Supreme Court New South Wales Medium Neutral Citation: In the matter of Mark Attard and others trading under the partnership name of Colin Biggers & Paisley [2013] NSWSC 1579 Hearing dates: 9 October 2013 Decision date: 31 October 2013 Jurisdiction: Equity Division - Corporations List Before: Black J Decision: Statutory demand set aside. Parties to be heard as to costs. Catchwords: CORPORATIONS - statutory demand - application to set aside creditor's statutory demand - whether it is open to the defendant to support the statutory demand on a basis other than that referred to in the demand and accompanying affidavit - content of the "genuine dispute" standard - whether demand should be set aside under s 459J Corporations Act 2001 (Cth) - whether "defect" in the statutory demand due to misdescription of the debt - whether substantial injustice to the company if defendant could rely on a basis for supporting the debt not raised in the statutory demand. Legislation Cited: - Corporations Act 2001 (Cth) ss 459E(1), 459E(3), 459G(3), 459H, 459H(1)(a), 459J, 459J(1)(a), 459J(1)(b), 459J(2), Pt 5.4 - Legal Profession Act 2004 (NSW) ss 350(4), 350(5) - Supreme Court (Corporations) Rules 1999 (NSW) r 5.2 Cases Cited: - Arcade Badge Embroidery Co Pty Ltd v Deputy Commissioner of Taxation [2005] ACTCA 3; (2005) 157 ACTR 22 - Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd [2013] NSWCA 344 - 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 - Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 - Graywinter Properties v Gas and Fuel Corp Superannuation Fund (1996) 70 FCR 452; (1996) 21 ACSR 581 - Infratel Networks Pty Ltd v Gundry's Telco & Rigging Pty Ltd [2012] NSWCA 365; (2012) 92 ACSR 27 - LSI Australia v LSI Holdings [2007] NSWSC 1406; (2007) 25 ACLC 1602 - 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 - 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 - TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd [2008] VSCA 70; (2008) 66 ACSR 67 Category: Principal judgment Parties: Obeid Corporation Pty Ltd (Plaintiff) Mark Attard and others trading under the partnership name of Colin Biggers & Paisley (Defendant) Representation: Counsel: M. Ashhurst SC/T.R. Gordon (Plaintiff) C.R.C. Newlinds SC/T.M.J. Fishburn (Defendant) Solicitors: Deutsch Partners (Plaintiff) Colin Biggers & Paisley (Defendant) File Number(s): 2013/167217 Judgment 1By Originating Process filed on 30 May 2013, the Plaintiff, Obeid Corporation Pty Limited ("Company") applies to set aside a creditor's statutory demand for payment of debt dated 9 May 2013 ("Demand") served by the firm of Colin Biggers & Paisley ("CBP"). Background facts 2I should first refer to certain background events, as to which there is no contest between the parties. On 8 December 2008, CBP and Streetscape Projects (Australia) Pty Limited ("Streetscape") entered a costs agreement in relation to a dispute between Streetscape and The City of Sydney, in respect of CBP's file number 83366. 3In July 2009, The City of Sydney commenced proceedings against Streetscape and Mr Obeid in this Court. Further proceedings were subsequently commenced by The City of Sydney in the Federal Court of Australia against Streetscape, Mr Obeid and another entity and cross-vested to this Court to be heard concurrently with the initial proceedings. CBP acted for those parties in the defence of those proceedings under its file number 83366. 4On 9 July 2010, the Company provided a letter ("2010 letter") to CBP in relation to costs incurred by Streetscape. That letter provided as follows: "Following the discussions earlier this week [the Company] Corporation sends this letter as comfort to your firm with respect to costs incurred by Streetscape for the legal matter with the City of Sydney. [The Company] is acutely aware of the outstanding amount and confirms to you that all costs pertaining to the legal action with the City of Sydney will be guaranteed by [the Company]. Moses Obeid will discuss with you a schedule for payments of the accounts." 5The Supreme Court proceedings were heard between April and September 2011 and judgment was delivered in October 2011. 6In February 2012, The City of Sydney served a bankruptcy notice on Mr Obeid and issued a creditor's statutory demand to Streetscape. CBP and Mr Obeid entered into a further costs agreement in respect of applications to set aside the statutory demand and bankruptcy notice on 29 March 2012, and entered a second costs agreement in respect of advice as to the consequences of insolvency of Mr Obeid and Streetscape on 10 April 2012, each with CBP's file number 121344. 