• any authorisation, property, asset, right or undertaking in connection with:
• the Property;
• the manufacturing plant and equipment on the Property;
• any member of the Group; and
• the operations or business of any member of the Group
56 In his supplementary affidavit Mr Magar said that the Company owned the shares in FFA, FFA Property and FFA Equipment as trustee for the Trust, (and that he and his brother, Nabil ("Bill") Magar, held units in the Trust). As noted earlier, the evidence was that FFA Properties owned the Property and that FFA Equipment owned the equipment on it. It may be, therefore, that the only property within "the FFA Trust Property" out of which the Company in its role as the Trustee enjoyed the right of indemnity was the shares in the subsidiaries. Since they were wholly owned subsidiaries, however, the Company in its role as the Trustee enjoyed, in effect if not in form, a right to be indemnified out of the assets of the subsidiaries as well.
57 The first sentence in para (a) of cl 11.18 purports to give the Company an option which it need not exercise to discharge its liability to Perpetual by resorting to the FFA Trust Property. The reference to the fact that the Company's recourse is limited to the FFA Trust Property which follows sounds a warning and introduces the second sentence. According to a natural reading of the two sentences together, the reference to "shortfall" in the second sentence is a reference to the shortfall between the total Money Owing and the realisable value of the FFA Trust property referred to in the first sentence, that is available to the Company.
58 The concept of a "shortfall" requires a comparison to be made. I do not accept the Company's submission that that comparison is between the Money Owing and the aggregate of the amounts paid off it. The Concept of the Money Owing (see [32] above) already takes into account all payments made. Moreover, the construction suggested would have the consequence, which cannot have been intended, that the Company would never bear any liability for any part of the Money Owing, even if the whole of the FFA Trust Property remained available to satisfy the full amount of the Money Owing.
59 The comparison called for is between the Money Owing and the realisable value of the FFA Trust Property.
60 As a whole, para (a) requires the Company, if it wishes to avail itself of the limitation of liability provided for in the second sentence, either to have recourse to the FFA Trust Property or at least to establish the amount that would be realised if it did so. The onus is on the Company to do one or other of these things if it is to take advantage of the "shortfall" provision.
61 Clause 11.18 contemplates that the Company may choose not to resort to the FFA Trust Property and instead to resort to other property owned by it (in his affidavit of 11 March 2010 Mr Magar said that the Company was an investment company that owned shares in approximately 15 companies in addition to the members of the Group). The Company may choose to have recourse to the FFA Trust Property but its value may be zero or at least less than the amount of the Money Owing. Again, it may be that its value exceeds the amount of the Money Owing.
62 The range of possibilities coupled with the fact that the realisable value of the FFA Trust Property is something peculiarly within the knowledge of the Company lends further support to the view that the onus was intended to be on the Company to raise and establish the amount with which the amount of the Money Owing was to be compared at peril of being indebted to Perpetual for the latter amount.
63 In my respectful opinion, the reference to applying to have the Company wound up is a distraction. Nor does it matter whether the serving of the statutory demand was a "proceeding" within para (a). The question raised by the Company was as to the existence or amount of the alleged debt of $6,810.053.71 the subject of the statutory demand in the light of the presence of cl 11.18 of the Restated Facility Agreement. According to s 459E of the Act, a statutory demand may be served only in respect of a "debt" of the company that is due and payable and the amount of which is at least the statutory minimum, or two or more such debts the amounts of which total at least the statutory minimum. As his Honour observed, the debt must be recoverable by action: see Remuneration Data Base Pty Limited v Pauline Goodyear Real Estate Pty Ltd [2007] NSWSC 59 at [38] - [43]; Takchi Bros Constructions Pty Limited v Woods [2010] NSWSC 115 at [5].
64 The notion of seeking to recover by bringing proceedings against the Company in the second sentence of para (a) is a concept wide enough to embrace the bringing of an action for debt. In a hypothetical action by Perpetual against the Company for debt, the Company would bear the onus of pleading and establishing that the claim was in respect of a "shortfall", that is to say, that the limitation of liability provision was enlivened. For all that is known, unless and until the Company pleaded and proved otherwise, the realisable value of the FFA Trust property might be sufficient to pay the Money Owing, that is to say, there might be no shortfall.
65 The third and final sentence of para (a) which provides that cl 11.18 applies despite anything elsewhere in the Restated Facility Agreement, subject to cl 11.18(b) and cl 11.18(c), adds nothing. While it has the effect that the limitation in favour of the Company prevails over the earlier provisions of cl 11 for the Company's liability for the Money Owing, this begs the question whether cl 11.18 has been enlivened at all and the onus of establishing that it has been rests on the Company.
66 On the hearing the Company relied on para (b) of cl 11.18 as indicating that the remedies to be available to Perpetual were limited to those referred to in that paragraph and excluded an action for debt. Sub-paragraph (1) of para (b) seems to be no more than recognition that Perpetual was to remain at liberty to exercise its rights as a security holder in respect of any part of parts of the FFA Trust Property over which it held security.
67 An injunction (see cl 11.18(b)(2)(A)) might be directed to ensure that the realisable value of the FFA Trust Property was maintained in order to keep any shortfall to a minimum.
68 The purpose and scope of cl 11.18(b)(2)(B) is not clear. However, one purpose might be to attempt to address the situation in which the Company proved the amount of the realisable value of the FFA Trust Property but refused to realise the FFA Trust Property in fact.
