JANE ANNE NIXON, JOHN ALEXANDER MARQUIS & KELLY BIANCA MARQUIS AS ADMINISTRATORS OF THE ESTATE OF JEFFREY ROY MARQUIS

Corporations - Application to set aside statutory demand - Defendant guaranteed plaintiff's debt to bank - Amount paid by defendant to bank in reduction of plaintiff's debt - Demand by defendant to recover that amount from plaintiff - Whether demand for 'debt' within meaning of s 459E(1) of Corporations Act 2001 (Cth) - Plaintiff advanced money to trustee of trust - Trustee advanced money to defendant - Whether plaintiff subrogated to trustee's right of indemnity from trust assets - Whether capable of constituting offsetting claim to defendant's demand - New grounds raised outside 21­day period - Turns on own facts

Corporations Act 2001 (Cth), s 459H, s 459E(1)

Trustees Act 1962 (WA), s 10

1 NEWNES J: This is an application to set aside a statutory demand served on the plaintiff (Deancrest) on or about 12 February 2007, in which the defendants, as the administrators of the estate of the late Jeffrey Roy Marquis (Mr Marquis), demanded payment of the sum of $101,172.72. That sum is expressed in the demand to be money paid by the defendants (administrators) to BankWest in discharge of money owing under certain facilities granted by BankWest to Deancrest and guaranteed by Mr Marquis.

2 Deancrest acts, and has at all material times acted, as trustee of the Booragoon Tyre Service Unit Trust (unit trust). It carries on business in that capacity as Booragoon Tyre Service and has done so since September 1978. The directors and shareholders of Deancrest were Mr Christopher Gray and, until his death on 10 December 2004, Mr Marquis. The current directors are Mr Gray and his wife. Mr Gray and the administrators each hold one share in Deancrest.

3 The unit holders in the unit trust are the trustees of the C V Gray Family Trust (Gray Family Trust) and the J R Marquis Family Trust (Marquis Family Trust) respectively. Each holds five units. The beneficiaries of those trusts, as the names suggest, are members of the families of Mr Gray and Mr Marquis respectively.

4 It is convenient at this stage to say something about the Marquis Family Trust. That trust was created by a deed of trust dated 30 August 1978. The original trustees were Geoffrey and Jennifer Blair. The primary beneficiaries of the Marquis Family Trust were, and apparently still are, John Marquis and Kelly Marquis and any other children of the marriage of Mr Marquis and Constance Marquis. The additional general beneficiaries were Constance Marquis and, until his death, Mr Marquis. The appointor was Mr Marquis and, if he did not appoint any other person by deed or will, upon his death, Constance Marquis.

5 There have been several changes of the trustee of the Marquis Family Trust over the years. By a deed of 1 December 1980, Raft Nominees Pty Ltd replaced Geoffrey and Jennifer Blair as trustee; by a deed of 10 May 1988, Agnost Pty Ltd replaced Raft Nominees Pty Ltd as trustee; and by a deed of 31 March 2000, Mr Marquis replaced Agnost Pty Ltd as trustee. Mr Marquis continued as trustee until his death. It was submitted that, pursuant to the deed of trust, upon Mr Marquis's death Constance Marquis became the appointor. By a deed of 11 May 2005, Constance Marquis appointed Marquis Nominees Pty Ltd (Marquis Nominees) as the trustee. On each occasion that a new trustee was appointed, the deed of appointment provided that the assets of the trust vested in the new trustee; see also Trustees Act 1962 (WA) s 10. The deed could not, of course, relieve the retiring trustee of liabilities to third parties, those being personal liabilities of that trustee.

6 The business of Booragoon Tyre Service was operated on a day to day basis by Mr Gray and Mr Marquis, until Mr Marquis's death. In an affidavit filed in support of this application, Mr Gray says that from the commencement of the business he and Mr Marquis were each paid salaries by Deancrest.

7 Mr Gray says that the same accountant acted for the unit trust, the Gray Family Trust, the Marquis Family Trust and for Mr Marquis and himself. Mr Gray says he has been informed by the accountant that where money in addition to salary was drawn from the business by Mr Marquis it would be debited in the accounts of the unit trust to the loan account of the Marquis Family Trust, and in the accounts of the Marquis Family Trust it would be debited to the loan account of Mr Marquis. A similar process involving the Gray Family Trust was followed in respect of money, in addition to salary, drawn by Mr Gray.

