White & Carter (Councils) Ltd v McGregor

Supreme Court of NSW|2012-08-15|Before: Brereton J, Miles J

Judgment (ex tempore) 1HIS HONOUR: By originating process filed on 2 April 2012, the plaintiff Australia Zhongfu Oil Gas Resources Pty Ltd ("Zhongfu") claims an order setting aside a Creditor's Statutory Demand dated 13 March 2012, and served on it by the defendant ADA International Pty Ltd ("ADA") on or about that date. The demand arises out of a Project Management Services Agreement - Drilling Services, dated 3 August 2011 ("the Agreement"), between ADA and Zhongfu - referred to in the Agreement as "the Operator" - for the provision by ADA of certain project management and drilling services in connection with an oil gas exploration project.

The Agreement 2In the Agreement, the term "ADA Project Management Services", was defined as follows: (a) drilling project preparation and planning services listed in Annexure B, Sections 1 & 2, as being provided by ADA, and referred to in clause 2.2; (b) preparation and provision of all necessary manuals, plans, statements and documents; (c) evaluation, recommendation, selection and management of Operator Contract Services; (d) provision of ADA Operation Management Services; (e) provision of well testing/completion advisory support as may be requested by the Operator; and (f) other services requested by the Operator pursuant to this Agreement or which are incidental to performance of this Agreement. "Drilling Operations", was defined as follows: Drilling Operations means all operations undertaken in respect of the Well to be drilled, and tested in performance of this Agreement, including but not limited to: (a) mobilisation of the Drilling Unit from the Mobilisation Site; (b) Support services; and (c) demobilisation of the Drilling Unit to a subsequent operator. "Management Fee", was defined as follows: Management Fee means the: (a) Project Planning Fee; (b) Daily Operations Management Fee; and (c) Close out Fee. 3Clause 2 of the Agreement was as follows: 2 Well Project Management 2.1 Operator Responsibility (a) The Operator acknowledges and agrees that it is responsible for obtaining all relevant licenses, permits and approvals from Government Agencies and all relevant rights in the Permit Area, required in order to carry out the Drilling Program and any other exploration work in the Permit Area, notwithstanding that this may be carried out by ADA on behalf of the Operator in accordance with this Agreement. (b) Without limiting the remainder of this clause 2.1, the Operator is responsible for, and indemnifies ADA in connection with, any acts or delays which affect, or may affect, the Permit, including the standing of the Permit howsoever arising. (c) The Operator acknowledges it is responsible for those matters listed in Annexure B as being the Operator's responsibility. (d) Operators Agreement will be supported by a Parent company to guarantee payments, indemnities, liabilities, warranties and all other obligations of the exploration licence and this Agreement. (e) The Operator acknowledges that it will pay for those services which are listed in Annexure B as being at the Operator's cost. (f) Operator will ensure that it has authority (including authority of any other Joint Venturers) to provide geological and other information necessary for Well planning and preparation so as to enable ADA to meet agreed deadlines and well objectives. (g) Prior to the spud of the Well, ADA will prepare and submit on behalf of the Operator, regulatory documentation as indicated in Annexure B, to each Relevant Authority in a form acceptable to the Relevant Authority, one hard copy plus a copy either by digital transmission or CD. 2.2 Drilling preparation and planning (a) If indicated in Annexure B, ADA shall prepare the Drilling Agreement and the Operator Contract Services Agreements with respect to the Well, issue invitations to tender on behalf and with the approval of the Operator and will evaluate the tenders for those Agreements on their technical and commercial merits, in the best interests of the Operator. ADA will, with reasonable prior notice to the Operator, seek the Operator's input in relation to the proposed tenders and the tender technical and commercial evaluations. The Operator will on the recommendation of ADA, review and, if Operator approves ADA's recommendation, sign off in respect of, award and execute all the Operator Contract Services Agreements and the Drilling Agreement. (b) All necessary operations manuals, procedures and policies (including the Drilling Program) with respect to the Well will be developed by ADA for review by the Operator and after approval by the Operator will be submitted by the Operator to the Relevant Authority for approval, where applicable. (c) All relevant Operator specific drilling and production interface, HSE manuals, procedures and policies will be developed by ADA for review by the Operator and after approval by the Operator will be submitted by the Operator to the Relevant Authority for approval where applicable. (d) The documents produced by ADA in accordance with clause 2.2(b), 2.2(c) and 1.1(a) shall be discussed, modified and agreed between the Operator and ADA prior to submission to the Relevant Authority for approval. (e) Unless otherwise directed by the Operator, ADA will liaise with the Relevant Authority on behalf of and in the name of the Operator. Operator shall execute correspondence and submissions to the Relevant Authority unless Operator specifically requires ADA to do so. If ADA executes any correspondence or submissions under this clause, it will, and is authorised by the Operator to, do so as an agent for the Operator. 2.3 Drilling Operations ADA shall implement the Drilling Operations in a timely manner and in accordance with the Drilling Program, by utilising as applicable: (a) Services provided by the Drilling Contractor; (b) Services provided by Operator Third Party Contractors and Third Party Contractors; (c) ADA Project Management Services; and (d) Operator provided services, where applicable. 