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[1997] FCA 753
plaintiff. The statutory demand served on 24 April 1997 was set aside, and Dacaro was ordered to pay JSW's costs of the application.
No linked legislation citations have been extracted yet.
The Court did not decide whether Dacaro was ultimately owed the $40,000. It decided only that JSW had raised a real dispute with some substance about whether Dacaro had done the work required to earn its fee. Earlier payments and JSW's silence about the work did not settle that question. The statutory demand was therefore set aside.
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2,154 words · generated 30/09/2026
J.S.W. Parts Pty Ltd (JSW) applied under s 459G of the Corporations Law to set aside a statutory demand from Dacaro Pty Limited. The demand, served on 24 April 1997, sought payment of $40,000 said to be owing for Dacaro's work assisting JSW to obtain export credits on motor vehicle components.
The parties agreed that JSW had retained Dacaro and that the fee was 20 per cent of the value of export credits obtained. The value of the credits meant that the claimed fee was approximately $40,000. The dispute was not simply whether JSW had received credits. It had. The central question was whether Dacaro had performed the work required by the retainer so as to earn the fee.
The retainer's terms were not clear. JSW's managing director, Mr Jacob, described a conversation in which Dacaro's director, Mr Gilmour, allegedly agreed that Dacaro would take the claim through the process, prepare documents, liaise with customs and find a purchaser for the credits. The judgment notes, however, that it appeared to be accepted for JSW that no agreement on those terms was reached in that conversation.
A later letter from Mr Gilmour referred to responsibility for negotiations with the Australian Customs Service and the Department of Industry, Science and Technology, attendance at audits, promotion of JSW, and keeping JSW informed about relevant government policy. Finkelstein J considered that the letter might have revoked an earlier offer, or that its reference to handling negotiations could be understood in light of the earlier conversation. The precise scope of the undertaking therefore remained uncertain.
JSW alleged that Dacaro's work was deficient. Among the examples, it said that Dacaro suggested an incorrect format for an application, which had to be reworked at substantial cost, and failed to advise it of procedures needed to obtain credits. JSW's broader position was that Dacaro had not performed the work it had promised, and therefore had not earned the fee.
Dacaro relied on JSW's earlier payments, totalling about $21,000, and its lack of complaint before service of the demand. The Court accepted that those facts were not disputed, but did not treat them as conclusive. It set aside the demand and ordered Dacaro to pay JSW's costs. The order resolved the statutory-demand application; it did not determine the ultimate merits of the underlying fee dispute.
Section 459H(1)(a) gave the Court power to set aside a statutory demand if satisfied there was a genuine dispute about the existence or amount of the debt. Finkelstein J emphasised that this process is not a trial of the debt. The court does not embark on an extended inquiry or determine which party's account is correct. The question is whether a genuine dispute exists.
The judgment explained that “genuine” carries its ordinary sense, including “not spurious”, “real” and “true”. A company's assertion alone is not enough. In the ordinary case, the company must point to evidence showing reasonable or substantial grounds for the dispute. That threshold helps distinguish a real dispute from a position raised merely to resist a demand.
Finkelstein J referred to Lockhart J's formulation in Chadwick Industries: a dispute must not be plainly vexatious or frivolous, and the claim must have some substance. He also noted decisions using expressions such as “triable issue” and “serious question to be tried”. In his view, those formulations expressed the same general requirement rather than a different test.
The evidence here gave the dispute substance. The terms defining Dacaro's work were unclear, and the parties differed about what Dacaro had undertaken to do. JSW gave particular examples of alleged deficient work and linked those allegations to its position that Dacaro had not earned the fee. Finkelstein J did not decide whether those allegations were true. He considered that, if true and if the retainer included the broader work described in the conversation, JSW might not be indebted to Dacaro.
The evidence of prior payments and silence did not remove the dispute. Payments under an apparent contractual arrangement may be consistent with an admission, but they may also have other explanations. Finkelstein J gave the example that a party might pay a relatively small sum to avoid the greater expense of a dispute and litigation. The possibility that JSW paid because Dacaro had earned its fee remained open too. The evidence did not allow the Court to treat the payments as necessarily resolving the question.
