Supreme Court New South Wales Medium Neutral Citation: In the matter of UGL Process Solutions Pty Ltd [2012] NSWSC 1256 Hearing dates: 21 September 2012 Decision date: 18 October 2012 Jurisdiction: Equity Division - Corporations List Before: Black J Decision: Defendant's statutory demand dated 12 July 2012 set aside. Defendant to pay Plaintiff's costs, as agreed or as assessed. Catchwords: CORPORATIONS - Winding up - Statutory demand - Application to set aside statutory demand - Whether genuine dispute established - Whether there is some other reason to set aside statutory demand - Whether defect in statutory demand which would give rise to substantial injustice - Whether there has been proper use of statutory regime. Legislation Cited: - Corporations Act 2001 (Cth) Pt 5.4, ss 459G, 459H, 459H(1)(a), 459H(2), 459H(3), 459H(4), 459J, 459J(1)(a), 459J(1)(b) Cases Cited: - Arcade Badge Embroidery Co Pty Ltd v Deputy Commissioner of Taxation [2005] ACTCA 3; (2005) 157 ACTR 22 - Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99 - Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 - Central City Pty Ltd v Montevento Holdings Pty Ltd [2011] WASCA 5 - Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37 - CP York Holdings Pty Ltd v Food Improvers Pty Ltd [2009] NSWSC 409 - Edge Technology Pty Ltd v Lite-On Technology Corporation [2000] NSWSC 471; (2000) 34 ACSR 301 - Energy Equity Corp Ltd v Sinedie Pty Ltd [2001] WASCA 419; (2001) 166 FLR 179 - Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 - First State Computing Pty Ltd v Kyling (1995) 13 ACLC 939 - Graywinter Properties Pty Ltd v Gas & Fuel Corp Superannuation Fund (1996) 70 FCR 452; 21 ACSR 581 - Hansmar Investments Holdings Pty Ltd v Perpetual Trustee Co Ltd [2007] NSWSC 103; (2007) 61 ACSR 321; 25 ACLC 282 - John Holland Construction and Engineering Pty Ltd v Kilpatrick Green Pty Ltd (1994) 14 ACSR 250 - Kay Investment Holdings Pty Ltd v North East Developments Pty Ltd (in liq) [2011] NSWSC 1121; (2011) 85 ACSR 610 - King Furniture Australia Pty Ltd v Higgs [2011] NSWSC 234 - Meehan v Glazier Holdings Pty Ltd [2005] NSWCA 24; (2005) 53 ACSR 229 - Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290; (1993) 11 ACSR 362 - Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 - Panel Tech Industries (Australia) Pty Ltd v Australian Skyreach Equipment Pty Ltd (No 2) [2003] NSWSC 896 - Portrait Express (Sales) Pty Ltd v Kodak (Australasia) Pty Ltd (1996) 20 ACSR 746 - POS Media Online Ltd v B Family Pty Ltd [2003] NSWSC 147; (2003) 21 ACLC 533 - Re 2 Roslyn Street Pty Ltd [2011] NSWSC 512 - Re Morris Catering (Australia) Pty Ltd (1993) 11 ACSR 601 - Saferack Pty Ltd v Marketing Heads Australia Pty Ltd [2007] NSWSC 1317 Category: Principal judgment Parties: UGL Process Solutions Pty Limited (Plaintiff) G & K Akers Contracting Pty Limited (Defendant) Representation: Counsel: D.R. Sibtain (Plaintiff) R. Dubler SC/C.P. O'Neill (Defendant) Solicitors: Corrs Chambers Westgarth (Plaintiff) Withnalls Lawyers (Defendant) File Number(s): 12/240786 Judgment 1By Originating Process filed on 2 August 2012, the Plaintiff, UGL Process Solutions Pty Limited ("UGLPS") applies to set aside a creditor's statutory demand ("Demand") dated 12 July 2012 served by the Defendant, G & K Akers Contracting Pty Limited ("Akers"). The Demand claimed the amount of $616,845.32, described by reference to 18 variations under a services agreement dated 20 August 2010 ("Services Agreement") (Ex P1 Tab 1). 2By way of background, UGLPS provides property management services to, inter alia, government departments and Akers provides site remediation services. By the Services Agreement, Akers agreed to provide site remediation services for land at Cox Peninsula in the Northern Territory to UGLPS which was in turn providing services to the Commonwealth Department of Finance and Deregulation. Akers in turn sub-contracted to other parties to perform the works. The original scope of works under the Services Agreement was completed in about October 2010 and subsequent variation works continued until early 2011. 3Akers relies on an affidavit of Mr Lyndon Montgomery, its General Manager, dated August 2012. Mr Montgomery's evidence is that Akers has been negotiating with UGLPS to have the invoices the subject of the variation orders paid for approximately 18 months and has, at UGLPS' request reissued several invoices so as to provide additional information or correct "minor errors" in the amounts claimed. Mr Montgomery also gave evidence (Montgomery [8]), inter alia, that: "The variations arose during the course of the Contract and for most part they were approved by Mr Evan Carroll of UGLPS, who is no longer employed by UGLPS. I am informed by Dave Nunn and verily belief that the way the variations would be approved was that Dave Nunn would contact Evan Carroll by telephone or by email and explain the variation work that needed to be done. Evan Carroll would then approve those variations over the phone or by e-mail." The reference to Mr Nunn is to a person associated with one of Akers' sub-contractors, who project managed the works the subject of the Services Agreement. UGLPS objected to that paragraph of Mr Montgomery's affidavit and I reserved my ruling on that objection to be addressed in this judgment. I reject the paragraph for form. I note that, in any event, that evidence would have had little weight where it does not disclose the content of the variations said to have been approved, what explanation was given of the particular variations or the content or terms of any approval given. Since I have rejected that evidence on that basis, it is not necessary to address the question, which is the subject of conflicting authority, as to whether hearsay evidence in the form of the second sentence of this paragraph is admissible in an application to set aside a statutory demand. 