Deputy Commissioner of Taxation v ASD Laguna Investments Pty Ltd, in the matter of ASD Laguna Investments Pty Ltd

AND: STEELFINNE FABRICATIONS PTY LTD (ACN 005 645 616) First Defendant

STEELFINNE HOLDINGS PTY LTD (ACN 143 880 246) Second Defendant

JUDGE: MOSHINSKY J DATE OF ORDER: 6 december 2016

1. The amount of the statutory demand be varied to $7,207,002.24.
2. The period for compliance with the statutory demand be extended to the day which is 14 days after today (namely, Tuesday 20 December 2016).
3. The application otherwise be dismissed.
4. There be no order as to costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ORDERS VID 800 of 2016 IN THE MATTER OF ASD LAGUNA INVESTMENTS PTY LTD (ACN 078 360 228) BETWEEN: ASD LAGUNA INVESTMENTS PTY LTD (ACN 078 360 228) Plaintiff

AND: STEELFINNE FABRICATIONS PTY LTD (ACN 005 645 616) First Defendant

STEELFINNE HOLDINGS PTY LTD (ACN 143 880 246) Second Defendant

JUDGE: MOSHINSKY J DATE OF ORDER: 6 DECEMBER 2016

1. The statutory demand dated 21 June 2016 be set aside.
2. There be no order as to costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ORDERS VID 801 of 2016 IN THE MATTER OF LAGUNA RESORT HOLDINGS PTY LTD (ACN 098 639 813) BETWEEN: LAGUNA RESORT HOLDINGS PTY LTD (ACN 098 639 813) Plaintiff

