Hellyer Metals Pty Ltd v Arculus Capital Pty Ltd, in the matter of Hellyer Metals Ltd [2025] FCA 1326

(b) Pursuant to the terms of the Mandate Letter:

(i) The plaintiff paid $275,000 (inclusive of GST) as a "non-refundable retainer fee", payable pursuant to clause 3(a) of the Mandate Letter.

(ii) The defendant engaged third party lawyers and consultants to assist with provision of the services contemplated by the Mandate Letter (Third-Party Advisers). Prior to engaging the Third-Party Advisers, the defendant provided the plaintiff with estimates of the anticipated costs that would be incurred by the Third-Party Advisers.

(c) The engagement the subject of the Mandate Letter was terminated on 9 July 2024, which termination was accepted by the plaintiff.

(d) The defendant provided the plaintiff with details of the costs and expenses invoiced to the defendant by the Third-Party Advisers, which amounts comprise the Debt.

(e) The plaintiff has not made a payment to the defendant in respect of the Debt.

(Emphasis in original and footnotes omitted.)

1. For ease of reference, I will adopt the parties' terminology of a mandate letter to refer to the contract the subject of their dispute.

1. The plaintiff seeks to rely upon:
   • An originating application dated 21 August 2024;
   • An affidavit of Mr Graham Cox dated 23 August 2024 (first affidavit);
   • An affidavit of Mr Graham Cox dated 1 October 2024 (second affidavit);
   • Submissions dated 17 October 2024; and
   • Submissions in reply dated 13 November 2024.
2. The defendant seeks to rely upon:
   • An affidavit of Mr Renny Ellis dated 20 September 2024; and
   • Submissions dated 1 November 2024.
3. There were no submissions from either party that the application to set aside the statutory demand was not brought within the requisite time frame pursuant to s 459G(2) of the Act, which, in turn, relies upon the definition of "statutory period" in s 9 of the Act, nor that Mr Cox's first affidavit was not filed within the statutory timeframe. Similarly, no submissions were made that service of the documents was not effected in accordance with the legislation.

1. Under s 459G of the Act, a company is permitted to "apply to the Court for an order setting aside a statutory demand served on the company".
2. Section 459H of the Act provides:

459H Determination of application where there is a dispute or offsetting claim

(1) This section applies where, on an application under section 459G, the Court is satisfied of either or both of the following:

(a) that there is a genuine dispute between the company and the respondent about the existence or amount of a debt to which the demand relates;

(b) that the company has an offsetting claim.

(2) The Court must calculate the substantiated amount of the demand in accordance with the formula:

Admitted total - Offsetting total

where:

admitted total means:

(a) the admitted amount of the debt; or

(b) the total of the respective admitted amounts of the debts; as the case requires, to which the demand relates.

offsetting total means:

(a) if the Court is satisfied that the company has only one offsetting claim - the amount of that claim; or

(b) (b)if the Court is satisfied that the company has 2 or more offsetting claims - the total of the amounts of those claims; or

(c) otherwise - a nil amount.

(3) If the substantiated amount is less than the statutory minimum, the Court must, by order, set aside the demand.

(4) If the substantiated amount is at least as great as the statutory minimum, the Court may make an order:

(a) varying the demand as specified in the order; and

(b) declaring the demand to have had effect, as so varied, as from when the demand was served on the company.

(5) In this section:

admitted amount, in relation to a debt, means:

(a) if the Court is satisfied that there is a genuine dispute between the company and the respondent about the existence of the debt - a nil amount; or

(b) if the Court is satisfied that there is a genuine dispute between the company and the respondent about the amount of the debt - so much of that amount as the Court is satisfied is not the subject of such a dispute; or

(c) otherwise - the amount of the debt.

offsetting claim means a genuine claim that the company has against the respondent by way of counterclaim, set-off or cross-demand (even if it does not arise out of the same transaction or circumstances as a debt to which the demand relates).

respondent means the person who served the demand on the company.

(6) This section has effect subject to section 459J.

1. The principles regarding whether there is a genuine dispute between the parties in the context of s 459H of the Act has been the subject of consideration in many cases and are usefully summarised in Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (in liq) [2015] VSCA 330 at [47] - [51]:

What must an applicant establish pursuant to s 459H of the Corporations Act?

The terms of s 459H of the Corporations Act and the authorities make clear that, on an application to set aside a statutory demand, the applicant is required only to establish a genuine dispute or offsetting claim. The applicant is required to evidence the assertions relevant to the alleged dispute or offsetting claim only to the extent necessary for that primary task. It is not necessary for the applicant to advance a fully evidenced claim. Therefore, the task faced by an applicant is by no means at all a difficult or demanding one.

In determining such an application, it is not necessary or appropriate for a court to engage in an in-depth examination or determination of the merits of the alleged dispute. This is because an application alleging a genuine dispute or offsetting claim is akin to one for an interlocutory injunction and requires the applicant to establish that there is a 'plausible contention requiring investigation' of the existence of either a dispute as to the debt or an offsetting claim. It is therefore not helpful to perceive that one party is more likely than the other to succeed or that the eventual state of the account between the parties is more likely to be one result than another. Further, the determination of the 'ultimate question' of the existence of the debt at a substantive hearing should not be compromised.

The court is required to determine whether the dispute or offsetting claim is 'genuine'. It has been said that the criterion of a 'genuine' dispute requires that the dispute be bona fide and truly exist in fact and that the grounds for alleging the existence of a dispute be real and not spurious, hypothetical, illusory or misconceived. It has also been observed that the dispute or offsetting claim should have a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion. It must also have sufficient factual particularity to exclude the merely fanciful or futile. A rigorous curial approach is essential to the effective operation of the statutory scheme.