4UGLPS relies on two affidavits of Ms Boyd, who is a Senior Account Director of UGL Services Pty Limited. Ms Boyd's first affidavit dated 2 August 2012 contains a detailed schedule identifying the outcomes of her review of Akers' invoices and the basis on which UGLPS contends that the amounts claimed in the relevant variation invoices, and by extension the amounts claimed in the Demand, are genuinely disputed (Boyd 2.8.12 [19]; Ex P1 Tab 8). Ms Boyd points out that invoices were addressed to UGL Services Pty Limited, of which UGLPS is a subsidiary, but I do not understand UGLPS to take any point as to that matter. 5Ms Boyd points to an issue which arose as to whether the correct invoicing procedure under the Services Agreement had been followed and to the issue of invoices by Akers for variation works it had previously undertaken; identifies various issues in respect of the particular invoices that are the subject of the Demand; and also refers to an audit process adopted from late February 2012 in respect of the invoices, by which a third party was appointed as independent auditor by agreement between Akers, UGLPS and the Commonwealth Department of Finance and Deregulation. There is a contest between the parties, which it is not appropriate for me to determine in an application of this kind, whether the independent auditor has "signed off" on the variations claimed by Akers. Whether a genuine dispute is established 6UGLPS contends that the Demand should be set aside under s 459H(1)(a) of the Corporations Act 2001 (Cth) on the basis that there is a genuine dispute between UGLPS and Akers about the existence or amount of the debt to which the Demand relates. That section provides that a statutory demand may be set aside when the Court is satisfied that there is a genuine dispute about the evidence or amount to which that demand relates. The test for a "genuine dispute" used in s 459H of the Corporations Act has been variously formulated as that the dispute is not "plainly vexatious or frivolous" or "may have some substance" or involves "a plausible contention requiring investigation" and is similar to that which would apply in an application for an interlocutory injunction or a summary judgment: Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290; (1993) 11 ACSR 362; Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 787; Edge Technology Pty Ltd v Lite-On Technology Corporation [2000] NSWSC 471; (2000) 34 ACSR 301 at [28]. 7In Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37 at 39, Lockhart J observed that: "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." 8In John Holland Construction and Engineering Pty Ltd v Kilpatrick Green Pty Ltd (1994) 14 ACSR 250 at 253, Young J noted that there may be cases where the Court will look not only to an assertion of a dispute, but some material short of proof which backs up the claim that the amount is disputed; and that, in a sizeable construction case, a disputing of the figures may establish a genuine dispute about the amount of the debt without review of the evidence that backs them up. 9In Panel Tech Industries (Australia) Pty Ltd v Australian Skyreach Equipment Pty Ltd (No 2) [2003] NSWSC 896 at [17], Barrett J noted that the test for a genuine dispute involved a "plausible contention requiring investigation" which was "real and not spurious, hypothetical, illusory or misconceived" and a "perception of genuineness (or lack of it)". His Honour also noted that the tests for a genuine dispute, applied in the context of a summary procedure where it is not expected that the Court will embark on any extended enquiry, mean that the task faced by a company challenging a statutory demand on the "genuine dispute" ground is by no means at all a difficult or demanding one, and that the company will fail in that test only if it is found, upon the hearing of its application, that the contentions upon which it seeks to rely in mounting its challenge are so devoid of substance that no further investigation is warranted. 10In Central City Pty Ltd v Montevento Holdings Pty Ltd [2011] WASCA 5 at [9], Murphy JA (with whom Buss JA agreed) observed that: "The expression 'genuine dispute' within the meaning of s 459H(1)(a) of the [Corporations] Act, connotes a plausible contention requiring investigation: Createc Pty Ltd v Design Signs Pty Ltd [2009] WASCA 85 at [44]. The demand will be set aside if there is a bona fide disputed issue of fact or law, which is not based on spurious, hypothetical, illusory or misconceived grounds: Createc v Design Signs; Asian Century Holdings Inc v Fleuris Pty Ltd [2000] WASCA 59 at [35]. Once such a dispute is raised, it is not necessary for a company to satisfy the court as to where the merits of the dispute lie: Turner Corporation (WA) Pty Ltd v Blackburne & Dixon Pty Ltd [1999] WASCA 294 at [30]. The court will not attempt to weigh or examine the merits of any dispute: Createc v Design Signs; Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290 at 295." 