4Clause 6 of the Agreement, entitled "Payment", relevantly provided as follows: 6.1 Payments for ADA Project Management Services (a) ADA shall invoice the Operator for, and Contractor must pay, the Project Planning Fee as set out in, and in accordance with, Annexure E - Schedule of Fees. Annexure E sets out the agreed schedule for payment of the Project Planning Fee and the applicable terms and conditions. (b) ADA shall invoice Operator for, and Contractor must pay, the Daily Operations Management Fee monthly in arrears as set out in, and in accordance with, Annexure E - Schedule of Fees. (c) ADA shall invoice Operator for, and Contractor must pay, the close out Fee as set out in, and in accordance with, Annexure E - Schedule of Fees, following disposal of surplus equipment or 20 days after completion of the program, whichever is earlier. (d) With respect to work conducted within the agreed scope of work and indicated as Operator's cost in Annexure B, ADA will submit invoices to the Operator for such miscellaneous and other services provided with respect to any additional costs incurred in connection with the Well, during the planning and closeout phases of the operations. This invoice will be submitted either on a monthly basis, or at the end of the Well. (e) Recharges for accommodation, BC class airline tickets, car hire and similar expenses reasonably incurred by ADA on behalf of the Operator will be recharged by ADA and payable by Operator at "cost plus 10%" plus applicable taxes. For a person travelling to site, the total travel time will be calculated from the time that person departs his/her place of residence to the time that person arrives on the Drilling Unit, and on the return trip from the time that person departs the Drilling Unit until the time that person arrives at his/her place of residence. ADA shall invoice the Operator, and the Operator must pay, for any Operator approved additional work outside the scope of work described in Annexure E, and under the terms and conditions of the clauses in Annexure E. 5Annexure E to the Agreement relevantly described the management fee as follows: 1 Management Fee - Schedule of Fees In consideration of ADA managing the Drilling Operation on behalf of Operator, the Operator shall pay to ADA the Management Fee as follows: 1.1 Project Planning Fee (a) A total lump sum planning fee of $980,000 will be due and payable by Operator over a period of three months, first payment of $380,000 will be paid the first day after the Account has been established the remaining two payments thereafter of $300,000 will be paid monthly after the first payment on the 30th day of each month Workscope as per questionnaire checklist completed by Operator in Annexure B. (b) Additional work conducted over and above the workscope described above and agreed to in advance by the Operator, shall be invoiced in arrears in the month following that in which the work was completed or in the case of continuing work, on a monthly basis. The rates agreed to by such additional work requirements shall be confirmed in writing by both the Operator and ADA separately to this Agreement. 1.2 Daily Operations Management Fee A Daily Operations Management Fee of $15,580 will be payable by the Operator to ADA for each day commencing on the day that the first ADA Drilling Supervisor leaves his/her place of residence to commence work in relation to Operator's Drilling Operations, and shall continue until the last ADA Drilling Supervisor returns to his/her place of residence upon completion of Operator's Drilling Operations. The Daily Operations Management Fee shall be invoiced in arrears in the month following that in which the work was completed or in case of continuing work, on a monthly basis. If: (a) the Drilling Unit has been mobilised; (b) the total well depth has been reached; (c) the well has been plugged and abandoned, site reinstated; (d) the Drilling Unit has been demobilised, all within a total period of 20 days, the Daily Operations Management Fee will be capped at a total of 20 days' (i.e. $311,600). In all other circumstances, the Daily Operations Management Fee will not be capped at a maximum number of days. 1.3 Close Out Fee A close out fee of $290,000 will be due and payable by Operator 30 days after P&A of the well. 1.4 Special Conditions Expenses for items such as: (a) the shore base and rig site office support (including but not limited to phone rentals, calls, computers, communications systems, faxes and photocopiers) for support outside the Melbourne operations base; and (b) Travel, accommodation and similar expenses, will be charged at cost plus 10%. (c) legal fees for all contractual Agreements other than this one, will be at Operators cost plus a 10% administration fee. For a person travelling to site, the total travel time will be calculated from the time that person departs his/her place of residence until the time that person arrives on the Drilling Unit, and on the return trip from the time that person departs the Drilling Unit until the time that person arrives at his/her place of residence. A day rate of $2,750 per person will be payable for attendance at any pre-drilling meetings plus travel and accommodation expenses. A day rate of $3,000 per day will be required for any additional night Drilling Supervisors. 6Annexure B comprised a lengthy table divided into four parts, the first entitled "Project planning", the second entitled "Detailed project and well planning", the third entitled "Well operations", and the fourth entitled "Well close out", the whole being prefaced by an introductory section which was as follows: The table in this Annexure B lists the various project tasks, the party responsible for managing each of the tasks, and the party responsible for the cost associated with managing the task. For reasons of transparency, the tasks for which ADA carries the management cost include the reference to the project fee through which the cost is recovered from the Operator. ADA (PP): Part of Project Planning Fee and, if applicable, the "Consortium Shared Services Sourcing/Contracting" fee paid by the Operator to ADA ADA (Ops): Part of Daily Operations Management Fee paid by Operator to ADA ADA (C/out): Part of Close Out Fee paid by Operator to ADA. Some tasks will require the involvement of third parties, in which case the table includes the party responsible for the third party charges.