The court is not required to accept uncritically every statement in an affidavit however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be, as it may not have sufficient prima facie plausibility to merit further investigation as to its truth. The court is also not required to accept uncritically a patently feeble legal argument or an assertion of facts unsupported by evidence, although this should not be read as suggesting that the applicant must formally or comprehensively evidence the basis of its dispute or off-setting claim. Except in such extreme cases, the court should not embark upon an inquiry as to the credit of a witness or a deponent whose evidence is relied on by the applicant to set aside a statutory demand.

Solarite Air Conditioning Pty Ltd v York International Australia Pty Ltd involved a demand for payment of a debt alleged to be due under a contract for the supply of goods. The applicant relied on four matters, each of which had the potential to affect the respondent's entitlement to be paid the entire amount of the debt. Barrett J held that all four matters were sufficiently plausible to raise a genuine dispute. He relevantly stated:

The [applicant] will fail in [the] task [of establishing a genuine dispute] only if ... the contentions upon which it seeks to rely ... are so devoid of substance that no further investigation is warranted. Once the [applicant] shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow. The court does not engage in any form of balancing exercise between the strengths of competing contentions. If it sees any factor that, on rational grounds, indicates an arguable case on the part of the [applicant], it must find that a genuine dispute exists, even where any case apparently available to be advanced against the [applicant] seems stronger.

1. The following may be added with respect to the Court's task in determining whether a genuine dispute exists in the context of s 459H of the Act, as follows:

(1) The scope of the Court's inquiry into whether there exists a genuine dispute merely requires the Court to be satisfied that a dispute exists and that it is genuine: Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] Vic Rp 61; (1993) 11 ACSR 362; [1994] 2 VR 290 at 295. There is no need for the Court to undertake an extensive inquiry or "weigh the merits" of the dispute: Mibor Investments at 295;

(2) The Court should undertake a "rigorous curial approach": Malec Holdings at [49];

(3) The Court will not "determine contested issues of fact or law which have a significant or substantial basis": Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd [1997] FCA 681; (1997) 76 FCR 452 at 463.

(4) In circumstances where there is a "simple and unambiguous" promise to pay in a contract, then the Court "embarks on a task of construction (albeit not a difficult or controversial one) in determining that that promise creates a debt and no argument to the contrary is plausible": Creata (Aust) Pty Ltd v Faull (2018) 125 ACSR 212; [2017] NSWCA 300 at [26];

(5) The Court is obliged to "exercise particular restraint" where there exists a question of construction which "has any element of rational controversy": Creata at [26].

1. See also Trecomax Pty Ltd v Prentice (2004) 50 ACSR 314; [2004] FCA 1057 at [34] - [35] per Sackville J as follows:

There are authorities which support the proposition that if the facts are not in dispute, the Court can decide the question of law. Thus in Delnorth v State Bank of New South Wales (1997) 17 ACSR 377 (SCt NSW), Cohen J considered (at 384-385) that where no further investigations of the facts was required, the Court, in an application under s 459G of the Corporations Law could decide, as a matter of law, whether there is a genuine dispute. His Honour thought that the occasions where this is possible might be 'few', but he proceeded in that case to resolve the question of law. See, too, Burdon Pty Ltd v Gillford Pty Ltd [1995] FCA 1096, per Hill J, with whom Whitlam J agreed.

While this approach is open, in my view the Court should take care to ensure that it does not go beyond the role that is appropriate, having regard to the considerations identified by Hayne J in Mibor Investments and the approach endorsed by the Full Court in Spencer Constructions. The procedure established by Div 3 of Part 5.4 of the Corporations Act is not ordinarily the occasion for final resolution of a dispute, even if the matter in contest rests on a question of law. The question for the Court is whether there is a genuine dispute about the existence or amount of the debt.

1. Additionally, with respect to the nature of a genuine dispute, the following propositions are well-accepted:
   • A genuine dispute is not usually a "short point of law": see Drillsearch Energy Ltd v Carling Capital Partners Pty Ltd [2009] NSWSC 1192 at [45], quoting Delnorth Pty Ltd v State Bank of New South Wales (1995) 17 ACSR 379 at 384.
   • A genuine dispute involving a question of construction which "has any element of rational controversy" requires the Court to "exercise particular restraint": Creata at [26].
   • A genuine dispute must be "bona fide and truly exist in fact and ... the grounds for alleging the existence of a dispute [must] be real and not spurious, hypothetical, illusory or misconceived": Malec Holdings at [49];
   • A genuine dispute evokes "a plausible contention requiring investigation": Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 787. See also Lodge Partners Pty Ltd v Pegum (2009) 255 ALR 516; [2009] FCA 519 at [18] and Ligon158 Pty Ltd v Huber (2016) 117 ACSR 495; [2016] NSWCA 330 at [73].
   • There is no requirement for "the company to advance, at this stage, a fully evidenced claim": TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd (2008) 66 ACSR 67; [2008] VSCA 70 at [71]. See also Malec Holdings at [47].
2. The statements of Barrett J at [45] - [47] of Drillsearch are useful too, wherein his Honour noted:

The existence of the dispute about the correct construction of the takeover mandate agreement means that there is also a dispute about the existence of the debt that would exist if the defendant's preferred construction were correct but not if the plaintiff's preferred construction were correct. A dispute as to the existence of a debt that is the product of a dispute about construction is not removed from s 459H(1)(a) just because the issue in contention is one of construction. While it has been said that "a short point of law or the construction of documents or agreed facts" may, unlike a disputed question of fact, be determined upon a s 459G application (see Delnorth Pty Ltd v State Bank of New South Wales (1995) 17 ACSR 379 at 384), it does not follow that the court is compelled to make such a determination. In the case of a legal argument, determination might be appropriate if it were, in the words of McLelland CJ in Eq in Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, a "patently feeble legal argument".