AND: STEELFINNE FABRICATIONS PTY LTD (ACN 005 645 616) First Defendant

STEELFINNE HOLDINGS PTY LTD (ACN 143 880 246) Second Defendant

JUDGE: MOSHINSKY J DATE OF ORDER: 6 DECEMBER 2016

1. The statutory demand dated 21 June 2016 be set aside.
2. There be no order as to costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 On 13 March 2012, a deed of loan (the Deed of Loan) was entered into between Steelfinne Fabrications Pty Ltd and Steelfinne Holdings Pty Ltd (the Steelfinne Companies) as lenders and Turtle Point Hotel and Spa Pty Ltd (Turtle Point) as borrower in the amount of $5,750,000. The loan was guaranteed by ASD Laguna Investments Pty Ltd (ASD) and Laguna Resort Holdings Pty Ltd (Laguna). These companies executed a guarantee (the Guarantee) on the same day as the Deed of Loan was executed. I will refer to Turtle Point, ASD and Laguna together as the Laguna Companies. 2 On 21 June 2016, the Steelfinne Companies served statutory demands on each of Turtle Point, ASD and Laguna (the Statutory Demands). The amount demanded was in each case the same, namely $8,800,205.92. Proceedings have been commenced by each of Turtle Point, ASD and Laguna seeking to set aside the Statutory Demands. These are proceedings VID 799/2016, VID 800/2016 and VID 801/2016 (the Statutory Demand Proceedings). 3 In March 2016, the Deputy Commissioner of Taxation commenced a proceeding against ASD seeking the winding up of ASD on the basis of non-compliance with a statutory demand. That is proceeding VID 221/2016 (the Winding Up Proceeding). The issue as between the Deputy Commissioner of Taxation and ASD having been resolved, the Steelfinne Companies apply, by interlocutory process in that proceeding, for an order that they be substituted as the plaintiffs in the proceeding. 4 There are, broadly speaking, two issues to be determined: (a) The first is whether the Statutory Demands should be set aside, either: (i) on the basis that there is a genuine dispute about the existence or amount of a debt to which the demand relates or that the company has an offsetting claim (within the meaning of s 459H(1) of the Corporations Act 2001 (Cth)); or (ii) on the basis that, because of a defect in the demand, substantial injustice will be caused unless the demand is set aside; or there is some other reason why the demand should be set aside (within the meaning of s 459J(1) of the Corporations Act). (b) The second issue is whether the Steelfinne Companies should be substituted as plaintiffs in the Winding Up Proceeding. 5 In relation to the first issue, there are four grounds advanced by the Laguna Companies. These are as follows: (a) First, Turtle Point has not received a notice from the Steelfinne Companies specifying the default and requesting that it be remedied within seven days, as required by clause 12(a) of the Deed of Loan, and hence no debt is due and payable. (b) Secondly, neither ASD nor Laguna received a written demand under clause 2.2 of the Guarantee; in these circumstances, the debt is not due and payable. (c) Thirdly, clause 2.3 of the Guarantee provides that the Guarantor will not be liable for payment of the Shortfall if it has arisen, directly or indirectly, as a consequence of any action or inaction on the part of the Lender, including by any delay or neglect in the Lender exercising its rights of "Enforcement" (as defined). The Due Date for payment under the Deed of Loan was 1 July 2012, four years ago. There has been significant delay or neglect on the part of the Lender prejudicing ASD and Laguna as guarantors. (d) Fourthly, the Steelfinne Companies or their related entities benefited from certain transactions which had the effect of extinguishing the alleged debt in full. 6 My conclusions in relation to the four grounds are, in summary, as follows: (a) In relation to the first ground, Turtle Point was obliged to pay the debt without a notice needing to be served under clause 12(a) of the Deed of Loan. Hence, subject to the matter raised by the fourth ground, the debt was due and payable by Turtle Point. (b) In relation to the second ground, there is a highly plausible argument that a written demand must be served on the Guarantors for them to be liable under the Guarantee. No written demand was served. In these circumstances, there is a genuine dispute as to whether a debt was due and payable by the Guarantors (ASD and Laguna). The Statutory Demands served on them should be set aside. (c) In light of the conclusion in relation to the second ground, it is unnecessary to deal with the third ground. However, I note for completeness that I do not think this ground is made out. (d) In relation to the fourth ground, there is a genuine dispute about the amount of the debt. In particular, while the Steelfinne Companies have in the Statutory Demands credited an amount of $843,015, there is a plausible argument that the credit should instead be $1,805,000. It is appropriate in the circumstances to vary the amount of the Statutory Demand served on Turtle Point pursuant to s 459H(4) of the Corporations Act. 7 In relation to the second issue, namely whether the Steelfinne Companies should be substituted as plaintiffs in the Winding Up Proceeding, I consider it appropriate to adjourn the interlocutory process for a period of time to give the Steelfinne Companies the opportunity to serve a written demand under the Guarantee.

Evidence 8 A large number of affidavits have been filed in the four proceedings. There is substantial duplication in the affidavits due to the overlap of issues across the proceedings. With the consent of the parties, an order was made that the evidence in one proceeding be evidence in the others. The main affidavits to which I was taken during the hearing were: (a) Mr Marriner's affidavit dated 14 July 2016, filed in VID 800/2016 (Marriner July Affidavit); (b) Mr Dickson's affidavit dated 27 July 2016, filed in VID 800/2016 (Dickson July Affidavit); (c) Mr Marriner's affidavit dated 3 August 2016, filed in VID 800/2016 (Marriner August Affidavit); (d) Mr Dickson's affidavit dated 5 August 2016, filed in VID 800/2016 (Dickson August Affidavit).