69 I am not persuaded that the construction of cl 11.18(a) as outlined above is altered by reference to cl 11.18(b).
70 In summary, the indebtedness of the Company to Perpetual provided for by cl 11.1 and cl 11.7 in respect of the amount stated in the statutory demand was not shown by the evidence before his Honour to have been reduced by the operation of cl 11.18. His Honour was therefore right not to set aside the statutory demand on the ground that it was.
71 The Court raised with the parties the possibility of a dismissal of the application for leave to appeal with a reservation for the Company, on the hearing of a winding up application, to support its reliance on cl 11.18 by adducing evidence establishing the extent of the shortfall: see s 459S of the Act. This course was not agreed to and the matter was not pursued.
Section 459G of the Act
72 I set out s 459G of the Act at [45] above.
73 In support of its notice of contention, Perpetual relied on Tennant Limited v Flomin Inc [2009] NSWSC 1246 (Tennant). In Tennant, Forster J addressed s 459G(3) and what has come to be called the "Graywinter principle": see Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452 (Graywinter), a decision of Sundberg J.
74 In Tennant, the company submitted that the contracts between it and the creditor were governed by standard terms and conditions of purchase which included a provision requiring that the parties attempt to resolve any dispute between them by negotiation, and if negotiation was not successful, by mediation. On the hearing the company wished to submit, inter alia, that non-compliance by the creditor with the provision was a bar to proceedings. His Honour held against the company on the construction of the provision. However, he also dealt with a submission by the creditor that the company had not complied with s 459G(3).
75 Forster J said that it did not suffice that the affidavit required by s 459G(3) annexed the standard terms and conditions, and explained in a passage on which Perpetual relies (at [20]):
There must something further provided to identify the point to be taken. Otherwise, the mere annexation of possibly relevant contractual documentation would be sufficient to permit an applicant for relief to raise any contractual argument, no matter how obscure, on the hearing of the application.
76 In the present case, as noted earlier, Mr Magar's first affidavit did not identify the point to be taken: cl 11.18 lay within the exhibits to his affidavit but there was nothing that directed attention to it.
77 The Company submitted, however, that the weight of authority is contrary to the passage from Tennant set out above.
78 Many cases have discussed s 459G(3) and the Graywinter principle. These include: Callite Pty Ltd v Adams [2001] NSWSC 52; Meadowfield Pty Limited v Gold Coast Holdings Pty Limited [2001] WASCA 360; Energy Equity Corporation Ltd v Sinedie Pty Ltd (2001) 166 FLR 179 at [185]; [2001] WASCA 419; Process Machinery Australia Pty Ltd v ACN 057 260 590 Pty Ltd [2002] NSWSC 45 at [21] - [22]; POS Media Online Ltd v B Family Pty Ltd (2003) 21 ACLC 533; [2003] NSWSC 147 at [26] - [43]; Jian Xing Knitting Factory v Scasa Pty Ltd [2004] SASC 152 at [18] - [21]; Tokich Holdings Pty Ltd v Sheraton Constructions (NSW) Pty Ltd (in liq) (2004) 185 FLR 130 at [50] - [58]; [2004] NSWSC 527; Elm Financial Services Pty Ltd v Macdougall [2004] NSWSC 560 at [7] - [12]; Arcade Badge Embroidery Co Pty Ltd v Deputy Commissioner of Taxation (2005) 157 ACTR 22; [2005] ACTCA 3; Hansmar Investments Pty Limited v Perpetual Trustee Co Ltd (2007) 61 ACSR 321; [2007] NSWSC 103 at [26] - [33]; Tatlers.com.au Pty Ltd v Davis (2007) 213 FLR 109; [2007] NSWSC 835 at [19], [26] - [32]; Saferack Pty Limited v Marketing Heads Australia Pty Ltd [2007] NSWSC 1143 at [21] - [25]; Canon Australia Pty Ltd v Young Bros Pty Ltd [2009] NSWSC 842.
79 I note in passing that Graywinter was decided before the harmonised Corporations Rules were adopted in the form of the Federal Court (Corporations) Rules 2000. At that time O71 r36B of the Federal Court Rules 1979 required the affidavit that accompanied an application to set aside a statutory demand to identify the grounds as well as the material facts on which the company relied. As Sundberg J accepted in Graywinter (at p 457), an affidavit that did not comply with the more demanding former r36B might nonetheless comply with s 459G and the rule could not illuminate the proper construction of the section.
80 It was common ground that satisfaction of paras (a) and (b) of s 459G(3) within the 21-day period is a condition of the making of an application to set aside and of the Court's authority to set aside, whether under s 459H or s 459J: see David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265; Energy Equity Corporation v Sinedie Pty Ltd (2001) 166 FLR 179 at 185 (the High Court refused special leave to appeal).
81 It is not necessary for the purpose of addressing the notice of contention to deal comprehensively with the "supporting affidavit" requirement of s 459G(3). Statements made in the cases concerning that requirement must be understood in the context of the factual circumstances with reference to which those statements were made. In the case of an offsetting claim or a case in which the company does not yet have its evidence in admissible form, for example, "support" may in practice if not in law involve some articulation of the ground for setting aside.
82 Statements that the affidavit must "reveal" the ground for setting aside that is relied on are ambiguous. It can be asserted that the affidavit in the present case did or did not "reveal" the limitation of liability contained in cl 11.18. It revealed the evidence to be relied on but not the particular construction to be advanced.
83 The salient facts of the present case are that: