By Originating Process filed on 23 December 2019 the Plaintiff, Premier Vacations Pty Ltd ("Premier") originally sought an order under s 459J of the Corporations Act 2001 (Cth) that a creditor's statutory demand for payment of a debt dated 9 December 2019 ("Demand") issued by LBS Group Australia Pty Ltd ("LBS") be set aside. Notwithstanding that that Originating Process relied on s 459J of the Act, both Mr Archibald, who appeared for Premier, and Mr Delany who appeared for LBS also addressed the question whether the Demand should be set aside, or varied, under s 459H of the Act on the basis that there was a genuine dispute as to the amounts claimed in the Demand.
The genesis of the dispute between the parties is straightforward, but the way in which the dispute as to the amounts claimed by LBS has been developed, and is addressed by the parties' evidence, is not. Premier is a travel agent and user of coach services, which were provided by LBS, and LBS claims that a substantial amount is owed to it in respect of the provision of such services. By the Demand, LBS identified the amount of debt owed to it as $884,749.98, comprising the sum of invoices in specified amounts for services provided between specified dates, the total of which added to that amount. The first of those invoices was said to cover the period from 1 April 2018 to 30 April 2018 and the last to cover the period from 1 November 2019 to 13 November 2019. The Demand was supported by an affidavit dated 9 December 2019 affirmed by Mr Pan Chung Lai, the sole director of LBS, who referred to the debts in the same terms as they are set out in the Demand. He also confirmed that the amounts of the debts were due and payable by Premier and that he believed there was no genuine dispute about the existence or amount of any of the debts.
In support of the application to set aside the Demand, Premier relied, first, on an affidavit of its director, Mr Chi Wai Lau, dated 23 December 2019. Mr Lau there referred to the genesis of the relationship between Premier and LBS, commencing in early 2016, when Mr Lai of LBS suggested that Mr Lau should start his own travel business, and offered to support that business. Mr Lau in turn annexed a spreadsheet to his affidavit, which set out the invoices which Premier had received from LBS during the course of its travel agency business, and the payments which it claimed to have made to LBS in that respect. Mr Lau there referred to a conference in July 2016, long before the invoiced amounts that are in issue, where he contended that an oral agreement was either formed, or confirmed, that Premier would receive a 20% discount off the amount of gross invoices issued by LBS for the provision of transport services and would be allowed six months credit for each invoice. Mr Lau's evidence is that Mr Lai responded that he had agreed that earlier; there was then some discussion about Mr Lai not having been allocated a shareholding in Premier; and a further statement is then attributed to Mr Lau (which, in its context could only have been made by Mr Lai) that reconfirmed the agreement to a 20% discount on gross invoices and six month trading terms on the basis that Premier would use only LBS's coaches and that Mr Lai trusted Mr Lau. Mr Lau in turn referred to the circumstances in which subsequent invoices were paid and provided a somewhat complex explanation of the spreadsheet of invoices and payments, which introduced a suggestion (which is now at least partly common ground) that a further amount had been loaned by LBS to Premier, and that loan had been repaid, and was in turn taken into account in the credit column of the spreadsheet.
Pausing there, it is plain that Mr Lau's affidavit at least sought to establish a genuine dispute in respect of the claim to a 20% discount upon the gross invoices and the six months to be allowed for payment of those invoices. That had, of course, all the usual difficulties which arise where an oral agreement is said to have provided a qualification to amounts that were invoiced and would otherwise be due and payable. However, it should be recognised that there is nothing particularly implausible in the suggestion of an oral agreement as to these matters, where the parties' arrangements were not documented in any written contract between them.
Mr Lai responded to Mr Lau's evidence by his further affidavit filed 11 March 2020. Mr Lai denied that the meeting and conversation to which Mr Lau deposed about the 20% discount on invoices or a six month credit for each invoice had occurred. He referred to steps taken to confirm the amount of invoices on a regular basis, by exchanging emails between the parties. Those steps are equivocal, because they could still sensibly have been taken, in respect of gross invoice amounts, even if the discount and time for payment arrangements to which Mr Lau referred existed. Mr Lai also leads evidence that he continued to trade with Mr Lau despite partial payments and delays in payments for several months, because he had known Mr Lau for a long period and because delayed payment was a standard practice in the tourist industry. A further difficulty arises here, because the practice of payments between the parties, both of partial payments and delayed payments, is neither consistent with payment of the gross amounts due on LBS's case, and also does not correspond, in any precise way, to payment with a 20% discount and a six month delay in payment on the basis for which Premier contends.
Mr Lai also responded, in some detail, to the spreadsheet at annexure E of Mr Lau's affidavit, addressing the arrangements between the parties in respect of the loan made by LBS to Premier, and accepting that Premier had repaid money to LBS, while contending that the repaid money had been accounted for in the credit column of the table annexed to Mr Lau's affidavit. Although this evidence responded to Mr Lau's analysis of the payment history, it did not provide an explanation of the basis on which the invoices claimed in the Demand had been issued by LBS, or why the amounts claimed by them were due and payable on the terms for which LBS contends rather than the terms for which Premier contends.