Applicable principles 9 There is no issue between the parties as to the applicable principles, which may be relevantly summarised as follows. 10 It is not for a Court hearing an application to set aside a statutory demand to determine the merits of a dispute. All the Court is charged with is determining whether there is a dispute and whether it is a genuine dispute: Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1993] 2 VR 290 at 295 per Hayne J. 11 The meaning of genuine dispute was formulated by McLelland CJ in Eq in Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 where his Honour said (at 787): It is, however, necessary to consider the meaning of the expression "genuine dispute" where it occurs in s 450H. In my opinion that expression connotes a plausible contention requiring investigation, and raises much the same sort of considerations as the "serious question to be tried" criterion which arises on an application for an interlocutory injunction or for the extension or removal of a caveat. This does not mean that the court must accept uncritically as giving rise to a genuine dispute, 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" not having "sufficient prima facie plausibility to merit further investigation as to [its] truth" (cf Eng Mee Yong v Letchumanan [1980] AC 331 at 341), or "a patently feeble legal argument or an assertion of facts unsupported by evidence": cf South Australia v Wall (1980) 24 SASR 189 at 194. 12 The dispute should have "sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion, and sufficient factual particularity to exclude the merely fanciful or futile ... Something 'between mere assertion and the proof that would be necessary in a court of law' may suffice": TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd (2008) 66 ACSR 67 at [71] per Dodds-Streeton JA. 13 In determining whether a genuine dispute exists, the Court will not embark on any extended inquiry and will not attempt to assess the merits of any dispute: TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd (2008) 66 ACSR 67 at [57]-[65] per Dodds-Streeton JA. In Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452, the Court said (at 463): What is clear is that in considering applications to set aside a statutory demand, a court will not determine contested issues of fact or law which have a significant or substantial basis. One finds formulations such as: "… at least in most cases, it is not expected that the court will embark upon any extended enquiry in order to determine whether there is a genuine dispute between the parties and certainly will not attempt to weigh the merits of that dispute. All that the legislation requires is that the court conclude that there is a dispute and that it is a genuine dispute."

Background facts 14 There is no dispute that by clauses 5(a), 5(b) and 5(c) of the Deed of Loan, to which each of the Steelfinne Companies and each of the Laguna Companies were party, Turtle Point covenanted with the Steelfinne Companies to repay the "Principal Sum" of $5,750,000, together with the "Establishment Fee" of $575,000 and the "Exit Fee" of $1,425,000, on the "Due Date" of 1 July 2012. 15 Nor is there any dispute that by clause 6 of the Deed of Loan, Turtle Point covenanted with the Steelfinne Companies to pay interest upon all moneys payable under the Deed from the date when they became due for payment (which was 1 July 2012) at a rate of 16% per annum, until such time as they were paid. 16 Each of the Statutory Demands sets out the following calculation of the debt claimed: Principal Sum due 1 July 2012 $5,750,000.00 Establishment fee due 1 July 2012 $575,000.00 Exit fee due 1 July 2012 $1,425,000.00 Less credit applied March 2012 (settlement funds of Laguna and Whisper Bay applied in accordance with the verbal agreement between Mr Dickson and Mr Marriner) -$843,015.00 Sub Total $6,906,985.00 Plus interest on Principal only of $6,906,985 from 1/7/12 to 14/1/15 $2,806,695.93 Less partial repayment received 14/1/15 (applied to interest first in accordance with clause 8(b) of the Deed) -$2,500,000.00 Sub Total $7,213,680.93 Plus interest on Principal only of $6,906,985 from 14/1/15 to 21/6/16 $1,586,524.99 BALANCE OWING: $8,800,205.92

First ground 17 The first ground relied on by the Laguna Companies is that Turtle Point has not received a notice from the Steelfinne Companies specifying the default and requesting that it be remedied within seven days, as required by clause 12(a) of the Deed of Loan. It is contended by the Laguna Companies that until such default notice is given, any debt is not payable under the terms of the Deed of Loan. 18 I do not think this is a correct construction of the Deed of Loan. In my view, pursuant to clause 5 of the Deed of Loan, Turtle Point as the Borrower was obliged to repay the Principal Sum (and other amounts) on the Due Date, namely 1 July 2012. Similarly, in my view, an obligation to pay interest arose under clause 6 of the Deed of Loan. Neither of these clauses requires service of a notice for the amount to be due and payable. 19 Clause 12 deals with default and sets out a range of circumstances which constitute a default. It is true that clause 12(a) requires the service of a notice. But other paragraphs of clause 12 do not require a notice to be served. Thus on the happening of certain other events of default, the Principal Sum and other moneys become due and payable without the service of a notice. For example, under clause 12(j), it is an event of default if a petition is presented for the winding up of a Company Guarantor. In the present case, the Deputy Commissioner of Taxation applied to wind up ASD, one of the Company Guarantors, by way of the Winding Up Proceeding. That application constitutes, in my view, the presentation of a petition for the winding up of ASD. That proceeding was commenced in March 2016. Thus, at that time, an event of default as described in clause 12(j) of the Deed of Loan occurred. The Principal Sum and all other moneys secured under the Deed of Loan became payable upon that event occurring without the need to serve a notice. 20 It follows that, subject to the matters raised by the fourth ground, the debt was due and payable by Turtle Point.

