Reported Decision : [2001] NSWSC 918 [2001] ACL Rep 120 NSW 155 New South Wales Supreme Court CITATION : Aviex Pty Limited v Winron Pty Limited [2001] NSWSC 918 FILE NUMBER(S) : SC 3472/01 HEARING DATE(S) : 17 October 2001 JUDGMENT DATE : 17 October 2001 PARTIES : Aviex Pty Limited (Plaintiff) Winron Pty Limited (Defendant) JUDGMENT OF : Master McLaughlin COUNSEL : W. Haffenden (Plaintiff) G. Lucarelli (Defendant) SOLICITORS : KNPW Lawyers (Plaintiff) Minter Ellison (Defendant) LEGISLATION CITED : Corporations Law DECISION : 1. Order that the originating process be dismissed.; 2. Order that the Plaintiff pay the costs of the Defendant.; 3. Note that the Defendant by its Counsel undertakes to the Court not to commence winding up proceedings against the Plaintiff prior to 4pm on 31 October 2001. IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION 3472 of 2001 Master McLaughlin Wednesday, 17 October 2001 Aviex Pty Limited v Winron Pty Limited Judgment 1 Master: These proceedings were instituted by originating process filed on 9 July 2001 by the plaintiff, Aviex Pty Limited. The form of that originating process was somewhat peculiar, in that it asserted that the application was made under section 459B of the Corporations Law and that the nature of the proceeding was an application for winding-up on the ground of insolvency. 2 However, that document then proceeded to claim substantively an order that the statutory demand of Winron Pty Limited, the present defendant, dated 18 June 2001, be set aside pursuant to section 459G of the Corporations Law. No point was taken by the defendant concerning the reference in the originating process to section 459B of the Corporations Law, or the reference to an application for winding up on the ground of insolvency. 3 At the commencement of today's hearing the plaintiff filed an amended originating process which removed the foregoing inappropriate references. By the amended originating process the plaintiff claims substantively an order that the statutory demand of the defendant dated 18 June 2001 be set aside pursuant to section 459G of the Corporations Law. 4 That statutory demand requires payment by the plaintiff to the defendant of an amount of $175,069. That amount is described in the schedule to the demand as follows: "The amount of the debt is $171,835. The debt is made up as follows: (a) Advances made to the company on or about 10 December 1997 $50,000. (b) Advance pursuant to loan agreement dated 9 February 1999 $90,000. (c) Interest pursuant to the loan agreement $11,250. (d) Interest on the above advances from 15 May to 16 December 1999 $11,345. (e) Interest on $162,595 from 16 December 1999 to 17 June 2001 at 15 percent per annum or $462 per week pursuant to letter from the company dated 16 December 1999 $36,036. (f) Less payments $23,562. Balance owing as at 17 June 2001 $175,069." 5 The plaintiff brings the present proceedings pursuant to the provisions of Division 3 of Part 5.4 of the Corporations Act (formerly the Corporations Law). In particular, the plaintiff relies upon the provisions of section 459H of the Corporations Act, and asserts that there is a genuine dispute between the plaintiff and the defendant about the existence or amount of the debt to which the demand relates. 6 I have had the benefit of receiving a written outline of submissions from Counsel for the plaintiff, and an annotated chronology from Counsel for the defendant. Those documents will remain in the Court file. 7 There is no dispute that there was received by Mr Robert Ernest Corben, the director of the plaintiff company, two amounts in cash from Mr Barry Ronald Roberts, the sole director of the defendant company, those amounts being $50,000 and later $90,000. 8 The original amount of $50,000 was invested by Mr Roberts in an entity known as Brooker Marine with which Mr Corben was involved. That investment was realised and the amount of $50,000 was retained by Mr Corben, to whom Mr Roberts directed on 30 October 1997 that that amount should constitute what, for the moment, I shall describe under the neutral designation of an advance to the plaintiff company. 9 It is submitted on behalf of the plaintiff that there existed a degree of confusion in the minds of at least the defendant, if not both the defendant and the plaintiff through the various directors of those companies, as to the characterisation of that $50,000 advance. 10 In February 1999 a further $90,000 was advanced by Mr Roberts in cash to Mr Corben. The circumstances of that advance were however (so far as, in my conclusion, the plaintiff company is concerned) set forth in a document headed "Loan Agreement" dated 9 February 1999 and executed both by the plaintiff and by Mr Corben, the plaintiff being described in that document as the borrower and Mr Corben as the guarantor. 11 The fact that that document was not executed by the defendant does not in my conclusion in any way affect the efficacy of that document or the character of the advance which was made by the defendant to the plaintiff in that amount of $90,000. 12 That loan agreement required repayment of the principal sum of $90,000 on or before 15 May 1999, together with an additional amount as set forth in that document, bringing the principal and the additional amount to a total of $101,250. 13 The defendant did not repay that amount as stipulated in the loan agreement. There were numerous communications between Mr Roberts on behalf of the defendant and Mr Corben on behalf of the plaintiff concerning the failure of the plaintiff to pay at least the $90,000. No such payment had been made by November 1999. 14 Subsequently a further proposal was made by the plaintiff to the defendant concerning the totality of amounts which had been advanced by the defendant to the plaintiff. That proposal was set forth in a letter from the plaintiff to the defendant dated 16 December 1999, which referred to the understanding of Mr Corben and his fellow director of the plaintiff, Mrs Liu, as to an agreement which the plaintiff understood had been reached with the defendant during what was described as Mr Corben's "recent visit and meeting". 