The statutory demand 7On or about 13 March 2010, ADA served on Zhongfu a Creditor's Statutory Demand bearing that date verified by an affidavit of Roy Peter Brailsford sworn 13 March 2012 ("the Demand"). The Demand was for a total of $1,302,804.94, described in the schedule as follows: Description of the debt Amount of the debt Invoice No. 1100, dated 9 September 2011 $330,000.00 Project Planning Fee - 2nd instalment Interest payable on Invoice No 1100 up to 13 March 2012 $8,782.14 Charged at the rate of LIBOR plus 3% per annum compounded monthly, as per clause 6 of Annexure E to the Agreement Invoice No. 1102, dated 25 October 2011 $43,092.43 Out of pocket expenses incurred in connection with the Calamia West 1 Well drilling project - 05/08/2011 to 21/10/2011 Interest payable on Invoice No 1102 up to 13 March 2012 $982.77 Charged at the rate of LIBOR plus 3% per annum compounded monthly, as per clause 6 of Annexure E to the Agreement Invoice No. 1103, dated 31 October 2011 $330,000.00 Project Planning Fee - 3rd instalment Interest payable on Invoice No 1103 up to 13 March 2012 $7,170.51 Charged at the rate of LIBOR plus 3% per annum compounded monthly, as per clause 6 of Annexure E to the Agreement Invoice No. 1104, dated 30 November 2011 $3,178.28 Out of pocket expenses incurred in connection with the Calamia West 1 Well drilling project -21/10/2011 to 31/10/2011 Interest payable on Invoice No 1104 up to 13 March 2012 $48.03 Charged at the rate of LIBOR plus 3% per annum compounded monthly, as per clause 6 of Annexure E to the Agreement Invoice No. 1105, dated 20 February 2012 $342,760.00 Daily Operations Fee - permit EP465 Invoice No. 1106, dated 20 February 2012 $319,000.00 Clouse Out Fee - permit EP465 Less partial payment of Invoice No. 1100 made on 11 November 2011 ($82,209.22) Total amount: $1,302,804.94