I consider it appropriate to adopt in this case the approach I outlined in Wellnora Pty Ltd v Fiorentino [2008] NSWSC 483; (2008) 66 ACSR 229 at [50]:

"Where the basis for the alleged dispute is a legal argument or question of construction which is not 'patently feeble' and does not involve a 'short point of law' and there are clearly arguable alternatives as to the correct outcome, the court should not, upon the s 459G application, attempt to reach a definitive resolution. The reasons are stated in the joint judgment of Brooking JA and Charles JA in Spacorp Australia Pty Ltd v Myer Stores Ltd (2001) 19 ACLC 1270; [2001] VSCA 89 at [4]:

'[4] We think, if we may say so, that, except in a case in which it is as plain as a pikestaff that there is no debt (where bluntness may be in the interests of both sides), Judges should, in general at all events, in dealing, whether at first instance or on appeal, with the question of genuine dispute, be at pains to perform the admittedly delicate task of disposing of that question without expressing a view on what we have called the ultimate question. For otherwise, on an application which resembles if it is not in law an interlocutory one, things may be said which embarrass the judge before whom the ultimate question comes.'"

It follows that the question about the meaning of "acquisition" (and related questions of construction) arising from the takeover mandate - involving clearly arguable alternatives - is one that of itself gives rise to "genuine dispute" within s 459H(1)(a) and no attempt should be made to determine it in these proceedings. Section 459G applications are usually determined on affidavit evidence alone. Cross-examination is very rare and allowed only for very good reason in exceptional cases. There was no cross-examination in this case. Nor, indeed, was there any real evidence of the circumstances of the formation of the takeover mandate agreement. The court therefore has no insight into pre-contractual conduct that may cast light on the genesis of the contract, its objective or the meaning of the ambiguous term "acquisition". Evidence of such conduct, if led, would in general be admissible on the question of construction: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337 at 347-352.

1. See also Creata at [26] - [29], Solarite Air Conditioning Pty Ltd v York International Pty Ltd [2002] NSWSC 411 at [23] and CGI Information Systems & Management Consultants Pty Ltd v APRA Consulting Pty Ltd (2003) 47 ACSR 100; [2003] NSWSC 728 at [16] as useful statements of authority.
2. The principles relevant to construing a commercial contract were summarised by Buss P, Mitchell JA and Vaughan JA at [51] of CA & Associates Pty Ltd v Fini Group Pty Ltd [2020] WASCA 31 as follows:

Principles in construing a commercial contract

The general principles that apply in construing a commercial contract are well-established:

1. The rights and liabilities of parties under a provision of a contract are determined objectively by reference to its text, context (the entire text of the contract) and purpose.

2. In determining the meaning of the terms of a commercial contract it is necessary to ask what a reasonable business person would have understood the terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.

3. The court approaches the task of giving a commercial contract an interpretation on the assumption that the parties intended to produce a commercial result, ie a commercial contract should be construed so as to avoid it making commercial nonsense or working commercial inconvenience.

4. Ordinarily the process of construction is possible by reference to the contract alone.

5. However, sometimes recourse to external events, circumstances or things is necessary; for example, to identify the commercial purpose or objects of the contract (by reference to the genesis of the transaction, the background, the context and the market in which the parties are operating) or to determine the proper construction where there is a constructional choice due to ambiguity.

(Emphasis in original and footnotes omitted.)

1. The approach must be "objective" and consider the "text, context and purpose" of the commercial contract: Price v Spoor (2021) 270 CLR 450; [2021] HCA 20 at [27]. The contract's meaning should be understood "by reference to what a reasonable business person would have understood those terms to mean": Price v Spoor at [27].
2. At [31] of Lodge Partners, Lindgren J helpfully stated:

Generally speaking, it is not permissible to take pre-contract negotiations into account in the construction of contracts. However, there are exceptions to the general rule, one of which is that evidence is admissible to show what both parties intended a particular ambiguous term used in the contract to mean. Sometimes cases of this kind are called "private dictionary" cases: the parties have agreed that a word or expression in the express terms of their contract is to have (or not to have) a certain meaning.

(Citations omitted.)

1. I will first address the parties' submissions, directed to the question of whether Hellyer may rely on paragraphs [4] - [13] of Mr Cox's second affidavit.
2. In Mr Cox's first affidavit, he deposes as follows:

Engagement of the defendant

1. On 19 June 2024, HML received a letter from the defendant in which the defendant offered to act as a financial consultant for HML (Mandate). A copy of that letter is at page 4 of the Exhibit.

2. On 24 June 2024, HML accepted the offer from the defendant set out in the letter referred to in the preceding paragraph by signing the letter.

3. On 24 June 2024, HML paid to the defendant the sum of $275,000 (incl GST). A copy of a screenshot for that payment is at page 19 of the Exhibit.

Termination of the Agreement

1. On 9 July 2024, I received an email from the defendant that attached a letter in which the defendant terminated the Mandate. A copy of that email is at page 20 of the Exhibit.

2. The plaintiff accepted the termination of the Mandate.

Invoices

1. On 17 July 2024, I received an email from the defendant that attached an invoice from King & Wood Malleson. A copy of that email is at page 19 of the Exhibit.