Mr Lai also provided an explanation, parts of which could only be described as obscure, of several discrepancies which he now appeared to acknowledge existed in the amounts claimed in the Demand. First, he fairly and clearly acknowledged that an amount of $40,000 which LBS had been claimed in the Demand had previously been paid by Premier. Second, he acknowledged that an amount of $19,759.81 which LBS claimed in the Demand involved mistakenly including amounts which he now acknowledges were in dispute, and which he said was attributable to his approach to the Demand. He did not explain what that dispute was or why that amount was included in the Demand. He also referred to a dispute about whether the amount of $49,108.50 attributable to invoices issued in September, October and November 2019 was payable, but did not there address the basis of that dispute, and also refers to an amount of $43,368.15, which appears to be related to the loan amounts between the parties.
By a further affidavit in reply dated 20 March 2020, Mr Lau in turn responds to aspects of that affidavit, and indicates that moneys were paid by Premier to LBS without attributing those payments to either services provided or the amount of the loan.
[3]
Whether there is a genuine dispute in respect of the amount claimed in the Demand
With that background, I turn now to the question of whether the Demand should be set aside on the basis that there is a genuine dispute as to the amount claimed, or whether it can be varied under s 459H of the Act to determine a substantiated amount that is due to LBS.
The case law establishes that a genuine dispute must be bona fide and truly exist in facts, and the grounds for the dispute must be real and non-spurious, hypothetical, illusory or misconceived. Once a company shows that one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow, and the Court does not engage in any form of balancing exercise between the strengths of competing contentions: Panel Tech Industries (Australia) Pty Ltd v Australian Skyreach Equipment Pty Ltd (No 2) [2003] NSWSC 896. I also proceed on the basis that I am bound by the decision of the Court of Appeal in Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd [2013] NSWCA 344; (2013) 85 NSWLR 601, which addressed the case law applicable to the threshold to demonstrate an offsetting claim, by reference to a comprehensive review of the cases referable to establishing whether a genuine dispute was established. Importantly, their Honours emphasised that the Court must be satisfied that there is a serious question to be tried or an issue deserving of a hearing or a plausible contention regarding investigation in order to set aside a creditor's statutory demand, but also emphasised that the evidence necessary for that purpose need not conclusively prove the claim or otherwise be incontrovertible or substantially non-contestable and that, except in extreme cases, the Court was not concerned to engage in an inquiry as to the credit of the deponent of the affidavit filed in support of the application, or to determine whether the evidence was disputed or was likely to be accepted at a final hearing of the claim.
I also have regard to my summary of the applicable principles in Re Wollongong Coal Ltd [2015] NSWSC 1680; (2015) 110 ACSR 134 at [9]-[22] and to the summary of those principles by Gleeson JA in Re AMP Life Ltd [2018] NSWSC 855 at [35]-[37]. His Honour there emphasised, importantly, that:
"The bar for establishing a genuine dispute is not set high; a 'plausible contention requiring investigation' will suffice [t]he court's state of mind concerning the existence of a genuine dispute may range from a clear conviction that the debt does not exist to an opinion that the genuine dispute hurdle has only just been cleared."
I do not neglect submissions made by Mr Delany, for LBS, as to the potential that the Court might, in some circumstances, have regard to the principle in Jones v Dunkel, and to the fact that, in this case, only Mr Lau, of several persons associated with Premier said to have been present at the meeting at which the agreement as to a discount and time for payment was formed gave evidence. I also have regard to the fact that an application to set aside a creditor's statutory demand is a summary procedure, and it would defeat the purpose of that summary procedure if it were to be conducted as though it were a trial with multiple witnesses, and the Court did not then, having heard all those witnesses, reach determinations as to their credit or the ultimate fact, but only whether a genuine dispute existed.
Although I am far from convinced that Premier would ultimately succeed at a final hearing, where the Court would reach findings as to credit, it seems to me that a genuine dispute as to the existence of the debt has here been raised, by the evidence of an oral agreement as to both the 20% discount on the amounts to be paid and the time for payment. No doubt, the position may have been different if LBS could show a regular history of payments of at least some amounts in full, and promptly, which would have been inconsistent with the terms for which Premier contended and the existence of a genuine dispute. The position may also have been different if Premier could show regular payments at a 20% discount, and after a six month delay, which would have been consistent with the position for which it contends, and would have established a stronger basis for a genuine dispute. Here, the evidence is equivocal, involving a record of irregular payments, less than the amount invoiced, and with a delay. It seems to me that, in those circumstances, there is a need for an inquiry, at a factual level, involving determination of questions of credit, as to the existence of the arrangement for which Premier contends, and how it was applied in practice, and that is sufficient to give rise to a genuine dispute as to the debt claimed in the Demand.