8 The amount shown in the accounts of the unit trust as owing by the Marquis Family Trust as at 30 June 2000 was $131,734, as at 30 June 2001 it was $141,128, as at 30 June 2002 it was $150,671, as at 30 June 2003 it was $143,993, as at 30 June 2004 it was $158,311 and as at 30 June 2005 it was $163,498. What, if any, amounts were repaid in any of those periods did not emerge from the evidence. Thus, it is not clear whether the amount shown at the end of each of those financial years simply represented further borrowings on top of the amount outstanding at the end of the previous year, or whether part or the whole of the outstanding sum at the previous financial year end had been repaid and the sum represented wholly or substantially new borrowings.

9 In order to operate the business, Deancrest (as trustee of the unit trust) obtained a loan from BankWest and operated an overdraft account at the same bank. The loan and overdraft were guaranteed by Mr Gray and his wife, and by Mr Marquis. Both the Grays and Mr Marquis gave mortgages over their respective family homes as security for the indebtedness of Deancrest to BankWest.

10 In an affidavit in opposition to the application, the first-named defendant, Ms Nixon, says that following the death of Mr Marquis, his estate owed an amount of $72,740.39 to BankWest on a home loan and an amount of $117,502 to Marquis Nominees, as trustee for the Marquis Family Trust, in respect of loans made to Mr Marquis.

11 On 18 October 2005, Marquis Nominees, as trustee of the Marquis Family Trust, issued a writ against the administrators to recover the amount owing by Mr Marquis. Default judgment was entered for Marquis Nominees on 7 February 2006 in the sum of $177,502, plus interest to the date of judgment in the sum of $3,055.96 and costs of $1,110.70, a total of $181,668.66.

12 Ms Nixon says that as the estate did not have the funds to meet the judgment, the assets of the estate of Mr Marquis, being substantially Mr Marquis's former home, had to be sold. That property was encumbered by a mortgage to BankWest which secured Mr Marquis's home loan and the business loan and overdraft facility BankWest had granted to Deancrest.

13 On 14 June 2006, the property was sold for $595,000. From the proceeds of sale the sum of $190,731.76 was paid to Marquis Nominees to discharge Mr Marquis's liability to the Marquis Family Trust, and the sum of $173,913.11 was paid to BankWest. The latter sum consisted of an amount of $101,172.72 paid to discharge one half of the amount then owing by Deancrest to BankWest, and the balance was to discharge Mr Marquis's home loan. It appears that BankWest would only agree to the discharge of the mortgage on the basis that half of the amount of the existing Deancrest indebtedness to it was repaid. The balance of that indebtedness was to be secured by Mr Gray's guarantee and mortgage.

14 I should say there is no evidence that any demand had been made by BankWest under Mr Gray's guarantee for repayment of any part of Deancrest's indebtedness, and there is no evidence that any grounds existed for such a demand to be made. Rather, it appears the payment was made by the administrators in order to have the BankWest mortgage discharged so that settlement of the sale of the property could proceed.

15 The administrators subsequently served on Deancrest the statutory demand for payment of the amount of $101,172.72 paid to BankWest.

16 In the present application, Mr Gray referred in his supporting affidavit to two substantive grounds upon which Deancrest says the statutory demand should be set aside. They are, first, that Ms Nixon, who signed the statutory demand, was not authorised by the other administrators to do so and, secondly, that Deancrest has an offsetting claim which exceeds the amount of the statutory demand. I should say that the former ground was subsequently abandoned by Deancrest.

17 In that affidavit, Mr Gray says that, as at 30 June 2004, the Marquis Family Trust owed to Deancrest the sum of $158,311. It is evident from Mr Gray's affidavit that Deancrest contends that that sum represents money drawn by Mr Marquis from the business in addition to his salary and the subject of the 'back to back' loans from the unit trust to the Marquis Family Trust and from the Marquis Family Trust to Mr Marquis, in the manner I have earlier described.

18 Deancrest says it is entitled to set-off against the sum demanded the sum of $158,311, that debt to Deancrest having been incurred by Mr Marquis as the former trustee for the Marquis Family Trust.

19 In the course of the extensive argument which took place on this application, other grounds were sought to be relied upon by Deancrest. Indeed, I think it is fair to say that counsel for Deancrest left no stone unturned in seeking to find grounds upon which the statutory demand should be set aside.

20 It was submitted by counsel for Deancrest that the statutory demand was defective in two respects, namely, that it was not signed by all of the administrators, and it did not contain reference to the alternative of securing or compounding the debt to the reasonable satisfaction of the creditors.