2. On 22 July 2024, I received an email from the defendant that attached an invoice from Anderson McCormack Pty Ltd. A copy of that email is at page 24 of the Exhibit.

3. On 22 July 2024, I received an email from the defendant that attached an invoice from Clayton Utz. A copy of that email is at page 30 of the Exhibit.

4. On 29 July 2024, I received an email from the defendant that attached an invoice from MEC Mining Group Pty Ltd. A copy of that email is at page 33 of the Exhibit.

5. A copy of the creditors [sic] statutory demand is at page 57 of the Exhibit.

Dispute regarding the debt

1. Having regard to clause 2.2(g) - (i) of the schedule to the Mandate and the matters stated at paragraph 5 above, I say that:

   (a) The plaintiff is not indebted to the defendant in the amount claimed, or at all; and

   (b) In fact, the defendant is indebted to the plaintiff in the amount of $101,949.19.

   1. The invoices of King & Wood Malleson and Clayton Utz are purportedly in respect of due diligence and other legal services provided for the benefit of HML. We have not received any documents, advice or correspondence from either King & Wood Malleson or Clayton Utz.
   2. HML was not provided with any cost disclosure or cost agreement by either King & Wood Malleson or Clayton Utz. I understand that, as a third-party payer, HML is entitled to receive cost disclosure from those firms.
   3. HML has serious concerns regarding the invoice received from Clayton Utz and would propose to have this invoice assessed.
   4. I do not understand the basis on which the invoice from Anderson McCormack Pty Ltd is a proper cost of the Mandate.

1. With respect to the terms of the retainer, in Mr Cox's second affidavit, he deposes that:

Terms of the retainer

1. Prior to the defendant agreeing to undertake the work pursuant to the agreement the subject of this proceeding, the defendant and Hellyer Metals Underground Pty Ltd (Hellyer Underground) (a subsidiary [of] HML) were in discussions regarding a capital raise of an amount about $20,000,000. A copy of an email from Mr Lyle dated 13 June 2024 with a draft agreement is at annexure GC-02 to this affidavit.

2. I note that the Retainer Fee for this capital raise was $190,000 (plus GST).

3. On either 19 or 20 June 2024, I attended a meeting at Rodney Lyles's office in Melbourne.

4. To the best of my recollection, the following people were present at the meeting:

   (a) Mr Ellis;

   (b) Mr Lyle;

   (c) A solicitor from Clayton Utz;

   (d) A solicitor from King & Wood Mallesons;

   (e) Tony Tran, HML's chief financial officer; and

   (f) Another person from the defendant, whose name I do not remember.

   1. During that meeting, I had a conversation with Mr Ellis about Arculus doing a capital raising for HML rather than Hellyer Underground.
   2. Mr Ellis said words to the effect that it would be simpler for Arculus to undertake a capital raise for $60,000,000 for Hellyer Metals rather than Hellyer Underground as this will allow for all of the senior debt to be retired.
   3. Mr Ellis said words to the effect that if it is a $60 million capital raise for HML, Arculus would need to be paid a $500,000 retainer fee rather than the $190,000 retainer fee in the Hellyer Underground mandate letter.
   4. I said to Mr Ellis and Mr Lyle words to the effect of, why, if the $60 million raise is simpler, has the Retainer Fee increased from $190k to $500k?
   5. In response, Mr Lyle said words to the effect that there will be more legal fees. If this terminates, we need to make sure all of the advisor fees are paid from the retainer, and I need to get $100k out of it also.
   6. This is how Mr Lyle explained to me the Mandate for HML would operate. The advisors' fees would be paid out of the retainer fee paid by HML[.]

On 24 June 2024, I signed the Mandate Letter on behalf of HML. The Retainer Fee in the Mandate is $500,000 (plus GST).

1. Mr Cox also deposes in his second affidavit as to the circumstances surrounding the termination of the mandate letter. Mr Cox affirms:
   • On about 8 July 2024, he first understood that the agreement between Hellyer and Arculus would be terminated and had a telephone conversation with Ms Lorraine Church, the accounts receivable manager at Hellyer, to that effect;
   • On 10 July 2024, he did not indicate to Mr Roderick Lyle during their "tense telephone conversation" that Hellyer was liable to Arculus for Arculus' advisors' expenses;
   • He requested the invoices from Arculus' legal advisors to ascertain whether Hellyer "had a further liability pursuant to the mandate, above the payment of the Retainer Fee it had already made";
   • He was not advised of the reasons for the termination of the mandate letter prior to reading Mr Renny Ellis' affidavit dated 20 September 2024, save that "Arculus required a senior secured position for the capital raise"; and
   • He raised "queries or disputes" with respect to the invoices by way of a telephone conversation with Mr Ellis.
2. In addition to the above matters, in his second affidavit Mr Cox deposes to the scope of services which were to be provided by Arculus to Hellyer.
3. Arculus submits that [4] - [13] of Mr Cox's second affidavit could not be relied upon as "the basis for the genuine dispute needs to be articulated in the 21-day affidavit". It relies upon the principle in Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452; [1996] FCA 822. Arculus alleges that Mr Cox's first affidavit (the relevant 21-day affidavit) did not give "fair notice" that the dispute rested upon "matters or events extraneous to the text of the mandate letter" that were raised only in Mr Cox's second affidavit.
4. Hellyer submits that Mr Cox's first affidavit provides a sufficient basis to establish a "genuine dispute" as it contains "evidence of the payment of the retainer fee" and puts the retainer as contained in the mandate letter into evidence. As to Mr Cox's second affidavit, Hellyer submits that it "supplements" the first affidavit which put Arculus on notice of the construction argument intended to be run by Hellyer.
5. Sundberg J in Graywinter outlined the requirements of a supporting affidavit in a genuine dispute case. His Honour clarified that the affidavit must contain some facts in favour of the case but need not rise to the level of detailing all admissible evidence: Graywinter at 459. A "mere assertion" of a genuine dispute, or a "bare claim that the debt is disputed" is insufficient: Graywinter at 459. It has been accepted that a ground may be "raised expressly or by necessary or a reasonably available inference": Hopetoun Kembla Investments Pty Ltd v JPR Legal Pty Ltd (2011) 286 ALR 768; [2011] NSWSC 1343 at [36] (per Ward J) approved by the New South Wales Court of Appeal in Infratel Networks Pty Ltd v Gundry's Telco and Rigging Pty Ltd (2012) 297 ALR 372; [2012] NSWCA 365 at [29] - [32].
6. In relation to an application to set aside a statutory demand as per ss 459G and 459H of the Act, and the requirement to file with the Court an affidavit in support of that application, Ferguson CJ, Sifris and Walker JJA stated at [38] of Sceam Constructions Pty Ltd v Clyne (2021) 365 FLR 326; [2021] VSCA 270 that:

