Re Beyond International Pty Limited [2023] NSWSC 830

Supreme Court New South Wales

Medium Neutral Citation: Re Beyond International Pty Limited [2023] NSWSC 830 Hearing dates: 10 July 2023 Date of orders: 10 July 2023 Decision date: 10 July 2023 Jurisdiction: Equity - Corporations List Before: Ball J Decision: (1) An order under section 459H of the Corporations Act 2001 (Cth) that the creditor's statutory demand dated 4 April 2023 be set aside; and (2) the defendant pay the plaintiff's costs of this application on an indemnity basis. Catchwords: CORPORATIONS — Winding up — Statutory demand — Application to set aside — No issue of principle Legislation Cited: Corporations Act 2001 (Cth) Cases Cited: Solarite Air Conditioning Pty Ltd v York International Australia Pty Ltd [2002] NSWSC 411 Category: Principal judgment Parties: Beyond International Pty Limited (Plaintiff) 108 Media Limited (Company Number 13176136) (Defendant) Representation: Counsel: A Flick (Plaintiff)

Solicitors: HWL Ebsworth (Plaintiff) File Number(s): 2023/134747 Publication restriction: Nil

EX TEMPORE JUDGMENT 1. Before the Court is an application to set aside a statutory demand for $300,000 served on the plaintiff, Beyond International Pty Limited, by the defendant, 108 Media Limited. The application is made under s 459H for the Corporations Act 2001 (Cth). The statutory demand was served in respect of a debt said to be owing under a non-binding indicative offer signed on 20 July 2022 between the plaintiff and the defendant. There was no appearance by the defendant at the hearing of the application, and no reason was advanced for why the statutory demand should not be set aside. 2. The non-binding indicative offer sets out proposed terms by which the defendant would acquire 100% of the share capital of the plaintiff by a scheme of arrangement. Under a clause entitled "Cost Reimbursement", the non-binding indicative offer provides for the payment of a break fee of $300,000 in the event that the plaintiff elects not to proceed with the transaction. The clause contains the following acknowledgment: The parties agree that the Agreed Fee is an amount to compensate 108 Media for: • advisory costs. • costs of management and directors' time. • out-of-pocket expenses (including any domestic or international travel costs); and • reasonable opportunity costs incurred by 108 Media in pursuing the Proposed Transaction or in not pursuing alternative acquisitions or strategic initiatives which 108 Media could have developed to further its business and objectives. The parties agree that the costs incurred are of a nature that they cannot be accurately quantified and that a genuine pre-estimate of the costs would equal or exceed the Agreed Fee. 1. The plaintiff seeks to set aside the statutory demand on two grounds. First, it contends that there is a genuine dispute as to the existence of the debt. The dispute is put in various ways, but essentially, the plaintiff contends that, particularly when read with the acknowledgment, the clause relating to the payment of the fee required that payment would only be made if the defendant was ready, willing, and able to perform the agreement, which it was not. In particular, the plaintiff says that the defendant delayed unduly in commencing the conduct of legal due diligence and did not have the financing the defendant required in order to proceed with the transaction. 2. Second, the plaintiff submits that it has an offsetting claim arising from the defendant's misleading and deceptive conduct. The relevant conduct involves making false representations before the non-binding indicative offer was signed concerning the financing available to the defendant and the defendant's readiness to commence legal due diligence. 3. It is not necessary to set out all the representations relied on by the plaintiff. However, relevantly, a director of the plaintiff gives evidence that on 24 June 2022, he had a telephone call with Mr Abhi Rastogi, a director of the defendant, in which Mr Rastogi said: Our goal is to announce the acquisition of Beyond at mipcom. The capital and debt is in place for the acquisition. Baker McKenzie, will start legal due diligence next week. Similarly, on 19 July 2022, Mr Rastogi sent a text message in which he said, "Bankers r ready to go [sic]." 1. As I have said, there are a number of other similar representations which were made by the defendant to the plaintiff. The plaintiff contends that if those representations had not been made it would not have agreed to pay the break fee. 2. It is only necessary for the plaintiff to establish that there is a genuine dispute concerning the existence of the debt. The dispute is genuine if it is real and not spurious, hypothetical, illusory, or misconceived. The threshold to establish a genuine dispute is not high: see Solarite Air Conditioning Pty Ltd v York International Australia Pty Ltd [2002] NSWSC 411 at [23] per Barrett J. 3. In my opinion, the plaintiff has clearly established that it satisfies that threshold in this case. It has advanced a good arguable case in relation to the correct interpretation of the relevant provisions of the non-binding indicative offer. It also appears to have a good arguable case that the defendant engaged in misleading and deceptive conduct in making representations concerning its willingness or ability to proceed with legal due diligence and the availability of funding. In those circumstances the statutory demand should be set aside. 4. In my opinion, it is appropriate to make an order that the defendant pay the plaintiff's costs on an indemnity basis. There was no appearance by the defendant today to contest the application, notwithstanding that the defendant had ample opportunity to do so. Moreover, in an email dated 23 December 2022, Mr Rick Narev, who at that time acted for the plaintiff, set out the basis on which the debt was disputed. The reasons given at that time correspond to the reasons I have accepted justify setting aside the statutory demand. In those circumstances it is appropriate that the costs be payable on an indemnity basis. 5. The orders of the Court are: 1. An order under section 459H of the Corporations Act 2001 (Cth) that the creditor's statutory demand dated 4 April 2023 be set aside; and 2. the defendant pay the plaintiff's costs of this application on an indemnity basis.