I recognise that, under s 459H of the Act, the Court is in some circumstances required, where a genuine dispute is established, to determine the substantiated amount, after allowing for the amount which is genuinely disputed. There would have been formidable obstacles in undertaking that exercise in this case, not least because the witnesses in their affidavit evidence had been diverted, first, to the dispute as to the approach to be adopted to Mr Lau's spreadsheet and, second, to the treatment of the loan between the parties. It seems to me that their evidence provides no evidentiary basis for the Court to calculate the substantiated amount, notwithstanding counsels' attempts, in their oral submissions, to advance alternative calculations which were largely not supported by evidence of the witnesses. In any event, that question does not arise because of the conclusions I reach on other grounds below.
[4]
Whether the Demand should be set aside under s 459J of the Act
The other basis on which Premier seeks to set aside the Demand, which was originally identified in its Originating Process, is under s 459J of the Act. Mr Archibald submitted that there was either a "defect" in the Demand for the purposes of s 459J(1)(a) of the Act, or there was some other reason to set aside the Demand because the amount claimed so substantially exceeded the amount that could properly be claimed that the Demand constituted an abuse of process or was unconscionable or inconsistent with the statutory scheme for the purposes of s 459J(1)(b) of the Act.
So far as the first of those contentions is concerned, Mr Archibald submitted that, at least on Premier's case, the amount claimed in the Demand included the amount of the loan made by LBS to Premier, and it was not shown that the amount of that loan was presently due and payable. On LBS's case, the amount claimed in the Demand does not include the amount of that loan, and no issue in that regard arises. Given the conclusions I reach on other grounds, it is not necessary to address that issue. It is not apparent to me that, if the amount of the Demand was in fact limited to amounts claimed by reference to the provision of coach and driver services by LBS, then any question of a defect in the Demand, as distinct from an overstatement of the debt claimed, would arise.
I recognise, however, that the inclusion in a creditor's statutory demand of substantial amounts which are in dispute may itself give rise to a substantial injustice, by requiring the recipient of the demand to move to set aside the demand, even if it paid the amount that was otherwise properly claimed. In First State Computing Pty Ltd v Kyling (1995) 13 ACLC 939, Santow J observed that a creditor's statutory demand could be set aside for a substantial overstatement of the amount claimed, where the demand was so grossly inflated as to comprise matters which it would have been obvious from the outset were genuinely disputed between the parties at the time the demand was served. Subsequent case law addressing that issue, including my decision in Re UGL Process Solutions Pty Ltd [2012] NSWSC 1256, was reviewed by Rees J in Re Granite Power Ltd (Admins Apptd) [2019] NSWSC 1491 at [36]ff. Her Honour there dealt with a contention that the inclusion of a substantial amount in a statutory demand, which was subject to a genuine dispute, would give rise to either a defect in the demand or should lead the Court to set aside the demand for some other reason under s 459J(1)(b) of the Act. Her Honour noted that, had she not found there was a genuine dispute, she would have been inclined to accept the contention that a substantial overstatement of the debt claimed may be inconsistent with the statutory regime and give rise to some other reason to set aside the Demand under s 459J(1)(b) of the Act.
Mr Delany submits that it would not necessarily have been apparent to Mr Lai, at the time the Demand was served, that there was a genuine dispute as to the existence of the substantial amount of the Demand, which is now said to be attributable to the 20% discount and the time which Premier was to be was to be allowed to pay the amounts. The difficulty with that proposition, of course, is that that depends upon the contested issue as to whether a conversation involving Mr Lai in fact occurred in which a 20% discount was agreed and a six month period for payment was also agreed. If that conversation occurred, and Mr Lai was party to it as Premier contends, then he would have been aware of that issue, notwithstanding that it and other aspects of the parties' relationship were not documented.
It seems to me that, irrespective of whether Mr Lai was subjectively aware of the basis on which a genuine dispute arose, at the time the Demand was issued, there is nonetheless some other reason to set aside the Demand under s 459J(1)(b) of the Act, so far as the issue and continuance of the Demand would be inconsistent with the proper operation of the statutory regime. On the findings which I have reached, there is in fact a genuine dispute as to a very substantial amount of the Demand, although the evidence led by the parties does not allow the Court to quantify any amount that is disputed as a specific figure. As I noted above, that is reflected in the Court's inability to calculate a substantiated amount under s 459H of the Act in the circumstances. It is not to the point that, as Mr Delany submits, there is evidence in Mr Lau's affidavit that he accepts that some amount, possibly including an amount referable to the loan, is owing to LBS, where he does not accept that amount is due and payable, and where that approach is in turn based on an approach to the loan which LBS does not accept. The genuine dispute as to a substantial part of that amount claimed in the Demand, combined with the Court's inability to calculate the substantiated amount, requires that the Demand be set aside for some other reason under s 459J(1)(b) of the Act, on the basis that its continuance would be inconsistent with the statutory regime.
[5]
Orders
For all these reasons, I order that:
The creditor's statutory demand dated 9 December 2019 issued by LBS Group Australia Pty Ltd be set aside;
The Defendant pay the Plaintiff's costs of the application, as agreed or as assessed.
[6]
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Decision last updated: 27 May 2020