Standing back from all that has been written in the authorities, it is important to bear firmly in mind that what is critical is the language in the legislation. It requires an affidavit supporting the application to be filed with the Court within the statutory period. In the context of a claim to set aside the statutory demand on the basis that there is a genuine dispute as to the existence or amount of the demand, pursuant to s 459H(1)(a), the affidavit must support the application by providing the basis for establishing that there is a genuine dispute. Establishing the genuineness of the dispute requires material showing, or from which it can be inferred, that there is a real dispute. Most commonly this will be done by the deponent describing the dispute. That description will delineate the scope of the dispute which may be relied upon to set the demand aside. Where the dispute is based purely on the construction of a written agreement between the parties, the support requirement may be satisfied by exhibiting the agreement without more. But, for example and without being prescriptive, if something beyond the written terms is to be relied upon, then it is highly likely that this will need to be raised in the affidavit and more than mere assertion will be necessary. Ultimately, what is required to satisfy the support requirement must be assessed in the context of the particular application that is made.

(Emphasis in original.)

1. Mr Cox's first affidavit disputed invoices provided by Clayton Utz and King & Wood Mallesons to Arculus on the basis that Hellyer had not sighted a costs disclosure or costs agreement from either of those legal firms. It also foreshadowed "concerns" regarding the Clayton Utz invoice, by inference with respect to quantum, and questioned the basis of an invoice from Anderson McCormack Pty Ltd. The paragraphs of Mr Cox's second affidavit, about which Arculus complains, relate in part to discussions between representatives of both Hellyer and Arculus, including the latter's advisers, prior to entry by Hellyer into the mandate letter. No mention whatsoever of these discussions is made in Mr Cox's first affidavit.
2. Accordingly, and consistent with the statements made in Sceam, as the precontractual discussions were not raised in Mr Cox's first affidavit such as to put Arculus on notice that Hellyer sought to rely upon them, I have not had regard to [4] - [13] of Mr Cox's second affidavit.

1. The main issue in contention between the parties is whether there is a "genuine dispute" arising out of the proper construction of the mandate letter, more specifically, the construction of those paragraphs in the mandate letter and those clauses in the Schedule which relate to the obligations of the parties upon termination.
2. Arculus in particular contends that the construction of the mandate letter is the only issue to be determined on the application. While Mr Ellis's affidavit, upon which Arculus sought to rely, disputed a number of the facts alleged in Mr Cox's first affidavit, Arculus did not in argument engage with those factual disputes.

1. The mandate letter is comprised of a letter and a Schedule. The first paragraph of the mandate letter describes the "scope of services" that Arculus was obliged to provide to Hellyer. Paragraph 2 of the mandate letter outlines the transaction fees which Hellyer was obliged to pay Arculus as consideration for the services. It reads as follows.

2.1 In consideration for the Services, Hellyer will pay ARCULUS CAPITAL the following transaction fees:

(a) Arranger Fee

On the issue of any Debt, an Arranger fee of 2% of the Debt Offer Proceeds (Arranger Fee).

(b) Management Fee

On the issue of any Debt, a management fee of 0.5% of the Debt Offer Proceeds.

(c) Distribution / Commitment Fee

On the issue of any Debt, a distribution/commitment fee of 1.5% of the amount of Debt Offer Proceeds.

All fees are exclusive of applicable GST and are due and payable on execution by the entity providing the Debt to Hellyer (Funder) of funding facility agreements applicable to the Debt. If requested by ARCULUS CAPITAL, Hellyer shall direct the Funder, or such other entity in control of the dispersal of the Debt, to pay to ARCULUS CAPITAL the above Transaction Fees as a disbursement out of the Debt Offer Proceeds, and otherwise authorises ARCULUS CAPITAL to ensure that such disbursement is included in the funding facility agreement/s applicable to the Debt.

2.2 If, in the timeframes set out below, a person introduced by ARCULUS CAPITAL to the Debt Offer provides, separately to the Debt Offer or independently of ARCULUS CAPITAL or a ARCULUS CAPITAL Group member, debt, capital or equity (New Funds) to Hellyer (or a related entity of Hellyer), Hellyer shall pay ARCULUS CAPITAL upon written notice from ARCULUS CAPITAL:

(a) a fee of 2% on the New Funds (plus GST) where the New Funds are available to Hellyer or a group affiliated with Hellyer at any time during the Mandate Period; and

(b) a fee of 2.5% of the New Funds (plus GST) where the New Funds are available to Hellyer or a group affiliated with Hellyer at any time during a period of up to 6 months after the Mandate Period.