11In Re 2 Roslyn Street Pty Ltd [2011] NSWSC 512 at [70], Ward J noted that: "A genuine dispute is therefore one which is bona fide and truly exists in fact and is not spurious, hypothetical, illusory or misconceived. It exists where there is a plausible contention which places the debt in dispute and which requires further investigation." 12If the court is satisfied that there is a genuine dispute as to the existence or amount of a debt to which the demand relates, the court is required to calculate the "substantiated amount" of the demand by deducting any disputed amounts from the admitted amount of the debt, being that part of the debt as to which no genuine dispute exists: s 459H(2). The court must set aside a statutory demand if the substantiated amount is less than the statutory minimum: s 459H(3). If the substantiated amount is at least as great as the statutory minimum, the court can make an order varying the demand as specified in the order and declaring the demand to have had effect, as so varied, as from when the demand was served on the company: s 459H(4). The intention of these provisions is that "a company should pay the undisputed part of a demanded debt even if the demand may have been excessive, but that it should not be placed under pressure of being wound up with respect to any part of the debt that is genuinely disputed, or where there is any genuine contra claim, whether or not it arises out of the same transaction as the debt to which the demand relates": Re Morris Catering (Australia) Pty Ltd (1993) 11 ACSR 601 at 605; 11 ACLC 919. If the substantiated amount exceeds the statutory minimum, the court will generally vary the demand pursuant to s 459H(4), unless the demand was so grossly inflated, or comprised matters which were so obviously in dispute, that the service of the demand amounted to an abuse of the regime under Pt 5.4: First State Computing Pty Ltd v Kyling (1995) 13 ACLC 939. Contractual provisions 13Each party relies on provisions of the Services Agreement to seek to establish, or rebut, the existence of a genuine dispute. UGLPS relies on various provisions relating to the content of "Properly Rendered Invoice[s]", as defined, and on its right not to pay invoices which are not "Properly Rendered Invoice[s]" in order to seek to establish that it is not presently required to pay the invoices issued by Akers in respect of the variations. On the other hand, Akers contends that the term "Properly Rendered Invoice" is not capable of application in respect of Akers' variation claims which are the subject of the Demand, and those invoices are not required to meet that description in order to give rise to a debt owed by UGLPS. 14The term "Properly Rendered Invoice" is defined in the Services Agreement as: "[A] suitably detailed, valid and accurate invoice provided by [Akers] to UGLPS which states the relevant UGLPS Contract Number, [Akers'] ABN, details of the Services to which the invoice relates, the Fees and Reimbursables (itemised separately), and otherwise complies in all respects with the requirements contained in Schedule 3 and the requirements of the GST Law as a tax invoice." The term "Services" is in turn defined as: "[T]he services to be provided by [Akers] under this Agreement as specified in item 7 of Schedule 1 and the Service Specification and includes the provision of any incidental services or functions required for the proper performance and provision of the Services." Item 7 of Schedule 1 in turn defines the Services as "[t]he provision of site remediation services, as more particularly described in Schedule 2." Schedule 2 contains a specification of particular services (Ex P1 Tab 1). The definition of "Properly Rendered Invoice" also requires that the invoice comply in all respects with the requirements contained in Schedule 3. Schedule 3 is a pricing schedule that refers to the contracted works and not variations to them, and an invoice for variations necessarily could not comply with the requirements of that schedule (Ex P1 Tab 1). 15Clause 11 of the Special Conditions to the Services Agreement in turn deals with the provision of Additional Services (as defined). The term "Additional Services" means a service to be provided as an addition to the Services (as defined) under the Contract. That clause provides that: "11.1 UGLPS may, at any time, request the provision of Additional Services by notice in writing to [Akers]. The provision of Additional Services may be subject to a requirement for [Akers] to provide a fixed price quotation for the Additional Services requested. [Akers] must negotiate in good faith with UGLPS to agree on the key performance indicators and the price for the additional services. 11.2 UGLPS is not liable for any Additional Services provided or additional expenditure incurred by [Akers] unless the Additional Services and the additional expenditure (if any) have been approved by UGLPS." (Ex P1 Tab 1) The fact that "Additional Services" are not "Services" (as defined), but are in addition to them, emphasises that they may not be the subject of a "Properly Rendered Invoice" as defined. 