21 It was further submitted that no debt was in fact owing by Deancrest to the administrators as no demand had been made by BankWest for payment of the debt. In effect, the administrators had voluntarily made an accelerated payment in order to have the mortgage to BankWest discharged for their own purposes. That did not give rise to a right at this stage to be indemnified by Deancrest in respect of that amount.

22 It was also contended that in respect of the money advanced by Deancrest to the various former trustees of the Marquis Family Trust, Deancrest was entitled to be subrogated to the rights of those trustees to recover the amount owing by Mr Marquis on his loan account and to set-off that amount against the amount demanded by the administrators.

23 The administrators objected to the reliance by Deancrest on any of those additional grounds as they had not been raised within 21 days of the service of the statutory demand.

24 I will deal first with Deancrest's contention that it has an offsetting claim.

25 An offsetting claim is defined by s 459H(5) as being:

A genuine claim that the company has against the respondent by way of counterclaim, set-off or cross-demand.

26 The test to be applied in such a case, as with the test to be applied to determine whether there is a genuine dispute, has been expressed in a number of ways. In Scanhill Pty Ltd v Century 21 Australasia Pty Ltd [1993] FCA 618; (1993) 12 ACSR 341, Beazley J said:

The test to be applied for the purposes of s 459H is whether the Court is satisfied that there is a serious question to be tried that the applicant has an offsetting claim (357).

27 In Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37, 39, Lockhart J, having reviewed a number of the authorities, including Scanhill Pty Ltd v Century 21 Australasia Pty Ltd, considered that the various tests enunciated were not inconsistent, although the highest threshold was probably that stated by Beazley J. His Honour concluded that the court must be satisfied that the claim is not plainly frivolous or vexatious and that it may have some substance.

28 In John Shearer Ltd v Gehl Co [1995] FCA 1789; (1995) 18 ACSR 780, von Doussa, Hill and Tamberlin JJ said:

In order to show that an offsetting claim is genuine it must be put forward in good faith. There must be something more than mere assertion (787).

29 The concept of good faith was considered in Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743, where Palmer J said:

In my opinion, a genuine offsetting claim ... means a claim on a cause of action advanced in good faith, for an amount claimed in good faith. 'Good faith' means arguable on the basis of facts asserted with sufficient particularity to enable the Court to determine that the claim is not fanciful. In a claim for unliquidated damages for economic loss, the Court will not be able to determine whether the amount claimed is claimed in good faith unless the plaintiff adduces some evidence to show the basis upon which the loss is said to arise and how that loss is calculated. If such evidence is entirely lacking, the Court cannot find that there is a genuine offsetting claim for the purposes of s 459H [18].

30 The obligation of a plaintiff who relies on an offsetting claim to adduce evidence of the basis of the claim and the manner in which it has been calculated was considered in Royal Premier Pty Ltd v Taleski [2001] WASCA 48 where Ipp J said, in relation to an offsetting claim for unliquidated damages:

Of course, at this stage, it is not necessary for evidence as to damages to be given in meticulous detail. But there must be at least some material upon which the court can conclude that some damage has been sustained and which will enable the court to make a reasonable assessment as to the amount thereof. In this case, however, there is simply no way of determining whether damage was suffered by the appellant in consequence of the alleged negligence or misleading or deceptive conduct, and there is no evidentiary material from which damage suffered by the appellant can be calculated. This absence of evidence as to damage is, of itself, fatal to the appellant's argument [57].

31 As I have mentioned, the essential basis of the offsetting claim relied upon by Deancrest is that Mr Gray and Mr Marquis each drew sums from the business, in addition to their salary, for their own personal use. The amounts so drawn were treated in the accounts of the unit trust as a loan to the family trust of the person concerned and, in turn, treated in the accounts of the family trust as a loan to that person.

32 That contention was not disputed by the administrators and the accounts of the unit trust which are in evidence lend some support to it. The amount of $163,498 owing by the Marquis Family Trust to the unit trust as at 30 June 2005 is not far short of the amount of $177,502 owing by Mr Marquis's estate to Marquis Nominees as trustee of the Marquis Family Trust in October 2005. Precisely how the two sums are reconciled, however, is not apparent from the evidence. No accounts of the Marquis Family Trust were put into evidence.