Travel and out of pocket expenses

(a) Hellyer will, within seven days of request made by ARCULUS CAPITAL, reimburse ARCULUS CAPITAL for all travel and out-of-pocket expenses (including any applicable GST) incurred in connection with the Debt Offer.

(b) ARCULUS CAPITAL will seek prior approval from Hellyer for any one-off out of pocket and travel expenses that exceed $1,000 or travel expenses that exceed $4,000 in any one-month period, which consent is not to be unreasonably withheld or delayed.

(c) All amounts paid by Hellyer in respect of travel and out of pocket expense will be deducted from any Arranger Fee if payable to ARCULUS CAPITAL.

2.4 ARCULUS CAPITAL advisor expenses

(a) Irrespective whether or not the Debt Offer proceeds, Hellyer must pay on a full indemnity basis all legal fees, costs and disbursements as invoiced to ARCULUS CAPITAL and any other advisers retained by ARCULUS CAPITAL (including any applicable GST) incurred by ARCULUS CAPITAL in connection with any activity forming part of the Services; or otherwise in connection with this Letter, which costs and disbursements shall be paid on the earlier of:

(i) termination of this Letter for any reason; and

(ii) the execution by the Funder of the funding facility agreements applicable to the Debt.

(b) If paragraph 2.4(a)(ii) is applicable, Hellyer shall, if requested by ARCULUS CAPITAL, direct the Funder or such other entity in control of the dispersal of the Debt to pay to ARCULUS CAPITAL out of the Debt all such costs and disbursements (including applicable GST).

1. Paragraph 3 of the mandate letter sets out the retainer as follows:

A non-refundable retainer fee in the amount of $500,000 plus GST (Retainer Fee) will be payable by Hellyer to ARCULUS CAPITAL as follows:

(a) $250,000 (plus GST) upon the signing of this engagement letter; and

(b) a further sum of $250,000 (plus GST) upon the signing of binding funding facility agreements between Hellyer and the Funder(s) in respect of the Debt.

1. Clause 2.2 of the Schedule outlines scenarios in which Arculus may permissibly terminate the mandate letter. The consequences of such an action are contained in subcll 2.2(g) - (i) of the Schedule, and read as follows:

2.2 ARCULUS CAPITAL may terminate this Letter and its appointment if:

...

in which case:

(g) all Transaction Fees less the Retainer shall become immediately due and payable as if the Debt Offer Proceeds had been advanced or made available to Hellyer; and

(h) all ARCULUS CAPITAL's travel and out of pocket expenses that have not been reimbursed shall be immediately reimbursed; and

(i) all fees and expenses of the type referred to in paragraph 2 of the Letter shall become immediately due and payable to ARCULUS CAPITAL.

1. Clause 20 of the Schedule is headed "Definitions" and relevantly includes:

20. Definitions

In this Letter, unless the context indicates otherwise the following words and phrases have the following meanings:

...

(e) Transaction Fees means the fees set out in paragraph 2;

...

(h) a word or expression used in this Letter, which has been defined in the body of this Letter, shall have that meaning as defined;

(i) a reference to a clause of this Letter is a reference to a clause contained in the Schedule to this Letter; and

(j) a reference to a paragraph of this Letter is a reference to a paragraph contained in the body of this Letter (excluding the Schedule).

(Emphasis in original.)

4. Indemnity

4.1 Hellyer shall:

(a) indemnify and keep indemnified ARCULUS CAPITAL and each related entity of ARCULUS CAPITAL (ARCULUS CAPITAL Group and each called an ARCULUS CAPITAL Group member), and their respective officers, employees, affiliates and agents (ARCULUS CAPITAL Group and each such person being called an Indemnified Person) against any claim, loss, liability, action, proceeding (including for negligence), cost and expense (including any legal costs as invoiced on a full indemnity basis, and the costs of complying with any regulatory requirement to provide information that arises during or following the provision of Services) to which an Indemnified Person may be subject in connection with any transaction or proposal contemplated by this Letter or the performance by ARCULUS CAPITAL of the Services, or the failure of Hellyer to perform an obligation under this Letter (Claim);

(b) reimburse each Indemnified Person for all costs and expenses (including legal costs as invoiced on a full indemnity basis) as they are incurred in connection with the investigation of, preparation for or defence of any pending or threatened Claim whether or not the Indemnified Person is a party to the Claim; and

(c) not settle, compromise or consent to the entry of any judgment in any pending or threatened Claim in respect of which indemnification could be sought under this indemnity without ARCULUS CAPITAL's prior written consent, unless that settlement, compromise or consent includes an unconditional release of each Indemnified Person from all liability arising out of such Claim.

(Emphasis in original.)