The result follows from this limited task. The Court found that JSW's position was not frivolous, vexatious or lacking in substance, and was satisfied there was a genuine dispute about whether Dacaro was a creditor. It set aside the demand without determining the parties' ultimate contractual rights.
The judgment describes the law as it stood in 1997. Finkelstein J said there was no authoritative statement defining “genuine dispute” in s 459G and identifying what must be established. He addressed that question by drawing on the ordinary meaning of “genuine” and earlier decisions, rather than claiming to settle every possible aspect of the statutory test.
The cases cited illustrate the vocabulary used in earlier decisions. Mibor Investments Pty Ltd v Commonwealth Bank of Australia supplied the statement that the court need only conclude there is a dispute and that it is genuine. Greenwood Manor Pty Ltd v Woodlock was cited in relation to the ordinary meaning of “genuine”. Chadwick Industries was used for the proposition that the dispute must not be plainly frivolous or vexatious and must have some substance. Finkelstein J also referred to Scanhill, Kalamunda Meat Wholesalers and Rohalo Pharmaceutical, noting that terms such as “triable issue” and “serious question to be tried” had been used as substitutes for “genuine”.
The judgment's contribution is to state a practical evidential formulation: ordinarily, the dispute must be based on reasonable or substantial grounds. It also explains the relationship between that formulation and the lower-threshold character of the statutory-demand process. The court tests whether a real dispute exists; it does not resolve the underlying contract case.
Finkelstein J compared the statutory-demand setting with proceedings involving a creditor whose debt is disputed but who does not rely on deemed insolvency from non-compliance with a statutory demand. Referring to The Roy Morgan Research Centre Pty Ltd v Wilson Market Research Pty Ltd, he considered that it would be unusual for a company to face a different standard merely because a creditor relied on s 459G to establish insolvency rather than proving actual insolvency. That was part of his explanation of the threshold, not a decision in this case about the facts or outcome of Roy Morgan.
The source supplied is the 1997 judgment and does not provide later judgments applying or qualifying it. Accordingly, this analysis cannot establish the present-day treatment or continuing status of its approach. It would be unsafe to infer later acceptance, modification or rejection from this judgment alone.
The judgment has no numbered paragraphs. The references below identify passages by their wording rather than inventing paragraph numbers.
“All that the legislation requires is that the court conclude that there is a dispute and that it is a genuine dispute.” This is a quotation from Hayne J in Mibor, reproduced by Finkelstein J. In plain English, the statutory-demand hearing is not intended to decide the whole debt case. The company must show a real dispute, not prove conclusively that it will win.
“To demonstrate that a dispute is genuine will, in the ordinary case, require evidence to show that the dispute is based on reasonable or substantial grounds.” Finkelstein J's formulation makes clear that simply denying a debt is not ordinarily enough. The company needs material that gives the denial a reasonable factual or legal foundation.
“The court must be careful” not to set aside demands whenever an applicant asserts a claim and some basis for it. This point appears in the passage from Chadwick Industries that Finkelstein J quoted. Its significance is that the threshold is real but limited: the court should neither conduct a full trial nor accept unsupported assertions automatically.
“There may be other explanations” for payments made without complaint. Finkelstein J used this reasoning to reject the suggestion that JSW's earlier payments necessarily admitted Dacaro's entitlement. The circumstances could support more than one interpretation, and the Court was not required to select the ultimate explanation at this stage.
“There exists a ‘genuine dispute’ as to whether Dacaro is a creditor of JSW.” This is the Court's conclusion on the application. It does not say Dacaro was not owed money. It means only that the evidence disclosed a real dispute about whether the fee was owing.
The judgment is relevant to a statutory-demand application where the company disputes the debt and can identify evidence supporting a real issue about liability or amount. The particular pattern here involved a fee calculated as a percentage of a benefit obtained, but a dispute over whether the service provider had performed the work required to earn that fee.