Second ground 21 The second ground raised by the Laguna Companies is that neither ASD nor Laguna received a written demand prior to the issuing of the Statutory Demands. It is contended that a written demand is required under the Guarantee and, in the absence of such a demand, the debt was not due and payable. 22 In my view, this ground has substance. Clause 2.2 of the Guarantee is in the following terms: If: (a) an Event of Default has occurred and; (b) the Property is sold by enforcement or otherwise and settlement of that sale has been effected; and (c) The Moneys hereby Secured are not repaid in full Then, subject to Clause 2.3, the Guarantor must pay the Shortfall to the Lender within 21 days of a written demand by the Lender. In the present case, there is no issue that (a), (b) and (c) had occurred. But no written demand was served on the Guarantors before the service of the Statutory Demands. In my view, there is a highly plausible argument that a debt only arises under the Guarantee after service of a written demand under clause 2.2. It follows that I consider there to be a genuine dispute as to whether a debt was due and payable by the Guarantors (ASD and Laguna). 23 It was contended on behalf of the Steelfinne Companies that, in circumstances where the Guarantors were also parties to the Deed of Loan, an obligation to pay arose under that agreement (together with clause 2.1 of the Guarantee) without the need for a written demand. This argument relied on the opening lines of clause 12 of the Deed of Loan, which was in the following terms: The Principal Sum or so much thereof as shall remain unpaid and all other moneys hereby secured or otherwise due hereunder and interest thereon at the Default Rate together with any Additional Sum being equivalent to the Additional Sum specified in Clause 20 (if any) shall immediately become due and payable and any Collateral Security shall immediately become due and enforceable at the option of the Lender and notwithstanding anything herein contained to the contrary or any delay or any previous waiver of the rights to exercise such option upon the happening of one or more of the following events (hereby considered an event of Default) without the necessity for any notice or demand being given by the Lender to the Borrower: … 24 However, I think the better reading of this provision is that, where it applies, any Collateral Security (including the Guarantee) becomes immediately due and enforceable in accordance with its terms. Thus, it remains necessary to serve a written demand under clause 2.2 of the Guarantee. This construction involves reading the two documents together and gives effect to the terms of both documents. It is also supported by the last few words of the opening lines of clause 12, namely "without the necessity for any notice or demand being given by the Lender to the Borrower". If the Steelfinne Companies' construction were correct, one would expect a reference to the Guarantors as well. 25 In circumstances where there is a genuine dispute as to whether a debt was due and payable by the Guarantors (ASD and Laguna), the Statutory Demands served on them should be set aside, either under s 459H(1)(a) or s 459J(2)(b): see NT Resorts Pty Ltd v Deputy Commissioner of Taxation (1998) 153 ALR 359 at 365-367 per Finkelstein J; AR Pilot Pty Ltd v Gouriotis [2007] NSWSC 396 at [5], [17]-[19] per Barrett J; Assaf F, Statutory Demands and Winding Up in Insolvency (2nd ed, 2012), para [7.42].