33 It is also not clear how much was advanced to Mr Marquis as trustee of the Marquis Family Trust from 31 March 2000, when he was appointed trustee, until his death on 10 December 2004. The accounts of the unit trust for the financial year ended 30 June 2001 show an amount owing of $131,734 as at 30 June 2000. But there was no evidence as to the amount owing to the unit trust by the Marquis Family Trust before 31 March 2000; that is, before Mr Marquis became trustee of the Marquis Family Trust. It is not, therefore, clear whether all, or only some (and what) part, of the debt owing by the Marquis Family Trust as at 30 June 2000 was incurred by Mr Marquis as trustee, rather than the outgoing trustee.

34 While it might reasonably be inferred that the greater part of that sum was incurred before Mr Marquis became trustee on 31 March 2000, on the evidence it is impossible to arrive at any conclusion as to precisely what amount was owing immediately prior to 31 March 2000.

35 The question, then, is whether Deancrest has an offsetting claim, within the meaning of s 459H(5) of the Corporations Act 2001 (Cth) (the Act), in respect of the sum of $101,172.72, paid to BankWest by the administrators as personal representatives of Mr Marquis.

36 It is clear that ordinarily a trustee is personally liable for all debts contracted in his or her capacity as trustee: Octavo Investments Pty Ltd v Knight [1979] HCA 61; (1979) 144 CLR 360, 367. In Elders Trustee & Executor Co Ltd v E G Reeves Pty Ltd [1987] FCA 332; (1987) 78 ALR 193, Gummow J explained the position as follows (253):

It is fundamental that the common law does not recognise a trustee as having assumed an additional or qualified legal personality. This means that the liability of the trustee for debts he incurs includes those incurred in the course of the performance of the trust. His liability to creditors is not limited or quantified by reference to the extent of trust assets: Re Johnson (1880) 15 Ch Division 548 at 552. The debts are his debts ... however, the law does permit a trustee to contract with third parties on the basis that his personal liability is limited, for example to the extent of his right to resort to and apply trust funds for the discharge of liabilities incurred by him in the authorised conduct of the trust. Nevertheless, third parties may, in a given case, not be prepared to deal with a trustee on such a basis and, in any event, clear words are necessary to achieve a result whereby what is prima facie the unlimited personal liability of a trustee is so qualified: Helvetic Investment Corp Pty Ltd v Knight (1984) 9 ACLR 773.

37 A trustee's liability will not be limited to his or her right to indemnity from the trust funds simply because the other contracting party knew the person was a trustee. Nor will a statement that a person contracts 'as trustee' be sufficient to exclude full personal liability: Helvetic Investment Corporation Pty Ltd v Knight (1984) 9 ACLR 773. There must be evident a clear intention of the parties that the liability of the trustee is to be limited: Ford & Lee, Principles of the Law of Trusts (3rd ed, 1996) [14010].

38 There is, in the present case, nothing to suggest that the liability to the unit trust that Mr Marquis incurred as trustee of the Marquis Family Trust was limited to the extent of his right of indemnity from the trust funds of the Marquis Family Trust. Indeed, given that it appears that most, if not all, of the amount reflected in the loan account of the unit trust was made up of drawings for Mr Marquis's personal benefit, such an arrangement seems hardly likely.

39 On the evidence it appears that the personal liability of Mr Marquis to the unit trust therefore extended to all amounts advanced to him by the unit trust while he was trustee of the Marquis Family Trust, which remained unpaid at his death. That is a liability that now lies with his estate, by his personal representatives.

40 The administrators submitted that any such liability of the estate of Mr Marquis to Deancrest was a contingent liability and could not therefore give rise to an offsetting claim. Counsel for the administrators argued that in the absence of any loan or other documents relating to the advances, it was to be implied that the loans to Mr Marquis, as trustee of the Marquis Family Trust, were repayable on demand. There was no evidence that any demand had been made by Deancrest for repayment of the loans and there was therefore no evidence that the money was due and payable. In the absence of such evidence, Deancrest could not rely on the debt as an offsetting claim.

41 It is the case that there is nothing in the evidence before me to suggest that the loans were ever documented except by way of entries in the accounts of the trusts involved. It seems that the money was simply drawn from the funds of the business without any attention having been given as to the terms of the loan. That, of course, is not uncommon in small businesses. But it does not necessarily follow that the loans are repayable only on demand.

42 It is clear that unless the parties agree that a loan shall be repayable only on demand, the loan creates an immediate debt for which an action may be brought for its recovery without any antecedent demand: Young v Queensland Trustees Ltd [1956] HCA 51; (1956) 99 CLR 560, 566. In Ogilvie v Adams [1981] VicRp 92; [1981] VR 1041, Fullagar J said:

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. The lender's cause of action still arises instanter on the receipt of the money by the borrower (1043).