8It will be apparent from the above that the Demand comprised a number of components; namely: the second instalment of the Project Planning Fee under invoice 1100 of $330,000, and interest on it; the third instalment of that fee under invoice 1103, and interest on it; out of pocket expenses under invoices 1102 and 1104, and interest on them; and, the Daily Operations Fee under invoices 1105 and 1106; less, a partial payment on account of invoice 1100. This partial payment arose in circumstances that Zhongfu had paid a sum of $500,000 under the Agreement, inclusive of the initial instalment of the Project Planning Fee, and the remaining balance was applied by ADA on account of the second instalment.

The Plaintiff's case 9As I have said, Zhongfu filed the present application on 2 April 2012. It was supported by an affidavit of Wen Jiang, a director of Zhongfu, affirmed that date. Subsequent evidence discloses that this affidavit was prepared in circumstances of some difficulty, due to the location of most of Zhongfu's principals in China, and problems in obtaining detailed and prompt instructions from them in the available time. 10Essentially, the affidavit first contains a bare denial that the moneys claimed in the schedule to the demand are "due and owing" to ADA. It then elaborates that if ADA has any claim against Zhongfu (which is not admitted), it is for unliquidated damages for alleged breach of the Agreement, and that such damages are not presently due and payable. The deponent proceeds to depose that after the initial payment of $500,000, Zhongfu had not paid any further moneys to ADA under the Agreement, as it considered that ADA had not performed its obligations under it. In particular, Zhongfu claimed that ADA had (1) not performed the drilling project preparation and planning services listed in Annexure B to the Agreement, (2) not completed adequately or at all the items for which it was responsible under contract or logistics in Annexure B, and (3) delayed in locating a suitable drilling rig to drill the intended exploration well. 11The deponent then says: Zhongfu bases the above claim on facts that Zhongfu did not receive any or any adequate reports from ADA on the work which it was allegedly doing under the [Agreement], no drilling contract was engaged, and no exploration well was drilled. Essentially, this amounts to an assertion that indebtedness was disputed on the basis that the work the subject of the contract to be performed by ADA had not been performed. The deponent then deposed that, to the best of his knowledge, information and belief, neither party had served a notice of default on the other, and neither had purported to terminate the Agreement. 12The deponent then turned to two particular components of the Demand - the Daily Operations Fee and the Close Out Fee - and deposed that to the best of his knowledge, information and belief, ADA did not drill the well and, accordingly, had not earned the Daily Operations Fee and the Close Out Fee. 13The deponent dealt next with the execution of the Agreement on 6 August 2012, and deposed to facts to the effect that (1) the Agreement had been amended in accordance with Zhongfu's request that the daily operations fee be capped at 20 days, with a maximum fee of $311,600; (2) that Zhongfu's officers relied on that representation in authorising execution of the Agreement; and (3) that the representation was incorrect, as while the daily operations management fee was capped at 20 days, that was subject to considerable qualifications [Annexure E, cl. 1.2, set out above], which had not been discussed or contemplated. The deponent said: [25] Zhongfu would not have signed the [Agreement] if [its officers] understood the qualifications to the purported "capping" of the Daily Management Fee in the form of the Agreement that was signed. [26] Zhongfu wishes to make an offsetting claim against ADA based on clauses 18, 20, 21 and 22 of the Australian Consumer Law and/or for rectification of the [Agreement] based on misrepresentation of Mr Bell at the Signing Meeting upon which Zhongfu relied and which led [to] Zhongfu signing [the Agreement]. 14In that way, the affidavit raised a dispute in respect of the Daily Operations Management Fee, and foreshadowed an "offsetting claim" based on the Australian Consumer Law, or, alternatively, a claim for rectification. 15The concept of an offsetting claim in this context is well understood, and must mean an offsetting claim for debt or damages. The reference to clauses 18, 20, 21 and 22 of the Australian Consumer Law are to provisions which prohibit misleading or deceptive conduct, unconscionable conduct and so on, not to the remedies that are conferred in respect of that conduct. There is nothing that I can see in paragraphs 25 or 26 of the affidavit, set out above, that indicates that indebtedness is disputed on the basis that the validity of the whole Agreement is impugned by an application to have it set aside. 16Accordingly, the affidavit revealed that the indebtedness was disputed: first, on the ground that any claim ADA had was for unliquidated damages and not for debt, so that it could not be said that the moneys claimed were due and owing; secondly, that the work, performance of which entitled ADA to remuneration under the Agreement, had not been performed; thirdly, and more particularly, that the work entitling ADA to the Daily Operations Management Fee and the Close Out Fee, or other conditions which were precedent to those fees being payable, had not been satisfied; and, fourthly, that, in any event, the Daily Operations Management Fee ought to have been capped at $311,600. 17Subsequent to 2 April 2012, ADA filed extensive further affidavit evidence. It is not necessary to recite it in full. Relevantly, its gravamen was that the form of the Agreement as executed departed in a number of respects from the preceding understanding of Zhongfu, which it had communicated to ADA, and, because Zhongfu's officers were not proficient in the English language, they did not, when presented with the Agreement for execution and told that it incorporated their previously communicated requirements, realise that it did not do so. The main respect in which this was so, other than the capping of the Daily Operations Management Fee, was the requirement that funds be paid into an "escrow account", although there were some additional aspects. Further, these supplementary affidavits deposed to a supplementary oral agreement said to have been made on 12 August 2011, to the effect that the Agreement would be varied to accord with Zhongfu's previously communicated requirements ("the Variation Agreement"). 18Zhongfu's claims can therefore be summarised as follows. First, that the Agreement should be set aside by reason of conduct of ADA in contraventions of sections 18, 20, 21 and 22 and ancillary provisions of the Australian Consumer Law, essentially, on the basis that the representations made on behalf of ADA to the effect that the terms of the Agreement included the amendments required by Zhongfu were false. Secondly, that ADA, by its persistent refusal to perform the variation Agreement, had repudiated the Agreement, and was not entitled to any payment. Thirdly, that the contract was void, or voidable, for mistake, the mistake being, in essence, that Zhongfu believed it to have been amended to exclude reference to an escrow account and include the cap on the Daily Operations Management Fee, when it had not been so altered. Fourthly, that ADA had failed to mitigate its losses. Fifthly, and finally, that, at least in relation to the Daily Operations Management Fee and the Close Out Fee, the conditions that made them payable had not been satisfied, and the work that earned those payments had not been performed.