16UGLPS contends that clause 11.2 of the Special Conditions excludes UGLPS' liability for Additional Services unless not only the Additional Services and the fact of additional expenditure (if any) for them had been approved by UGLPS, but also unless the final amount of that additional expenditure had been approved by UGLPS. I cannot accept that reading of the clause, which would expose a contractor which provided Additional Services after having been approved to do so, to being denied (subject to any application of principles of good faith) payment unless UGLPS chose to approve the final amount of the charge. That reading of the clause would not be consistent with the requirement that a commercial contract must be read in a way that will result in a sensible and businesslike meaning: Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99 at 109; Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540; Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 at [22]. 17Clause 15.3 of the Services Agreement in turn provides that UGLPS will reimburse Akers for properly incurred and invoiced "Reimbursables" (defined as any costs in relation to the provision of Services for which Akers is entitled to be reimbursed as specified in Schedule 3) but is only obliged to reimburse Akers for Reimbursables to the extent that the relevant cost is identified in Schedule 3 as a Reimbursable; the reimbursable has been clearly identified and separately itemised in a Properly Rendered Invoice; that Properly Rendered Invoice is accompanied by all applicable receipts, together with any supporting documentation required by UGLPS in its sole discretion and proof of payment of the relevant reimbursable; and all other requirements specified in Schedule 3 have been complied with. Again, this clause is not capable of applying to Additional Services, since Schedule 3 is a pricing schedule applicable to the Services to be provided under the Services Agreement and not the services to be provided in addition to those services. 18Clause 15.4 of the Services Agreement requires UGLPS to pay Akers for the Services and Reimbursables monthly in arrears within 30 days of accepting a Properly Rendered Invoice. In my view, that clause also has no application to payment for Additional Services, for the reasons noted above, although a term might well be implied requiring payment for such Additional Services within a reasonable time. Clause 15.5 of the Services Agreement in turn provides that: "Invoices which are not Properly Rendered Invoices are invalid and will not be paid until corrected and re-submitted as "Properly Rendered Invoices". (Ex P1 Tab 1) In my view, that clause also has no application to the invoices in respect of the Additional Services provided by Akers under variations which, as I have noted above, are not capable of being "Properly Rendered Invoices" because they do not relate to "Services" as defined and cannot comply with the requirements contained in Schedule 3. 19Since the provisions relating to "Properly Rendered Invoices" do not apply to the Additional Services which are the subject of the invoices to which the Demand relates, I do not consider that UGLPS has established that any non-compliance with those provisions establishes a genuine dispute in respect of the invoices underlying the Demand. 20On the other hand, Akers contends that UGLPS cannot establish a genuine dispute as to any of those invoices because, under clause 17 of the Services Agreement, UGLPS can only withhold payment of an invoice if it gives notice of a dispute and reasons within 29 days of receipt. That clause provides that: "If UGLPS disputes an invoice (or part of an invoice) issued by [Akers] then UGLPS: 17.1.1 will notify [Akers] of the dispute and the reasons for the dispute within 29 days of receipt of the invoice; 17.1.2 may withhold payment of the disputed part of the invoice until the dispute is resolved in accordance with clause 30; and 17.1.3 will not delay or withhold payment of any part of a Properly Rendered Invoice which is not disputed. (Ex P1 Tab 1) Clauses 17.1.1 and 17.1.2 refer to an "invoice", which is not limited to an invoice in respect of the Services (as defined) and could extend to an invoice in respect of the Additional Services comprised in the variations. Clause 17.1.1 is not expressed as a precondition to raising a dispute, and there may also be a question whether its operation was suspended or varied by the audit process adopted by the parties. Clause 17.1.2 does not, in terms, impose a positive obligation on UGLPS to pay an undisputed part of the invoice for Additional Services on the 30th day (or at any other specified time) after the invoice was issued, as distinct from a permission to withhold payment in the specified circumstances, and Akers was not able to point to any other affirmative requirement within the Services Agreement to that effect. Clause 17.1.3 does not take the matter further because, as Akers contended and as I have accepted above, invoices in respect of variations were not capable of falling within the defined term "Properly Rendered Invoice". I do not consider that I can find that clause 17 excludes the possibility of a genuine dispute being established in respect of particular invoices even if UGLPS is in breach of the notification obligation under clause 17.1.1, particularly in circumstances where the parties have apparently both engaged in a consensual audit process in order to deal with differences between them in respect of the particular invoices. 