Third ground 26 The third ground raised by the Laguna Companies is that clause 2.3 of the Guarantee states that the Guarantor will not be liable for payment of the Shortfall if the Shortfall has directly or indirectly arisen as a consequence of any action or inaction on the part of the Lender, including by any delay or neglect in the Lender exercising its rights of "Enforcement" (as defined). It is contended by the Laguna Companies that the Due Date for payment was 1 July 2012, four years ago; and that, in these circumstances, there has been significant delay or neglect on the part of the Lender, prejudicing ASD and Laguna as guarantors. 27 In light of my conclusion in relation to the second ground, it is unnecessary to determine this ground. However, for completeness I indicate that in my view this ground does not give rise to a genuine dispute. The word "Enforcement" is defined in clause 1.1 of the Guarantee in terms which do not include "the collection of Principal and Interest after it becomes due and owing in the normal clause". It is unclear whether there has been delay or neglect in the Lender exercising its rights of Enforcement, as defined. But in any event, clause 2.3 relieves the Guarantors from liability only to the extent that part of the Shortfall has directly or indirectly arisen as a consequence of any action or inaction on the part of the Lender. The material put forward by the Laguna Companies does not establish a plausible argument that part of the Shortfall has so arisen.

Fourth ground 28 The fourth ground relied on by the Laguna Companies is that "there were various transactions and agreements entered into between the defendants and their related entities and the plaintiff's related entities after the date of the Deed [of Loan] and Guarantee" (Marriner July Affidavit, paragraph 13). In paragraph 15 of the Marriner July Affidavit, there is a list of transactions which are said to have "reduced the amounts for which the plaintiff was liable pursuant to the Deed". It is unclear whether this is a reference to Turtle Point's liability under the Deed of Loan or ASD's liability under the Guarantee. Nothing turns on this. This list is as follows (substituting the numbers 1 to 8 for the paragraph numbers in the affidavit): [1] in March 2012 a credit was applied in respect of a verbal agreement between Glenn Dickson and I regarding the settlement funds of Laguna and Whisper Bay (allegedly in the amount of $843,015), as referred to in the Statutory Demand. [2] on 22 May 2013 it was agreed to transfer title of apartment 1301, 505 St Kilda Road, Melbourne, more specifically described in Certificate of Title Volume 11173 Folio 811. … [3] on 26 July 2012 title to Apartment 26, 11 Altman Avenue, Cannonvale, Queensland 4802 was transferred from a related entity of the plaintiff, Whisper Bay Whitsundays Pty Ltd (ACN 143 599 320) (Whisper Bay Whitsundays) to Noxid. The value of the apartment was $1,900,000 and referred to in the Schedule of the Deed; … [4] on 26 July 2012 title to Apartment 68, 11 Altman Avenue, Cannonvale, Queensland 4802 was transferred from Whisper Bay Whitsundays to Whisper Bay Adventures Pty Ltd (ACN 146 238 119), a related entity of the defendants. The value of the apartment was $720,000 and referred to in the Schedule of the Deed; … [5] on or about 21 June 2013 Hook Island Adventure Cruises Pty Ltd, a related entity of the plaintiff, transferred 64 shares in the Ship, Sir William Lyne, to Elite Motor Yachts Pty Ltd, a related entity of the defendants. The value of the shares was $100,000 as referred to in the Bill of Sale; … [6] on 14 January 2015 a payment of $2,500,000 to the defendants was made upon the settlement of sale of Laguna land; … [7] a mortgage and charge to the defendants over the shares of Laguna Island Adventures Pty Ltd (a company related to the plaintiff) to the value of $3,000,000. In addition, it was agreed between Laguna Island Adventures Pty Ltd, as mortgagor, and the defendants, as mortgagee that Laguna Island Adventures Pty Ltd would apply for a freehold or a perpetual lease extension for Hook Island. If the application failed, then the defendants had the right to convert the mortgage to full equity over Laguna Island Adventures and apply for the lease in its own right. In this regard there were various Deeds of Sale and Transfers of permits whereby Marriner entities sold and transferred permits to the defendants. In addition, Elite Motor Yachts Pty Ltd, a related entity of the defendants, at all times would have access to moorings and use of Island facilities as it requires. Glenn Dickson and various consultants took control of the Hook Island process of transferring freehold, leases and permits. … [8] a mortgage and charge granted by Goldworthy Pty Ltd to the defendants (subsequently granted to Elite Motor Yachts Pty Ltd, a related entity of the defendants) over the Registered Ship "First Light 11" registration number 852771 for $1,832,000. … 29 Apart from this summary of the transactions, the Marriner July Affidavit provided no detail as to how it was said these transactions reduced the liability of Turtle Point or the Guarantors pursuant to the Deed of Loan or the Guarantee. In the Dickson July Affidavit, Mr Dickson provided some evidence in response, dealing with the topic of the alleged reduction of the debt at paragraphs 24-90. Mr Marriner responded to these paragraphs in the Marriner August Affidavit at paragraphs 19-33. 