The Defendant's case 19ADA's position was that it accepted that a genuine dispute had been raised in respect of the sums claimed in invoices 1105 and 1106 - that is to say, in respect of the Daily Operations Management Fee and the Close Out Fee - but not otherwise, and that the demand should be varied pursuant to (Cth) Corporations Act 2001, s 459H(4), to the amount of $641,044.94, and time extended for compliance. 20So far as Zhongfu's fifth ground - non-performance of the work that earned the Daily Operations Management Fee and Close Out Fee - is concerned, it is effectively conceded by ADA that a genuine dispute is raised, so that this does not require further consideration. 21So far as Zhongfu's fourth ground - failure to mitigate - is concerned, it does not, in my judgment, give rise to a genuine dispute, because it is misconceived in law. There is no suggestion that, on 12 August, or for that matter at any later date, Zhongfu had repudiated the Agreement so as to entitle ADA to terminate, or, at least, that ADA had, in fact, terminated. To the contrary, Zhongfu's evidence is that neither party had given notice of termination as recently as April 2012. ADA's claim is not a claim for damages for breach of contract in respect of which there would be an obligation to mitigate, but for liquidated sums said to be due under the contract. There is no obligation to mitigate in respect of such liquidated sums [White & Carter (Councils) Ltd v McGregor [1962] AC 413; Francis May Pty Ltd v Tikitere Pty Ltd (NSWSC, Miles J, 2 April 1982, unreported)]. Moreover, even if the claim were one for damages, no obligation to mitigate arises just because it appears to one party that the other party took issue with some aspect of the Agreement. 22The ground raised in the original affidavit, to the effect that any claim that ADA had was for damages and not for debt, was not pressed. 23That then leaves for consideration the first three grounds raised in Zhongfu's submissions, namely, in effect (1) that the whole of the debt was disputed because the Agreement was liable to be set aside, or rescinded for contravention of the Australian Consumer Law; (2) that failure to implement the Variation Agreement amounted to a repudiation of the Agreement; and (3) that the Agreement was void, or voidable, for mistake.