1. Hellyer submits that there is a "genuine dispute" about the proper construction of the mandate letter. It advances an argument that the current case is not one which falls into the categories of cases about contractual construction which could be conclusively determined in the context of a dispute concerning s 459H of the Act. Hellyer submits that the threshold is low - all it is required to do is establish a genuine dispute by raising an argument that is not "illusory" (see Malec Holdings at [49]) or "patently feeble" (see Drillsearch at [45] - [46], quoting Eyota at 787 and Wellnora Pty Ltd v Fiorentino (2008) 66 ACSR 229; [2008] NSWSC 483 at [50]).
2. To that end, Hellyer contends that the proper construction of the mandate letter should be as follows:

(a) upon termination of the Mandate Letter by Arculus under clause 2.2(e) of the Schedule, the "Transaction Fees" less the Retainer became owing by Hellyer (clause 2.2(g) of the Schedule);

(b) by clause 20(e) of the Schedule to the Mandate Letter, the Transaction Fees included any "advisor expenses" payable under paragraph 2.4;

(c) the Retainer paid by Hellyer of $275,000 covered all advisor expenses claimed in the Statutory Demand. There is no inconsistency between paragraph 2.4 of the Mandate Letter and the operation of clause 2.2(g) of the Schedule as all advisor expenses have been paid by Hellyer from the Retainer on termination. If the advisor expenses had exceeded the Retainer, such that there was a shortfall, then clause 2.4 would require Hellyer to pay the additional amount;

(d) as there were no additional out of pocket expenses or other Transaction Fees payable under the Mandate Letter, no additional amounts required reimbursement under clause 2.2(h) or became owing under clause 2.2(i) of the Schedule; and

(e) there is therefore no amount payable by Hellyer to Arculus under the Mandate Letter.

1. Further, Hellyer submits that even if the Court held there was no genuine dispute, such that the case could be determined conclusively at this stage, its arguments for construction were preferable. It submits that an "objective approach" must be used to determine the proper construction of the contract, taking into account "its text, context and purpose", such that the meaning of the contractual terms is that which a "reasonable business person would have understood those terms to mean": Price v Spoor at [27].
2. Hellyer relies upon the pre-contractual context of the mandate letter. It submits that it and Arculus knew of the "circumstances preceding the entry into the Mandate Letter" and the statement of Mr Lyle "to the effect that the advisors' fees were to be paid out of the retainer fee if the mandate was terminated". However, in light of my finding above with respect to [4] - [13] of Mr Cox's second affidavit, I have not taken account of those submissions.
3. Hellyer contends that upon reading cl 2.2 of the Schedule to the mandate letter, a "reasonable businessperson" would not have understood it to mean that Arculus "would be entitled to both the Retainer of $275,000 and to recover all additional costs and fees" (emphasis in original) upon termination of the mandate letter, which Arculus effected within 15 days of the mandate letter being entered into by the parties, with none of the services having been provided thereunder. Hellyer contends that such a construction would also have allowed Arculus to terminate the mandate letter "including at its discretion" within one day of entering into it, without providing any services thereunder and remaining entitled to the retainer. Hellyer contends that this would lead to a "commercially unreasonable" and "unjust" outcome.
4. Contrastingly, Arculus contends that the Court could resolve the issue of construction, as this is a case where "the question is straightforward and of little complexity": Eatertainment Group Pty Ltd v Curtis Family Developments Pty Ltd, (as trustee for the Curtis Family Trust) [2024] VSC 512 at [119], per Gardiner AsJ. Thus, the contention about construction does not require "further investigation": Eyota at 787, Solarite Air Conditioning at [23], CGI Information Systems at [16] and Lodge Partners at [18]. In Arculus' submission, the Court should proceed to "determine as a matter of law whether a construction argument raised by a plaintiff amounts to a genuine dispute". It is a "simple question of construction that can be decided following a short hearing": Lodge Partners at [18].
5. Arculus submits that to adopt Hellyer's construction would result in the Court ignoring the "clear words" of the mandate letter, particularly paragraph 2.4(a) of the mandate letter and cl 2.2(i) of the Schedule. Arculus contends that paragraph 2.4 of the mandate letter makes it clear that the legal fees, costs and disbursements are to be paid on a full indemnity basis. The mandate letter's text should be read such "that third-party expenses such as those that comprise the Debt are not 'Transaction Fees' from which the 'Retainer' may be deducted". It relies upon cl 2.2 and cl 20(e) of the Schedule, and paragraphs 2.1 - 2.4 of the mandate letter.
6. Arculus also submits that there is a distinction between fees and expenses in paragraphs 2.1 - 2.4 of the mandate letter. It submits that paragraphs 2.1 and 2.2 are clearly intended to relate to fees while paragraphs 2.3 and 2.4 relate to expenses. According to Arculus this is "confirmed" by cl 2.2(h) and cl 2.2(i) of the Schedule, on the basis that "[t]he obligation at subclause 2.2(i) is unqualified and the corresponding liability of the plaintiff is not subject to any offset or reduction ...".
7. In oral submissions, Arculus contends that it was a "deliberate choice" that the language of cl 2.2(g) of the Schedule is not "replicated" in cl 2.2(h) or cl 2.2(i). Arculus submits that cl 2.2(g) of the Schedule cannot alter or modify the effect of paragraph 2.4 of the mandate letter. Further it submits that cl 2 of the Schedule, which deals with termination, is set out such that the circumstances which allow the defendant to terminate the mandate letter are contained in cll 2.2(a) - (f) and the consequences thereof are contained in cll 2.2(g) - (i), which distinguish between transaction fees, travel and out of pocket expenses, and fees and expenses of the kind referred to in paragraph 2 of the mandate letter. Therefore, on Arculus' case, transaction fees are those referred to in paragraphs 2.1 and 2.2 of the mandate letter on the basis that the preamble to paragraph 2.1 is expressed as "[i]n consideration for the Services...". According to Arculus, that is in "stark contrast to the type of expenses, as distinct from fees" contemplated in paragraphs 2.3 and 2.4 of the mandate letter.
8. Arculus also contends that paragraph 3 of the mandate letter made clear that the retainer fee was "non-refundable" in any circumstances. The only circumstances in which Hellyer would be entitled to a credit with respect to the retainer fee is where a transaction fee was earned but unpaid and the mandate letter was terminated.
9. Arculus also takes issue with the perceived lack of explanation on the part of Hellyer with respect to cl 2.2(i) of the Schedule. It submits that Hellyer failed to explain:

(a) how the Construction Contention accommodates the operation of that subclause (rather than rendering it otiose); or

(b) why that subclause does not foreclose the plaintiff's attempt to dispute its unconditional obligation to pay the Debt (which arises pursuant to both clause 2.4 of the Mandate Letter and subclause 2.2(i) of the Schedule).