30 It is convenient to deal together with the first, third and fourth transactions. It is apparent from the calculations in the Statutory Demands that the Steelfinne Companies have credited an amount of $843,015 in favour of the Laguna Companies. It is described in the Statutory Demands as a credit "applied March 2012 (settlement funds of Laguna and Whisper Bay applied in accordance with the verbal agreement between Mr Dickson and Mr Marriner)". There appears to be a connection between the application of this credit and a provision in the Schedule to the Deed of Loan. The Special Covenants in the Schedule include a section dealing with "Associated Property Transactions". Within this section, two transactions are referred to: the first relates to Apartment 26 - Whisper Bay; the second relates to Apartment 68 - Whisper Bay. In relation to Apartment 26, the Schedule states that if the owner transfers the apartment unencumbered and for nil consideration to a company named Noxid Nominees Pty Ltd (which, other material indicates, is related to the Steelfinne Companies) then "it will be deemed a reduction of the Principal Sum by $1.803 million". I note that no comparable words appear in relation to Apartment 68. 31 In the Dickson July Affidavit at paragraphs 27-34 he deals with the credit in the Statutory Demands and Apartments 26 and 68. He annexes a Certificate of Credit Calculations which explains how the credit of $843,015 was calculated. This indicates that, in relation to Apartment 26, a credit of $1,805,000 was allowed in favour of the Laguna Companies. This is broadly consistent with the Schedule to the Deed of Loan. In relation to Apartment 68, the certificate indicates that a number of other, possibly related, transactions have been taken into account, the net effect of which is to reduce the credit of $1,805,000 by the sum of $961,985, producing a net credit of $843,015. Mr Dickson provides some evidence about the basis for these transactions at paragraphs 32(3) to 32(9) of the Dickson July Affidavit, but the details are sketchy. It is not clear from this evidence that the parties agreed to vary the Schedule to the Deed of Loan to allow the setting off of amounts as effected in the certificate annexed to his affidavit. I note that clause 18 of the Deed of Loan provides that the Schedule may be amended by agreement in writing, but no such agreement has been produced. In the circumstances, I consider there to be a plausible argument that the amount to be credited should be $1,805,000 rather than $843,015. This constitutes a genuine dispute as to the amount of the debt for the purposes of s 459H(1). 32 The second transaction is the transfer of title of a St Kilda Road apartment. The affidavit material of Mr Marriner does not provide any explanation of how it is said that the transfer of this property effected a reduction in the debt. 33 The fifth transaction is the transfer of 64 shares in the ship, Sir William Lyne. The Dickson July Affidavit makes it clear that this transfer relates to satisfaction of a debt which arose between the Marriner parties and the Steelfinne parties, which had nothing to do with the debt the subject of the Deed of Loan. The Marriner August Affidavit does not contain a substantive response to that evidence. 34 The sixth transaction is the payment of $2,500,000, by way of reduction of the debt, on 14 January 2015. This amount was allowed for as a credit in the Statutory Demands. The Laguna Companies did not press this ground at the hearing. 35 The seventh transaction comprises a mortgage and charge over shares of Laguna Island Adventures Pty Ltd and an agreement to apply for a freehold or perpetual lease extension for Hook Island. This transaction is explained in the Dickson Affidavit at paragraphs 57-70. It appears that a transfer of the Hook Island leases for an expressed consideration of $500,000 to a related entity of the Steelfinne Companies was executed in December 2013, but the transfer was conditional and has not been registered. The Marriner August Affidavit provides only a limited response to Mr Dickson's evidence. Mr Marriner states that at the time of signing the transfer of the leases he believed he "had done everything I needed to do to sell and transfer Hook Island and associated permits". His evidence does not contest the existence of the condition referred to by Mr Dickson. Moreover, Mr Marriner's evidence does not explain how the transaction effected a reduction in the debt owed by Turtle Point under the Deed of Loan or the Guarantors under the Guarantee. 36 The eighth transaction is a mortgage and charge granted by Goldsworthy Pty Ltd to the Steelfinne Companies over the ship "First Light 11". The circumstances of the giving of this mortgage, which was to provide alternative security to the "Collateral Security" referred to in the Deed of Loan, are set out in the Dickson July Affidavit at paragraphs 76-78. These facts are not disputed. This evidence establishes that the transaction involved the provision of security for part of the debt owed by Turtle Point and did not reduce the amount of the debt. 37 Thus, I accept that there is a plausible argument in relation to the first, third and fourth transactions, but not in relation to the other transactions. In these circumstances, there should be an order varying the amount of the Statutory Demand pursuant to s 459H(4) to the relevant extent. I will hear from the parties as to the calculation of this amount.