Consideration 24All these grounds depend, in one way or another, upon the negotiations that had taken place between the parties prior to execution of the Agreement, and, in the case of the Variation Agreement, supplemented by negotiations shortly thereafter on 12 August 2011.

The Graywinter principle 25ADA objected that it was not open to Zhongfu to raise these grounds by reason of the so-called Graywinter principle. This is a reference to the judgment of Sundberg J in Graywinter Property Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 21 ACSR 581. As his Honour held that the application and affidavit filed in that case sufficiently constituted an application for the purposes of s 459G in the relevant respect, his Honour's observations may be regarded as obiter. Nonetheless, they have been so frequently followed and applied that I ought not depart from them. 26His Honour said, essentially, that to comply with the requirements of s 459G, the supporting affidavit must, as a minimum, contain a statement of the material facts on which the applicant intends to rely to show a genuine dispute. It is not in doubt that those facts do not have to be proved in admissible form. His Honour then said that the court could not entertain an application under s 459G where the affidavit containing the minimum requirements had not been served within time. However, his Honour, following earlier authority, accepted that an applicant whose initial affidavit had satisfied the threshold test, was entitled to supplement the material, because, whilst the supporting affidavit did not have to deploy the evidence to be relied on at the hearing, admissible evidence could and would have to be relied on. 27In Elm Financial Services Pty Ltd v MacDougal [2004] NSWSC 560, Barrett J, as his Honour then was, said of the Graywinter principle (at [7]): The Graywinter principle derives from the judgment of Sundberg J in Graywinter Properties Pty Ltd v Gas and Fuel Superannuation Fund ...and may be regarded as now firmly established: see the most recent survey of the authorities in Tokich Holdings Pty Ltd v Sheraton Constructions (NSW) Pty Ltd [2004] NSWSC 527 (21 June 2004, White J). What it means is that the application for an order setting aside the statutory demand and the affidavit in support of that application, both filed and served within the 21 day period stipulated in s 459G(3), must fairly alert the claimant to the nature of the case the company will seek to make in seeking to have the statutory demand set aside. The content of the application and affidavit must convey, even if it be by necessary inference, a clear delineation of the area of controversy so that it is identifiable with one or more of the grounds made available by ss 459H and 459J for setting aside statutory demands. That process of delineation may not be extended after the end of the 21 day period, although it is open to the plaintiff to supplement the initial affidavit by way of additional evidence relevant to the area of controversy identified within the period. (His Honour repeated these observations in Condor Asset Management Limited and Excelsior Eastern Limited [2005] NSWSC 1139; (2005) 56 ACSR 223 (at [50]).) 28In Tuta Health Care Pty Ltd v Nipar Asia Pty Ltd [2005] NSWSC 664, Campbell J, as his Honour then was, cited that passage from Elm Financial Services (at [9]) with evident approval, and observed that the line of cases following Graywinter had been extensively followed. His Honour extended its application as follows (at [13]): While the Graywinter ... principle has been formulated in terms of what affidavits must be filed by what time concerning an application to set aside a statutory demand, it has an effect on the amendments which may be made to an application to set aside a statutory demand. If there cannot be an evidentiary basis for a submission that the statutory demand should be set aside on some particular ground because that ground was not one which has been fairly notified by the affidavit in support, there is simply no point in allowing an amendment to an originating process to articulate that ground. 29It will be observed that Barrett J and Campbell J have both referred to the requirement that the s 459G(3) affidavit, "fairly alert the claimant to the nature of the case the company will seek to make in seeking to have the Statutory Demand set aside". In Infact Consulting Pty Ltd v Kyle House Pty Ltd [2007] NSWSC 56, White J said (at [23] - [24]): [23] It has been held in a long series of cases that the corollary of the mandatory requirement that an affidavit supporting the application be filed and served within 21 days, is that the grounds to be relied upon to set aside a Statutory Demand must be raised in that affidavit (see the list of authorities referred to in Tuta Healthcare v Nipar Asia at [12] and see also Condor Asset Management Limited and Excelsior Eastern Limited (2005) 56 ACSR 223 at 50). This principle, known as the Graywinter principle ... has been considered and affirmed at appellate level. In Energy Equity Corporation v Sineidi Pty Limited the Court of Appeal of the Supreme Court of Western Australia was invited not to follow Graywinter Properties. However, the Court of Appeal declined that invitation. The High Court refused special leave to appeal. [24] The principle must now be taken to be well settled. 30To some extent, there has been a relaxation in the Graywinter principle, in so far as it required that the ground be raised expressly or by necessary implication. In Safe Rack Pty Limited v Marketing Heads Australia Pty Limited [2007] NSWSC 1143; (2007) 214 FLR 393, Barrett J, having regard to observations made in other cases by Austin J and White J, accepted that that requirement was too strict. His Honour said (at [25]): In the Graywinter case itself, the minimum requirement with respect to a supporting affidavit was said by Sunberg J to be that it must "contain a statement of the material facts on which the applicant intends to rely to show a genuine dispute" [emphasis added]. That was, of course, a s 459H(1)(a) case. But the same reasoning applies where the challenge is under s 459J. In endorsing the approach taken by Sundberg J, the Full Court of the Supreme Court of Australia in Meadowfield Pty Limited v Gold Coast Holdings (2001) WSCA 360 said that the supporting affidavit is "required to reveal a genuine dispute" [emphasis added]. These statements, coupled with the approaches taken by Austin J and White J and the decision of Santow J in Callite, persuade me that a ground is "raised", as referred to in Energy Equity, if the ground is evident from the supporting affidavit, even if only because it can be discerned from some annexed document the content of which "reveals" it. 31Accordingly, it will be sufficient if the material facts on which the applicant intends to rely to support the genuine dispute are discernible from the supporting affidavit and/or the annexures and exhibits to it. Nonetheless, while explicit reference to the ground or necessary implication may not be necessary, it remains important that the affidavit convey some fair notice to the creditor of the case that is to be made.

