has established a basis for setting aside each of the APEA Demand and the Ma Demand.

conclusion and orders

1. Given that One Pro Investment has been successful in each proceeding, costs should follow the event.
2. Accordingly, I make the following orders. In proceeding 2024/336918 1. The creditor's statutory demand issued by the Defendant and dated 8 August 2024 be set aside. 2. The Defendant pay the Plaintiff's costs, as agreed or assessed. In proceeding 2024/336932 1. The creditor's statutory demand issued by the Defendant and dated 8 August 2024 be set aside. 2. The Defendant pay the Plaintiff's costs, as agreed or assessed.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 26 February 2025