43 Whether or not, in the present case, a term is to be implied that the loans would only be repayable on demand is not a matter to be resolved on an application of this nature. But it is certainly not obvious that such a term is to be implied.

44 On the material before me, I am satisfied that Deancrest has an offsetting claim, within the meaning of s 459H(5) of the Act, in respect of the amount loaned by Deancrest, as trustee of the unit trust, to Mr Marquis as trustee of the Marquis Family Trust. Although the debt was incurred by Mr Marquis in his capacity as trustee of the Marquis Family Trust, Mr Marquis was personally liable for it. It is therefore an amount owing to Deancrest by the administrators in their capacity as his personal representatives.

45 I have earlier mentioned, however, that the precise amount advanced to Mr Marquis by the unit trust was not disclosed in the evidence. There is no evidence as to the amount owing to Deancrest when Mr Marquis became trustee of the Marquis Family Trust on 31 March 2000. The figure closest in time is the sum of $131,734 shown in the accounts of the unit trust to be owing as at 30 June 2000. There is also no evidence as to the precise amount owing to Deancrest as at the date of Mr Marquis's death on 10 December 2004. The accounts of the unit trust show an amount of $158,311 owing as at 30 June 2004. As at 30 June 2005, the amount was $163,498. There also is no evidence as to what (if any) payments were made to Deancrest between 30 June 2000 and 10 December 2004 in reduction of the amount that was owing at the time Mr Marquis became trustee.

46 It was submitted by counsel for Deancrest that if I found that there was an offsetting claim in respect of loans made during the period that Mr Marquis was trustee of the Marquis Family Trust, the appropriate figure was $26,577, being the difference between the balances owing at 30 June 2000 and 30 June 2004 respectively. I did not understand counsel for the administrators to take issue with that approach if an offsetting claim were found. In the circumstances, that seems an appropriate figure, bearing in mind the nature of these proceedings.

47 Deancrest also appeared to rely in answer to the demand upon an offsetting claim based upon a right of subrogation. Counsel argued that as it had made advances to the various trustees from time to time of the Marquis Family Trust, Deancrest was entitled to be subrogated to the rights of those trustees to recover from the estate of Mr Marquis the whole amount owing on his personal loan account.

48 There are, it seems to me, a number of difficulties with that contention. They include the following. First, the right of subrogation is a right in equity of the creditor to enforce the trustee's right of indemnity from the trust assets, not a right of recovery in respect of a specific asset, and, as such, in my opinion is not capable of constituting an offsetting claim to the administrators' claim for the amount paid to BankWest. In fact, property in the specific asset, the debt owed by the estate of Mr Marquis to the Marquis Family Trust, vested in Marquis Nominees upon its appointment as trustee on 11 May 2005 and, on the evidence, that specific asset ceased to exist when the debt was repaid in full to Marquis Nominees following the sale of Mr Marquis's house.

49 Secondly, it has been held that a creditor does not have a right of subrogation simply by virtue of the existence of a debt owed to it by a trustee, but it must reasonably appear, at least, that any attempt to recover the debt from the trustee would be fruitless: Re Wilson [1942] VicLawRp 40; [1942] VLR 177, 183. That is, the right of subrogation does not exist simply as an alternative means by which a creditor may recover a debt owed by a trustee. In the present case, there is nothing to suggest that the debt could not reasonably be recovered by Deancrest from the trustees concerned.

50 In my view, this ground does not assist Deancrest, even if it is accepted that it is within the grounds raised in the supporting affidavit.

51 It was also contended by Deancrest that at the time the statutory demand was issued there was no debt due and payable by Deancrest to the administrators and that the statutory demand should be set aside on that alternative ground. It was argued that at the time the sum of $101,172.72 was paid to BankWest by the administrators no liability had arisen under the guarantee and the payment was made simply to permit the sale of the house. Counsel for Deancrest argued that a guarantor who chooses to pay the creditor on a date before the money is due to be paid cannot thereby accelerate their right of recovery from the principal debtor. Where a guarantor pays the creditor before the money has become due and payable, the guarantor's right of recovery from the principal debtor only accrues at the time at which the principal debtor's liability to pay the money arises. Counsel referred to Good Motel Co Ltd (In Liq) v Rodeway Pacific International Ltd (1988) 94 FLR 84, 93.

52 The administrators argued that, whatever the merits of that submission might be, it was not a ground upon which Deancrest was entitled to rely on this application, as it had not been raised in Deancrest's affidavit supporting the application. It had first been raised well after the expiration of 21 days from service of the statutory demand.