Application to this case 32For Zhongfu, it was submitted that that the s 459G affidavit of 2 April 2012 satisfied the Graywinter principle so understood, because paragraphs 25 and 26 "alluded to" a claim that the debt was not payable because the Agreement was liable to be set aside. I am afraid that I am unable to accept that submission. I do not think that any creditor fairly reading this affidavit would have divined from it that indebtedness was disputed on the ground that the Agreement was liable to be set aside. The references to the relevant clauses of the Australian Consumer Law in the context of "an offsetting claim against ADA" would have conveyed a reference to a claim for damages for contravention of those clauses. The claim for rectification conveyed a claim for rectification to limit the Daily Operations Management Fee in the way in which Zhongfu contended that it ought to be limited. In my view, the material facts underlying a claim to have the whole Agreement avoided for misleading and deceptive conduct or unconscionable conduct are not revealed by or discernable from the affidavit. Accordingly, in my view the Graywinter principle precludes Zhongfu from relying on its first, second and third grounds. 33In reaching this conclusion, which may have the effect of precluding Zhongfu from ultimately litigating those grounds, I am somewhat comforted by the circumstance that the respects in which the Agreement departed from Zhongfu's claimed understanding of it are not relevant to the basis upon which those parts of the claim that remain in dispute, or are still pressed, are founded.