The case may be especially relevant where the contract or retainer is unclear. Here, the terms potentially came from both an oral conversation and a later letter, and the Court identified different possible readings of those communications. The judgment shows that uncertainty about the scope of an agreement can form part of a genuine dispute when connected to evidence about the work performed and the claimed entitlement.
It also addresses complaints about deficient performance. JSW did not deny that credits were obtained; it said Dacaro's work was inadequate and had caused additional work and cost. The Court treated those allegations as potentially relevant to whether Dacaro had earned the fee, while leaving their truth and legal effect undecided.
The case also speaks to a creditor's reliance on conduct such as previous payments or delayed complaints. Such conduct may be evidence bearing on the dispute, but the judgment does not treat either fact as automatically decisive. The explanation for payment, the context, the amount involved and the nature of the alleged failure may matter to the assessment of whether a dispute is genuine.
The decision does not establish that every disagreement about performance is enough. The company must present material supporting reasonable or substantial grounds. Nor does the judgment determine whether allegations of negligence, deficient performance or failure to perform will ultimately defeat a fee claim. Those are matters for resolving the underlying dispute, not the limited statutory-demand inquiry described here.
The provided judgment does not discuss any later courts applying J.S.W. Parts Pty Ltd v Dacaro Pty Limited. It was delivered on 11 August 1997, and the legal materials supplied include this judgment and the authorities it cites, not subsequent treatment. No conclusion about later acceptance, distinction, qualification or overruling can therefore be drawn from the supplied source.
Within this judgment, Finkelstein J situates the analysis among earlier authorities. He quotes Mibor for the limited inquiry required, refers to Greenwood Manor on the meaning of “genuine”, and adopts the substance of Chadwick Industries' distinction between a substantial dispute and a plainly frivolous or vexatious one. He also says that the “triable issue” and “serious question to be tried” language in Scanhill, Kalamunda Meat Wholesalers and Rohalo Pharmaceutical did not, in his view, express a different effect.
That account describes how Finkelstein J understood the cited cases in 1997. It does not show how later courts interpreted this decision. Establishing subsequent treatment would require later case materials not present here.
Several issues were not decided because the statutory-demand application was not a trial of the underlying fee claim. First, the precise terms of the retainer remained unresolved. The judgment considered alternative readings of the oral discussion and the later letter, but did not determine which interpretation governed.
Second, the Court did not decide whether Dacaro's work was actually deficient. JSW's claims about the application format and procedural advice were relevant to whether its dispute had substance, but their truth was not finally determined. Nor did the Court decide what consequences any failure would have for Dacaro's fee.
Third, the judgment left open why JSW made earlier payments. Those payments could have reflected recognition that Dacaro had earned its fee, or a decision to pay relatively small amounts to avoid further costs. The Court held only that the payments did not necessarily amount to an admission.
Finally, the judgment does not resolve the current status of its reasoning or how later courts have applied it. Its own conclusion is narrower: on the material before Finkelstein J, JSW's dispute was genuine for the purpose of setting aside the demand. This is general legal information, not legal advice. Zoe can make mistakes. Before acting on or relying on this analysis, have a qualified Australian lawyer check it.
REASONS FOR JUDGMENT This is an application by J.S.W. Parts Pty Ltd ("JSW") pursuant to s.459G of the Corporations Law to set aside a statutory demand served on JSW by Dacaro Pty Limited ("Dacaro") on 24 April 1997 relating to an alleged debt of $40,000 said to be owed by JSW to Dacaro. If the demand is not set aside at the end of the period for compliance (as to which see s.459F(2)) JSW will be presumed to be insolvent (s.459C(2)(a)) and an order that it be wound up in insolvency might be made. The Court has power to set aside a statutory demand if it is satisfied "that there is a genuine dispute ... about the existence or amount of a debt to which the demand relates": s.459H(1)(a). Once set aside a statutory demand is of no effect: s.459K. In determining whether there is a genuine dispute the Court will not embark upon any extended enquiry, nor will it determine where the merits of that dispute lie. As was said by Hayne J. in Mibor Investments Pty Ltd v Commonwealth Bank of Australia (1993) 11 ASCR 362 at 367: "[a]ll that the legislation requires is that the court conclude that there is a dispute and that it is a genuine dispute."