1. Arculus contends that Hellyer's construction is "spurious" because cl 4.1 of the Schedule imposes unconditional liability for payment of the debt on Hellyer. It submits that Hellyer's construction is irreconcilable with the position advanced in Mr Cox's first affidavit. Moreover, Arculus submits that there is no ambiguity in the mandate letter such as would give rise to "resort to extraneous matters".
2. In its written submissions Arculus further submits that the contested construction of the mandate letter was "first advanced in the Plaintiff's Submissions filed on 18 October 2024 ... having not been articulated by or on behalf of the plaintiff prior to the filing of the Plaintiff's Submissions". Arculus submits that this amounts to a late invention on Hellyer's part which casts doubt upon the bona fide nature of its contentions.
3. As to that submission, Hellyer contends that the dispute was raised prior to the submissions dated 17 October 2024, as evidenced in those paragraphs of Mr Cox's second affidavit about which no dispute arose, and in respect of which Mr Cox had not been required for cross examination. Hellyer submits that the uncontested paragraphs are consistent with the construction it advances, and moreover that this construction cannot be a recent invention or not in good faith because Mr Cox's second affidavit was filed prior to the submissions. I note at the hearing, Arculus did not expressly press its submission with respect to good faith.
4. Hellyer also submits, with respect to Arculus' argument seeking to distinguish between fees in paragraphs 2.1 and 2.2 and expenses in paragraphs 2.3 and 2.4 of the mandate letter, that such a distinction is not to be found in the Schedule which defines transaction fees in cl 20(e) in such a way that clearly includes those referred to in paragraph 2 of the mandate letter. According to Hellyer, cl 2.2(g) of the Schedule clearly means that the amounts within paragraph 2 of the mandate letter, which details the transaction fees, are deducted from the retainer upon termination, and there are no distinctions between the types of fees and expenses within paragraph 2 of the mandate letter. It submits the ordinary meaning of "fee" is "a payment made to a professional person in exchange for advice or services". As to the distinction which Arculus maintains exists between cl 2.2(h) and cl 2.2(i) of the Schedule, Hellyer submits that that argument fails to take account of cl 2.2(g), the effect of which is that all amounts that fall within paragraph 2 of the mandate letter (Transaction Fees) are deducted from the amount of the retainer on the termination of the agreement.
5. As well, Hellyer contends that both cl 2.2(h) and cl 2.2(i) of the Schedule would have "work to do" should circumstances arise where the relevant expenses and fees under those clauses exceed the retainer paid. This is simply a case where that has not occurred.
6. In reply Hellyer contends that Arculus' "tortured construction" sought to distinguish between fees and expenses in paragraph 2 of the mandate letter to "avoid the clear definition" in cl 20(e) of the Schedule, relating to the meaning of "Transaction Fees". It argues that Arculus' construction should not be preferred as paragraph 2.4 of the mandate letter "describes the amounts recoverable under this clause as legal fees", which should be interpreted within its "ordinary meaning". Indeed, cl 4.1 of the Schedule does not provide assistance to Arculus, as "[t]he plaintiff has indemnified the defendant against costs and expenses ... by reason of the Retainer Fee paid to it", such that Arculus has not incurred loss. Finally, as to the claim that Hellyer's argument was a late invention, Hellyer submits that "the issuance of the statutory demand was the first time that the defendant had demanded or requested payment of the amount the invoices the subject of the statutory demand".
7. On a preliminary basis, it would appear that Hellyer's arguments have some force, although no view is expressed as to their merit. Paragraph 2.4 of the mandate letter, which refers to advisor expenses is contained within paragraph 2 which is entitled "Transaction Fees". Clause 20(e) of the Schedule states that "Transaction Fees means the fees set out in paragraph 2". Hellyer has mounted plausible responses to the arguments made by Arculus with respect to the operation of cl 2.2(i) of the Schedule and cl 4.1 of the Schedule, being the indemnity clause. While the pre-contractual discussions referred to at [4] - [13] of Mr Cox's second affidavit have not been taken into account it is possible that the other evidence contained in Mr Cox's second affidavit, to which no exception was taken has some bearing on the construction of the mandate letter. In my view therefore this is a case in which "particular restraint" ought be exercised: Creata at [26]. I consider that this is a case where it would be "unsafe" for me to conclude that there is no genuine dispute in light of the submissions made above: See Citation Resources Ltd v IBT Holdings Pty Ltd (2016) 116 ACSR 274; [2016] FCA 1265 at [43], citing Austral Softwoods Tumbarumba Pty Ltd v Tasman KB Pty Ltd [2001] NSWSC 1122 at [16] and [24].

1. For the reasons above the application is allowed. The creditor's statutory demand dated 9 August 2024 is set aside. Costs should follow the event.

I certify that the preceding fifty-six (56) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Meagher.