21It follows that UGLPS has not established that all invoices in respect of variations underlying the Demand are the subject of a genuine dispute because they are not "Properly Rendered Invoices", and Akers has not established that no such invoices are the subject of such a dispute because UGLPS did not give notice of that dispute within the 29 day period specified in clause 17.1.1 of the Services Agreement. It is therefore necessary to determine whether a genuine dispute is established in respect of the individual invoices underlying the Demand. The disputes in respect of the invoices 22UGLPS contends that it has established a "plausible contention requiring investigation" in respect of each of the invoices and that the statutory demand procedure is not to be used for debt collecting where a genuine dispute exists. On the other hand, Akers contends that UGLPS has not established a genuine dispute as to the amounts claimed by making assertions that it needs to make further investigations as to those amounts. I do not consider that a "genuine dispute" necessarily requires that UGLPS assert that the amount claimed by Akers is incorrect, as distinct from genuinely asserting that the amount claimed is not accepted as correct until further necessary inquiries are completed. This approach seems to me consistent with that adopted by Young J in John Holland Construction above, and avoids the result that a party in a complex contract would be unable to set aside a statutory demand made for a substantial amount which cannot be verified without making further inquiries. 23Akers also contends that the genuineness of the dispute must also be assessed having regard to, inter alia, the fact that the majority of the invoices referred to in the Demand relate to variation works which were completed in excess of 18 months prior to the issue of the Demand; invoices were issued in respect of those works some time ago and Akers has been unsuccessfully endeavouring to negotiate payment of them in the intervening period, and Akers has requested, but not received, clarification from UGLPS as to its concerns with the invoices on several occasions. At the same time, it appears that UGLPS has also not received some of the information which it has requested from Akers in respect of issues arising from the invoices. Variation 10 24Mr Montgomery's evidence is that variation 10 related to works including removal of surface waste and road widening, sorting and stockpiling of removed materials and removal of recycle and waste material (Montgomery [12]). UGLPS indicated in the course of submissions that the amount of $40,738 which was the subject of variation 10 had now been approved for payment and contended that, if the Demand was not set aside unconditionally, it should be set aside subject to a condition requiring the payment of that amount within a relatively short period. Variations 13, 34, 41 and 42 25Akers accepted in the course of submissions that a genuine dispute exists as to the amount of the debt claimed in the Demand in respect of the invoices relating to variation orders 13, 34, 41 and 42, which it accepts where not issued sufficiently in advance of the issue of the Demand so as to fall due and payable prior to that date. Akers concedes that a genuine dispute is therefore established as to the amount of $340,638.06 of the amount claimed in the Demand referable to these invoices, and presses the balance of $276,207.26 claimed in the Demand. Akers invokes the Court's power to vary the Demand under s 459H(4) of the Corporations Act as to the balance claimed. I will address that issue further below. Variation 20 26Variation 20 relates to a claim in the amount of $10,560 inclusive of GST. Mr Montgomery's evidence is that this variation related to the demolition of a small shed and removal of contaminated soil beneath its slab. Ms Boyd's evidence is that the auditor has commenced assessment of this variation and has requested further information to substantiate it, reflected in her email dated 30 May 2012 by which she sought confirmation that this variation was a replacement for an earlier variation V008B, requested a new invoice with the description to reflect actual costs and observed that she would "like to think that this will finalise this Variation". Ms Boyd's evidence is that the information requested not been provided by Akers (Boyd 8.9.12 [15(b)(i)]). 27In my view, the apparently unresolved issue whether this variation is a replacement for another and as to the supply of information necessary to establish the correctness of this claim, combined with the parties' submission to the audit process to which I have referred above, is sufficient to establish a genuine dispute as to this claim. Variations 21, 25, 26 and 32 - Bagging issues 28It appears that variation orders 21, 25, 26 and 32 related to bagging and/or storage of a substantial number of bags of contaminated soil and other material. Ms Boyd's first affidavit and the supporting schedule to it identified the basis of dispute in respect of the invoices relating to these variations as that Akers had provided insufficient information to verify the amount and the work claimed (Boyd 2.8.12 [20(e)]; Ex P1 Tab 8), and her affidavit exhibited some of the information provided by Akers. Ms Boyd's evidence is that Akers also had issued three different invoices and three different variation orders in relation to variation 25 (Ex P1 Tab A) and, she contended, had provided insufficient information to allow her to verify the amount and the work claimed (Boyd 2.8.12 [20(e)]); had issued two invoices for different amounts and two variation orders in respect of variation 26 and, she contended, had provided insufficient information to allow her to verify the amount and the work claimed; and had not provided sufficient information to allow her to verify the amount claimed in the invoice relating to variation 32 and the work claimed (Ex P1 Tab 8 and Tab C). In my view, these matters are sufficient to establish a genuine dispute, pending the inquiries necessary to resolve the matters to which Ms Boyd refers and in the context of the parties' submission to the audit process to which I have referred. 