There is no authoritative statement dealing with the meaning of the expression "genuine dispute" in s.459G and what must be established to show that a genuine dispute exists. The difficulty, if there is one, lies with the meaning of the word "genuine". It appears to be used in its ordinary meaning but as the Oxford English Dictionary shows the word has a number of meanings. Perhaps the meanings which are most apposite are "not spurious", "real", and "true": see also Greenwood Manor Pty Ltd v Woodlock (1994) 48 FCR 229 at 234 per Northrop J. Thus, something more than the mere assertion of a dispute by the party resisting the statutory demand is required to satisfy s. 459G. To demonstrate that a dispute is genuine will, in the ordinary case, require evidence to show that the dispute is based on reasonable or substantial grounds. This conclusion appears to accord with the view of Lockhart J. in Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37 where (at p.39) his Honour said: "The notion of a 'genuine dispute' ... suggests to me that the court must be satisfied that there is a dispute that is not plainly vexatious or frivolous. It must be satisfied that there is a claim that may have some substance. On the other hand the court must be careful, because if all an applicant has to do is to assert both a claim and some basis for it, without more, it would mean in almost every case that the court would set aside statutory demands where application is made to that effect. Plainly that is not what the legislature intended by introducing this new regime." There are decisions both in the Federal Court and in State Courts where the requirement is expressed in different terms but not, in my view, to a different effect. I refer by way of example to cases such as Scanhill Pty Ltd v Century 21 Australasia Pty Ltd (1993) 47 FCR 451, Kalamunda Meat Wholesalers Pty Ltd v Reg Russell & Sons Pty Ltd (1994) 13 ACSR 525 and Rohalo Pharmaceutical Pty Ltd v R. P. Scherer SpA (1995) 13 ACLC 94 where expressions such as "triable issue" and "serious question to be tried" are used as a substitute for the word "genuine". Further the need to establish that a dispute is based on reasonable or substantial grounds will then be the same as that which must be established by a company seeking to enjoin a winding-up application that has been threatened, or seeking to stay or resist a winding-up application that has been made, by a creditor whose debt is disputed but who does not rely on deemed insolvency arising from a failure to comply with a statutory demand: as to the position of such a creditor see The Roy Morgan Research Centre Pty Ltd v Wilson Market Research Pty Ltd (1996) 20 ACSR 108, a case decided after the amendments to Part 5.4 of the Corporations Law effected by Act No. 210 of 1992. It would be unusual if a company had a different standard of proof to defend the claim of a creditor with a disputed debt who relied on s. 459G to establish insolvency from that applicable to a creditor with a disputed debt who could establish actual insolvency. I now turn to examine whether JSW has established that there is a genuine dispute concerning the amount claimed to be due by Dacaro. It was common ground that JSW retained Dacaro to assist it in obtaining "export credits" on motor vehicle components. The fee to be paid was 20 per cent of the value of the export credits obtained. The terms of the retainer, in particular those terms which defined the scope of the work to be undertaken by Dacaro, are far from clear and possibly derive from two sources. The first is a conversation between by Mr. T.E. Jacob, the managing director of JSW and Mr. D.M. Gilmour, a director of Dacaro, which was dealt with in an affidavit sworn by Mr. Jacob. The affidavit states that Mr. Gilmour agreed that Dacaro would "a. take us [JSW] right through the claim (for export credits) including all preparation of documentation; b. liaise with customs; c. find a purchaser for the credits". But it is also clear, or at least it appeared to be accepted by counsel appearing on behalf of JSW, that no agreement regarding those terms was reached between Mr. Jacob and Mr. Gilmour during this conversation. The second possible source of the terms of the retainer is a letter Mr. Gilmour wrote to JSW soon after the conversation. In it he asked for confirmation that the fee of 20 per cent of the value of the export credits would be paid and set out the work that would be performed to earn the fee in the following terms: "I will be responsible for all negotiations with the Australian Customs Service and the Department of Industry Science and Technology. I will attend audits and