The consumer law claims 34In so far as Zhongfu's consumer law claims related to the Daily Operations Management Fee cap, that has, for present purposes, been conceded. 35In so far as they relate to the escrow account, that is not material to the basis upon which the remaining components of the debt are sustained. 36If Zhongfu were to succeed on its consumer law claims, in circumstances where moneys have been paid under the Agreement and some considerable work has undoubtedly been done under the Agreement, rescission ab initio is an unlikely outcome, particularly where it has not been the matters in respect of which the Agreement as documented is said to depart from Zhongfu's understanding of it that has caused the present dispute. A much more likely result would be rectification of the Agreement, and such rectification would have no bearing on ADA's present claims.

Non-performance of the work entitling the defendant to the Project Management Fee 37The remaining ground with which I should deal - although it was not advanced, as I understand it, in the written submissions as a separate ground - was that raised in the original affidavit, concerning performance of the work said to be interdependent with entitlement to the Project Management Fee. I have set out above the relevant provisions of the Agreement which make the Project Management Fee payable in three instalments, the first by reference to a specified event - and which has on any view been paid - and the second and third by reference to particular dates. It may be that, if there had not been substantial compliance with the obligation to do work during the relevant periods, that it could have been argued that the fee was not payable, but prima facie this was a fee payable by a number of instalments, rather than payable contingent upon any particular work being done. 38In my view, the Project Planning Fee was distinct from the Daily Operations Management Fee and the Close Out Fee, and Annexure B to the Agreement enables one to see how the fee was apportioned, having regard to the particular work to be done. Although the original affidavit was sufficient to amount to a supporting affidavit, in this respect, for the purposes of the Graywinter principle - because it showed facts which, if ultimately established, would found a genuine dispute - subsequently the respondent has adduced evidence that the relevant work was done, and there is no evidence contradicting it. The applicant says, in effect, that they had not received reports to show that the work had been done, but the evidence also reveals that extensive reporting took place. In any event, while the absence of such reports, if it stood alone, might have been enough to show a genuine dispute, it does not continue to do so in the light of affirmative and uncontradicted evidence that the work has been done. 39Particular reference was made to the fact that a rig had not been sourced and that the well had not been dug. There is nothing in Annexure B of the Agreement to show that the sourcing of a rig was part of the Project Planning and Detailed Project and Well Planning phases, let alone that failure to achieve it meant that the fee was not payable in accordance with the terms of the Agreement. Although Annexure B does not appear to specifically refer to it, by necessary implication the digging of the well was part of the drilling operations as distinct from the project planning, and if it was not done that might have impacted on the entitlement of ADA to the Daily Operations Management Fee, but not to the Project Planning Fee. 40In my view, Zhognfu has not established a basis for resisting payment on the footing that the work has not been done, even to the low standard required in an application of this kind. In essence, the evidence is all one way.

Conclusion 41For those reasons, as conceded by ADA, the demand should be varied to the amount of $641,044.94, and the application should be otherwise dismissed.

Orders 42I make the following orders: (1)Order pursuant to (Cth) Corporations Act 2001, s 459H(4), that the creditor's statutory demand dated 13 March 2012 be varied by deleting in paragraph 1 the sum of $1,302,804.94 and substituting the sum of $641,044.94 and by omitting from the schedule those parts that refer to invoices number 1105 and 1106 and substituting for the total amount of $1,302,804.94, the sum of $641,044.94. (2)Declare, pursuant to s 459H(4)(b), that the statutory demand has had effect as so varied from the date on which the demand was served on the plaintiff. (3)Extend time for compliance with the creditor's statutory demand to 5 September 2012. 43In my view, the effect of the defendant's offer of 13 June 2012 - which was, essentially, on the terms that I have ultimately determined the case - is that the plaintiff is deprived of an argument, which it otherwise might have had, that, in procuring the reduction of the claim by 50 per cent - from $1.3 million to $640,000 - it has had a significant measure of success, which should bear on the usual cost consequences of the dismissal of its application. But I do not think, in this case, the offer triggers or justifies an indemnity costs order. 44I order that the plaintiff pay the defendant's costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 09 November 2012

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