29Ms Boyd's second affidavit also refers to issues raised by the auditor concerning the individual variation orders in this category, including that a number of variations had been submitted which appeared to have conflicting or overlapping information in them (Ex P1 Tab 8). Akers accepts that a genuine dispute as to these invoices would be established by Ms Boyd's second affidavit, if it is open to UGLPS to rely upon these matters. However, Akers contends that the matter was not sufficiently raised in Ms Boyd's initial affidavit to permit UGLPS to rely upon it, for the purposes of the principle in Graywinter Properties Pty Ltd v Gas & Fuel Corp Superannuation Fund (1996) 70 FCR 452; 21 ACSR 581. 30It is well established that the only grounds of opposition which may be relied on in an application to set aside a statutory demand are those identified in the affidavit supporting that application filed within the 21 day period under s 459G of the Corporations Act: Graywinter Properties Pty Ltd v Gas & Fuel Corp Superannuation Fund above; see also Energy Equity Corporation Ltd v Sinedie Pty Ltd [2001] WASCA 419; (2001) 166 FLR 179; King Furniture Australia Pty Ltd v Higgs [2011] NSWSC 234; Kay Investment Holdings Pty Ltd v North East Developments Pty Ltd (in liq) [2011] NSWSC 1121; (2011) 85 ASCR 610. However, the strictness of the Graywinter principle has been qualified at least to the extent that the initial affidavit will sufficiently raise a dispute if that ground is raised by a necessary or reasonably available inference, including from documents exhibited to the initial affidavit: POS Media Online Ltd v B Family Pty Ltd [2003] NSWSC 147; (2003) 21 ACLC 533; Hansmar Investments Pty Ltd v Perpetual Trustee Co Ltd [2007] NSWSC 103; (2007) 61 ACSR 321; 25 ACLC 282; Saferack Pty Ltd v Marketing Heads Australia Pty Ltd [2007] NSWSC 1317. Ms Boyd's initial affidavit annexed documents relating to these works which indicated attempts to reconcile these invoices and, in my view, raised the possibility of conflicting, duplicated or overlapping claims by a reasonably available inference. The Graywinter principle therefore does not prevent UGLPS relying on this claim and the claims relating to these invoices should therefore be treated as genuinely disputed, having regard to Akers' concession noted in paragraph [30] above. Variation 22 31Variation order 22 related to the removal of copper contaminated cable (Montgomery [27]). By email dated 30 May 2012, Ms Boyd requested an invoice for the variation including seeking particular information, noting that "the auditor understands the answers to most of these questions" but the invoice needs to clearly provide it. By emails dated 31 May 2012 a representative of Akers provided further information to Ms Boyd, including the dates works started and were completed, the nature of the works, the amount of cable involved, where the cable was stored and the place from which it was removed; and a subcontractor to Akers also provided further information as to the work done, including a description of the machinery used and confirmation that, as previously pointed out during a site inspection, the cable was stored in a particular location. Ms Boyd's evidence is that this variation had yet to be verified as part of the audit process (Ex P1 Tab 8 and Tab D). I do not consider that a genuine dispute would be established as to this invoice where it appears that UGLPS has sought further information which it concedes the auditor already understands; Akers has provided information; and UGLPS has identified no other basis on which the amount claimed is not payable. I will address the question of the status of the Demand generally below. Variation 23A 32This variation relates to the removal of asbestos contaminated soil from a particular site (Montgomery [32]). Akers provided information relating to that invoice to UGLPS on 2 April 2012 and an email dated 16 April 2012 from Ms Boyd identified an error in the dollar figure between the variation and invoice of 10¢, sought clarification of a variation in the text and raised a question as to whether supporting worksheets were truly reflected in the variation or invoice. By email dated 22 May 2012, Ms Boyd advised Akers of the auditor's comment that she needed clarification on the cost per cubic metre for removal of the material, and that the cost did not seem unreasonable but was not listed in the original proposal. By email dated 30 May 2012, Ms Boyd advised Akers that she had not received a response to her queries of 16 April or 22 May in respect of this variation. Ms Boyd's evidence is that the auditor