promote your company in a way to maximise your sales, profitability, etc. and will keep you informed of any changes, or proposed changes to Government policy that may affect the interests of JSW Parts." On one view, the effect of the letter may have been to revoke any offer to perform the work described in the conversation. On another view Mr Gilmour's promise to undertake responsibility for all negotiations with the Australian Customs Service could be interpreted, having regard to the fact and contents of the conversation, as including the work described in the conversation other than the promise to find a purchaser for the export credits. The identification of the precise terms of the retainer is of importance because the principal reason JSW denies liability to pay Dacaro any fee is its assertion that the export credits that it did obtain did not result from work that Dacaro had promised to perform. I should make it clear that JSW did obtain export credits 20 per cent of the value of which is approximately $40,000, or at least so it was conceded for the purposes of the application. JSW did accept that Dacaro attempted to perform some work in connection with the obtaining of those export credits but says that what little work Dacaro undertook was performed in a negligent or deficient manner. For example, it is asserted that, at Dacaro's suggestion, JSW adopted an incorrect format for its application for export credits and consequently had to rework the application at substantial cost. It is also asserted that other procedures required to obtain export credits were not initially complied with because Dacaro had failed to advise JSW as to those procedures. As a result, so it is said, unnecessary work was performed no doubt at significant cost to JSW. The general tenor of the complaint, however, is that Dacaro did not perform the work as promised so as to entitle it to its fee. If the facts alleged are true and the terms of the retainer include the work described in the conversation between Mr Gilmour and Mr Jacob, JSW may not be indebted to Dacaro. In answer Dacaro makes two main points. First, it says that JSW had made payments to it at the agreed rate in relation to export credits that had been obtained in the year 1995 and for some export credits that had been obtained for the years 1991 to 1994 (inclusive). Those payments were made after its retainer had been terminated. Secondly, it says that until the statutory demand was served, JSW had made no complaint about the manner in which Dacaro carried out its retainer. It was submitted that these facts, the substance of which was not disputed, prevent JSW from asserting that a genuine dispute now exists. As this argument runs, the conclusion to be drawn from JSW's conduct is that the dispute is not genuine but manufactured purely to avoid winding up proceedings. However, making payments apparently in pursuance of a contractual obligation and without complaint does not always amount to an admission that those payments were lawfully due or, so far as this case is concerned, that the work required to be performed by Dacaro had been performed adequately. There may be other explanations. Here we are dealing with relatively small sums of money. A contracting party may be willing to pay a small sum in order to avoid more significant costs that would arise if a dispute arose and litigation followed. It might be that JSW thought that paying the amounts it did, totalling some $21,000, would be the end of the matter. Or it might be, as Dacaro contends, that it had earned its fee and that the payments made were in recognition of that fact. On the state of the material before the Court it cannot be said that the assertion by JSW that it is not indebted to Dacaro in the amount claimed is frivolous, vexatious or lacking in substance. On the contrary, I am of the view that there exists a "genuine dispute" as to whether Dacaro is a creditor of JSW. It follows that an order must be made that the statutory demand served by Dacaro on JSW on 24 April 1997 be set aside and that Dacaro pay the costs of this application. I certify that this and the preceding five (5) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein
Associate: Helen Grutzner Dated: 11 August 1997 Counsel for the Applicant: M. Sifris
Solicitor for the Applicant: Isakow, Solicitors 2/200 Queen St. Melbourne. Vic. 3000.
Solicitor for the Respondent: GSM Lawyers 228 Smith St. Collingwood. Vic. 3066.
Mibor Investments Pty Ltd
Commonwealth Bank of Australia
(1994) 48 FCR 229
(1993) 47 FCR 451
The statutory demand served on 24 April 1997 was set aside, and Dacaro was ordered to pay JSW's costs of the application.