53 In Energy Equity Corporation Ltd v Sinedie Pty Ltd [2001] WASCA 419; (2001) 166 FLR 179, the question was whether the plaintiff could seek to establish that it had an offsetting claim in negligence in relation to a contract when all that was relevantly said in the affidavit was that there was 'a string of offsetting claims'. Wallwork J (with whom Steytler J and Olsson AUJ agreed) said:

In my view it now seems to be accepted that an affidavit filed outside the 21 day period which raises a new ground or grounds to set aside a statutory demand (as opposed to an affidavit which expands on grounds in an earlier affidavit which has satisfied the threshold test) cannot be used in an application of this nature [185].

54 In Process Machinery Australia Pty Ltd (t/as DCL Engineering) v ACN 057 260 590 [2002] NSWSC 45, Barrett J said:

The real point is that the application and affidavit filed and served within the 21 day period must fairly alert the claimant to the nature of the case the company will seek to make in resisting the statutory demand. The content of the application and affidavit must convey, even if it be by necessary inference, a clear delineation of the area of controversy so that it is identifiable with one or more of the grounds made available by s 459H and s 459J. That process of delineation may not be extended after the end of the 21 day period, although it is open to the plaintiff to supplement the initial affidavit by way of additional evidence relevant to the area of controversy identified within the period [22].

55 In the affidavit filed in support of this application, there were relevantly only two grounds relied upon (some other grounds referred to in the affidavit were subsequently abandoned); namely, that Ms Nixon was not authorised to sign the statutory demand and that Deancrest had an offsetting claim in respect of advances totalling $158,311 it had made to Mr Marquis as trustee of the Marquis Family Trust. It was not suggested that Deancrest relied upon the ground that no debt was in fact due and payable, and there was no reference in the affidavit to the payment by the administrators to BankWest having been made at a time when they had no liability to make it.

56 In my view, this ground falls outside the grounds referred to in the supporting affidavit and on this application it is not open to Deancrest to contend that no debt was due and payable. This ground must therefore fail.

57 It was, in addition, suggested in the course of argument that the claim by the administrators was in the nature of a restitutionary claim and did not therefore constitute a 'debt' within the meaning of s 459E(1) of the Act. I do not agree. In my view, a claim of the present nature for a liquidated sum is clearly such a debt: see HL Diagnostics Pty Ltd v Psycadian Ltd [2005] WASC 234.

58 Deancrest also sought to argue that the statutory demand should be set aside on the ground that it was defective. In that respect it was submitted, first, that the statutory demand was not, as it was required to be, signed by all of the administrators, but only by Ms Nixon. Secondly, the statutory demand did not express the alternative of securing or compounding the debt to the reasonable satisfaction of the creditor. It is clear that neither ground is alluded to in the supporting affidavit, but counsel for Deancrest argued that that was not necessary because the defects were apparent on the face of the statutory demand and were not matters for affidavit evidence. Counsel for Deancrest referred, quite properly, to the decision of the Supreme Court of New South Wales in Endeavour Film Management Pty Ltd v Fox Studios Australia Pty Ltd [2003] NSWSC 1056, which appears to be to the contrary, and sought to distinguish it.

59 The administrators argued that neither ground was open to Deancrest, neither having been raised in the supporting affidavit. They further contended that, in any event, neither ground had any merit.

60 It is sufficient for present purposes to say that I do not consider either ground is capable of providing a basis to set aside the statutory demand.

61 A demand is not to be set aside by reason of a defect in it unless substantial injustice would be caused unless the demand is set aside: s 459J of the Act.

62 I do not consider that the absence of the signatures of the other administrators (if indeed that is required) would give rise to substantial injustice. The demand itself is expressed to be made by the administrators (who are named in the demand) and in the accompanying affidavit Ms Nixon deposes that she is authorised by the other administrators to make the affidavit on their behalf. No substantial injustice was pointed to by counsel for Deancrest arising from the absence of the signatures of the other administrators and, in the circumstances, I cannot envisage any.

63 Nor do I consider that the absence from the statutory demand of a reference to the alternative of securing or compounding the debt to the reasonable satisfaction of the creditor would give rise to substantial injustice unless the statutory demand were set aside. No such injustice was suggested.

64 I am satisfied that Deancrest has an offsetting claim in the sum of $26,577, but it has failed to establish any ground upon which the statutory demand should be set aside. I would therefore vary the statutory demand by reducing the amount to $74,595.72 and would otherwise dismiss the application.