had commenced assessment of this variation and requested further information to substantiate it which had not been provided by Akers. In my view, a genuine dispute as to this claim is established on that basis. Variation 27 33Variation order 27 relates to removal of concrete to a concrete stockpile (Montgomery [46]). An email dated 30 May 2012 from Ms Boyd noted that further information had been sought as to the work done, but the new invoice had increased the cost of the work from $3,540 to $4,763 exclusive of GST and UGLPS's client had received two prices for the one job and was questioning the change. Akers does not identify any response which it provided to that issue. Ms Boyd's evidence is that Akers had issued an invoice for this variation that differed from the undated variation order (Ex P1 Tab 8 and Tab H); the variation order was then amended; and the invoice contained insufficient information to allow her to verify the amount or the works claimed. In my view, these matters are sufficient to establish a genuine dispute as to this invoice. Variation 28 34Variation order 28 related to the sorting and stockpiling of recyclable materials (Montgomery [50]). By email dated 30 May 2012, Ms Boyd noted that the invoice had been rendered at a different rate from the variation and that UGLPS's client was becoming "suspicious" of anomalies in invoicing. A subcontractor to Akers advised on 31 May 2012 that they were instructed to add any charges that had been missed and had added a charge for machinery but the hours and rates for labour remained the same. Ms Boyd's evidence is that Akers had issued three invoices and two variation orders relating to this variation containing four different amounts and had provided insufficient information to allow her to verify the amount or the works claimed (Ex P1 Tab 8 and Tab I). In my view, a genuine dispute as to these claims is also established on the basis of the conflicting information and requests for further information to which UGLPS refers and the open issue as to the entitlement to add the additional charge for machinery. Variation 35 35Mr Montgomery identifies variation order 35 as relating to an order for satellite phones (Montgomery [60]). Mr Montgomery's evidence is that he can find no correspondence from UGLPS concerning the invoice. Ms Boyd's evidence is that this variation was not pre-approved prior to purchase (Ex P1 Tab 8). UGLPS also contends that the assessment process in respect of these invoices has not been completed. In my view, a genuine dispute as to these claims is also established on the basis of the contention that the variation was not pre-approved as required by clause 11 of the Special Conditions to the Services Agreement. Variation 36 36Mr Montgomery's evidence is that variation order 36 relates to waste bin hire (Montgomery [62]). That evidence appears to be incorrect, since the invoice refers to "water barrier hire". Mr Montgomery's evidence is also that he can find no correspondence from UGLPS as to the invoice, but that evidence is of uncertain weight where he has misidentified the subject of the work. Ms Boyd's evidence is that this variation was not pre-approved prior to purchase (Ex P1 Tab 8). UGLPS also contends that the assessment process in respect of these invoices has not been completed. In my view, a genuine dispute as to these claims is also established on the basis of the contention that the variation was not pre-approved as required by clause 11 of the Special Conditions to the Services Agreement. Variation 37 37It appears that the invoice relating to this variation related to bin hire (Montgomery [64]). Akers contends that this variation is not genuinely disputed by reason of an email from Ms Boyd to Akers dated 4 May 2012 advising that: "UGLPS and the auditor as [sic] satisfied that adequate information has been provided in order to justify the following list of works. These works have been presented for approval to pay." By email dated 12 May 2012, Ms Boyd noted that a spreadsheet had previously been provided to support the variation order but requested more detailed information. She also indicates "confusion" as between variation 37 and variation 37A. By email dated 30 May 2012, Ms Boyd noted that she had received no response to that email; had now found an invoice and variation for variation 37, which highlighted the confusion between variations 37 and 37A; questioned whether variation 37A was no longer a variation; requested Akers to review the position in total and advise what the claim should be, and to reissue the invoice with detail in the description broken up; and requested clarification why some months were more expensive than others. By email dated 30 May 2012, a subcontractor to Akers responded to the question as to variation of monthly charges by noting that some months have 5 weeks in the month. 