The second issue 38 The Steelfinne Companies' application for substitution as plaintiffs in the Winding Up Proceeding is premised on a debt being due and payable by ASD under the Guarantee. I have concluded that there is a highly plausible argument that, in the absence of a written demand, no debt was due and payable before the Statutory Demand was served on ASD. In these circumstances, rather than deal with the application for substitution now, I think it preferable to adjourn this application for a period of time to give the Steelfinne Companies the opportunity to serve a written demand under clause 2.2 of the Guarantee. Neither party suggested that there was any difficulty in adopting this course. 39 I will also make an order by consent pursuant to s 459R extending the period within which the application for winding up is to be determined.

Conclusion 40 I will hear from the parties on the form of orders to give effect to these reasons and as to costs. [Submissions were made as to costs.] 41 The Laguna Companies seek an order that the Steelfinne Companies pay two-thirds of their costs on an indemnity basis in relation to the Statutory Demand Proceedings. The Steelfinne Companies submit that there should be no order as to costs in relation to the Statutory Demand Proceedings. 42 In my view, it is appropriate to deal with the three Statutory Demand Proceedings together in relation to costs, because they were argued together and there was a substantial overlap in legal work across the three proceedings. 43 Approaching the matter this way, I think each side has had a significant measure of success. On the one hand, the Steelfinne Companies have been substantially successful in VID 799/2016. Although the amount of the Statutory Demand was varied, this was only by about 20% and the Statutory Demand remains on foot. On the other hand, the Laguna Companies have been successful in relation to the two guarantor proceedings. 44 Although one may say that there are three proceedings, and that the Steelfinne Companies have been successful in one and the Laguna Companies successful in two, in substance there was an almost complete overlap in issues across the two proceedings relating to the Guarantee. Thus, the substance of the matter is that each side has had a substantial and roughly equal measure of success. 45 The Laguna Companies refer to a letter dated 11 July 2016 which raised the clause 2.2 issue upon which they were ultimately successful. I do not think this letter justifies an order for indemnity costs or an adjustment in the costs order I would otherwise make. It is true that they correctly raised the point at that early stage. But there were arguments to be made against it and it was not a situation where the Steelfinne Companies should have known their case was hopeless and foredoomed to fail. It should also be noted that the Laguna Companies raised many arguments which were ultimately unsuccessful and which occupied significant time during the hearing and occasioned significant legal work by way of the preparation of responding affidavit material. 46 For these reasons, I will order that there be no order as to costs in each of the Statutory Demand Proceedings. I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moshinsky.