15 That letter set forth an acknowledgment and an undertaking to repay the debt outstanding by the plaintiff to the defendant, and set forth that the principal sum to be repaid was $162,595, and that that sum should attract interest at 15 percent per annum or $462 per week, and made provision for the principal sum being reduced in the event, which did not happen, that it was repaid on or before 31 January 2000. That letter also made provision for Mrs Liu and Mr Corben personally to guarantee the repayment of the principal sum by the plaintiff. 16 In accordance with the provisions of that letter of 16 December 1999 the plaintiff in fact made weekly payments to the defendant representing interest of $462 per week owed, as set forth in that letter, by the plaintiff to the defendant, together with another amount of interest in a sum amount of $90 per week (being in respect to a personal indebtedness of the plaintiff to Mr Roberts). Those interest payments were made from December 1999 until 23 November 2000, when they ceased. 17 It would appear that a statutory demand was served on the plaintiff by the defendant on 1 May 2001, and was subsequently withdrawn. The withdrawal of that statutory demand appears to have been in consequence of certain without prejudice discussions between the parties. Those without prejudice discussions were the subject of various communications passing between the respective solicitors for the parties. 18 In the letter of 29 May 2001 the solicitors for the plaintiff stated, "We note that neither our clients nor yours are bound by the draft documents until both sides have executed same in final form with any agreed variations being made". No such execution of final documentation was ever effected by the parties. 19 It has been submitted on behalf of the plaintiff that there is a genuine dispute as to the indebtedness of the plaintiff to the defendant, that that genuine dispute arises firstly out of the fact that there is, so it is submitted, a binding agreement between the parties in the terms of the proposed outcome of the without prejudice discussions of May 2001, and that, under the terms of what appears to have been proposed in those discussions, any entitlement of the defendant to receive payment from the plaintiff would not arise until 15 November 2002. 20 Further it is submitted that, even if there is no such binding agreement between the parties, there is in any event a genuine dispute between the parties as to the identity of the person or entity to whom any debt is owed by the plaintiff in consequence of the admitted advances to the plaintiff of the two amounts of $50,000 and $90,000. 21 In proceedings of the nature of that presently before the Court it is necessary for the Court only to be satisfied as to the existence of a genuine dispute as to the debt. It is not necessary for the Court to embark upon some form of inquiry into the strengths or weaknesses of the respective cases for the parties, let alone to attempt to determine disputed questions of fact as to the ultimate liability. If the Court is satisfied as to the existence of such a genuine dispute then the Court must set aside the statutory demand. 22 The mere assertion of the existence of a dispute does not of course constitute a dispute, let alone a genuine dispute. 23 The plaintiff places considerable significance upon the facts that neither the loan agreement of 9 February 1999 was executed by the defendant, nor was the letter of 16 December 1999 adopted by the defendant by signing a copy thereof and returning it to the plaintiff, as was requested in the final paragraph of that letter. 24 The plaintiff also places considerable significance upon the fact that the asserted indebtedness of the plaintiff to the defendant was not reflected or disclosed in the financial records of the defendant. In this regard the plaintiff also points to the fact that the affidavit verifying the statutory demand, which was sworn by Mr Roberts on 18 June 2001, states in paragraph 3 that he had inspected the books and records of the creditor in relation to the amounts outstanding to it by the debtor company, "and those books and records are the source of my knowledge of the matter stated in this affidavit concerning the debt". 25 It is quite apparent from the affidavit evidence both of Mr Robert's himself and of Mr Corben that the source of Mr Roberts' knowledge concerning the matters stated in his affidavit accompanying the statutory demand was his own personal knowledge based upon his dealings and communications with Mr Corben. 26 The fact that paragraph 3 of his affidavit accompanying the statutory demand is not accurate was not however in any way relied upon by the plaintiff as a ground for setting aside the statutory demand. Had it been so relied upon, I would have declined to set aside the statutory demand upon that ground. 27 It is abundantly obvious in this case that the plaintiff received the two amounts of $50,000 and $90,000 in cash from the defendant, and that, as recognised by the various arrangements and undertakings made and given by the plaintiff, both in the loan agreement of 9 February 1999 and in the negotiations which preceded the letter of 16 December 1999, and in the manner set forth in that letter itself, the plaintiff regarded itself as being indebted to the defendant in the amounts claimed. Any assertion that is now made by the plaintiff that there is a dispute as to those amounts is an assertion which cannot in my conclusion be supported, let alone be regarded as constituting any genuine dispute concerning those amounts. 28 I have no hesitation in expressing my conclusion that there is no such genuine dispute. In those circumstances therefore the originating process should be dismissed, and I propose so to order. 29 I make the following orders, (1). I order that the originating process be dismissed. (2). I order that the plaintiff pay the costs of the defendant. (3). I note that the defendant by its counsel undertakes to the Court not to commence winding up proceedings against the plaintiff prior to 4 pm on 31 October 2001. ******** Last Modified: 12/05/2001 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.