38Ms Boyd's evidence is that the auditor has requested further information in respect of this variation, reflected in a further email dated 3 July 2012 to Akers seeking an explanation of two quantity figures in the variation order in respect of this variation and again raising the question of different figures charged in different months for storage bins, to which she has not received a response (Boyd 8.9.12 [15]; Ex P1 Tab J). On balance, and with some hesitation, I consider this claim is genuinely disputed given the unanswered request for this information. Variation 40 39It appears that the invoice relating to this variation related to attendance at a site meeting and associated costs (Montgomery [68]). Akers contends that this variation is not genuinely disputed by reason of the email from Ms Boyd to Akers dated 4 May 2012 to which I referred in paragraph 37 above. Ms Boyd's evidence is that, after the auditor completed her assessment of this variation, UGLPS received an invoice for an amount in excess of the variation order. By email dated 4 June 2012, Ms Boyd advised Akers that the invoice had come in at a different price to the variation presented to the client, and noted that the invoice would need to be raised at the original price plus GST and the detail would need to be validated, and that "these sort of inconsistencies are further clouding the confidence in the recordkeeping of this project" (Boyd 8.9.2012 [15]). On balance, and again with some hesitation, I consider this claim is genuinely disputed given the unresolved issue as to the price to be charged. Summary - genuine dispute 40It follows that, apart from the amount claimed which UGLPS has now approved for payment, a substantial amount of the debt claimed in the Demand is not pressed by Akers on the basis that it was not due when the Demand was filed, and I have held that substantially all of the balance claimed is genuinely disputed by UGLPS. It is not necessary to consider whether to vary the Demand, given the view that I have reached below in respect of s 459J of the Corporations Act. Whether some other reason to set aside the Demand is established 41UGLPS also contends that the Demand should be set aside under s 459J of the Corporations Act because of a defect in the Demand which will give rise to substantial injustice or because there is some other reason why the Demand should be set aside. UGLPS contends that the nature of the agreement and services performed by Akers are such that the unravelling of the debts truly owing is not readily ascertainable by it. 42In my view, the inclusion in the Demand of substantial amounts which Akers now accepts were not due for payment, constituting more than half of the amount claimed, was in itself a defect which would give rise to substantial injustice, by requiring UGLPS either to move to set aside the Demand, even if they were to pay any amount of it which was otherwise properly due: Portrait Express (Sales) Pty Ltd v Kodak (Australasia) Pty Ltd (1996) 20 ACSR 746 at 750. This would warrant an order setting aside the Demand under s 459J(1)(a) of the Corporations Act. 43The Court may set aside a statutory demand under s 459J(1)(b) of the Corporations Act if it is satisfied that there is some other reason that the demand should be set aside. The Court's power under that section exists to maintain the integrity of the process provided under Pt 5.4 of the Corporations Act and is to be used to counter an attempted subversion of the statutory scheme, but is not exercised by reference to subjective notions of fairness: Portrait Express (Sales) Pty Ltd v Kodak (Australasia) Pty Ltd above; Meehan v Glazier Holdings Pty Ltd [2005] NSWCA 24; (2005) 53 ACSR 229; CP York Holdings Pty Ltd v Food Improvers Pty Ltd [2009] NSWSC 409. A statutory demand may be set aside under that section where it involves conduct which is unconscionable or an abuse of process: Arcade Badge Embroidery Co Pty Ltd v Deputy Commissioner of Taxation [2005] ACTCA 3; (2005) 157 ACTR 22. In First State Computing Pty Ltd v Kyling (1995) 13 ACLC 939, Santow J observed that a statutory demand could be set aside under s 459J(1)(b) by reason of a substantial overstatement in the amount claimed, and that, where a statutory demand has been so grossly inflated as to comprise matters which it should have been obvious from the outset were in genuine dispute between the parties at the time the demand was served, then an order under s 459J(1)(b) setting aside that statutory demand may well be required to prevent such an abuse of the regime under Pt 5.4 of the Act. 44I would not go so far, in this case, as to find that it would have been obvious from the outset that the matters raised by UGLPS amounted to a genuine dispute, since the correspondence indicates that Akers had made substantial attempts to address UGLPS's demands for further information, and it was arguable that those demands for verification did not amount to a dispute of the amounts claimed, although I have not accepted that argument in the context of the nature of the claims and the parties' submission to the audit process. However, in my view, a statutory demand for a substantially overstated amount, where more than half of the amount claimed was conceded to be genuinely disputed, and substantially all of the balance of the debt claimed was found to be genuinely disputed at the hearing, is nonetheless inconsistent with the proper use of the statutory regime. In my view, the Demand therefore should also be set aside in its entirety under s 459J(1)(b) of the Corporations Act. It remains open, of course, to Akers to bring proceedings to recover the amounts claimed. Orders and costs 45Accordingly, I order that: 1. The Defendant's statutory demand dated 12 July 2012 be set aside. 2. The Defendant pay the Plaintiff's costs as agreed or assessed. ********** 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: 24 October 2012