7Streetscape was subsequently placed in voluntary administration on 21 June 2012. CBP and Mr Obeid entered a further costs agreement in respect of appeal proceedings on 22 June 2012 and, on 28 June 2012, CBP lodged a proof of debt in Streetscape's administration in the amount of $632,047. 8A draft Deed of Guarantee and Indemnity was provided by CBP to the Company in late June 2012 and the Deed of Guarantee and Indemnity ("Deed") was executed by the Company, by two of its directors, and by CBP in mid-July 2012. It provided, broadly, for the Company to guarantee payment of and indemnify CBP in relation to fees and disbursements incurred by CBP in providing the "Services" to the "Debtor" as defined. The term "Debtor" was defined as Mr Moses Obeid and the term "Services" was defined as "professional legal services provided to [Mr Obeid] by [CBP] pursuant to the terms of the Costs Agreement". The term "Costs Agreement" was in turn defined as a costs agreement between Mr Obeid and CBP for the provision of the Services commencing on 22 June 2012. 9In early May 2013, CBP issued letters of demand to the Company and several other persons. 10On 9 May 2013, CBP issued the Demand claiming the amount of $750,227.77, being the amount of the debt described in a schedule, which was verified by an affidavit of Mr Antony Riordan dated 9 May 2013. The description of the debt in the Schedule was: "Sum guaranteed in Deed dated on or about 17 July 2012 $565,902.00 Further sum guaranteed by Deed $185,135.77 Total amount: $750,227.77". 11The supporting affidavit of Mr Riordan stated that the Company entered into the Deed on or around 17 July 2012 and annexed a copy of that Deed and stated that, "pursuant to the Deed", a demand had been made on the Company for payment of the debt and annexed a copy of that demand. The affidavit stated that the Deed related to amounts billed by five bills that had been rendered to the Company) in the amount of $565,092.00. There was an arithmetical error in the total of those invoices, which should have read $512,293.49. Further amounts were claimed in respect of invoices rendered to entities other than the Company in the amount of $185,135.77. Each calculation allowed for part payments that had been received. After correcting for the arithmetical error, the total amount claimed in the Demand should have been $697,429.26 rather than $750,227.77. 12The application to set aside the Demand was, as noted above, filed on 30 May 2013 and supported by an affidavit of Mr Moses Obeid sworn the same date. Mr Obeid identified several matters relied upon in support of the application, a number of which were not canvassed in this hearing. He contended that the Deed did not relate to the provision of legal services to anyone other than him personally and, in particular, did not extend to services provided by CBP to Streetscape in respect of the relevant litigation. He also referred to an intended application by the Company for assessment of CBP's costs. 13On 28 June 2013, Streetscape applied for assessment of CBP's costs billed in respect of the costs billed in CBP's file number 83366; Mr Moses Obeid applied for assessment of the costs billed in CBP's file number 94178; and the Company applied for assessment of the costs billed in matter number 121335. Streetscape's application for assessment of those costs was subsequently referred by the Manager, Costs Assessments to an assessor for determination whether that application was out of time. No application has been made by Streetscape to the Court to extend the time in which such an application might be made. 14There have been several developments which have affected the matters in issue in this application since the date the Originating Process and Mr Obeid's supporting affidavit was filed. First, by CBP's submissions served on 29 July 2013, CBP accepted that the construction of the Deed on which the Demand relied was "problematic", while contending that it would ultimately prevail on that question, and accepted that that question should not be resolved on an application to set aside the Demand. CBP instead sought to support the Demand by reference to the 2010 letter, to which I have referred above. CBP contended in those submissions that the Deed on which the Demand relied could be put to one side and the application to set aside the Demand determined by reference to that letter "leaving no scope for any dispute" as to the amount claimed in the Demand. This change in CBP's position in respect of the Demand was also made clear by Mr Newlinds at a directions hearing, at which the Company was represented by Mr Weinberger of Counsel, on 29 July 2013. 15CBP also accepted in those submissions that, since the Originating Process was served, applications had been made by the Company for assessment of fees claimed to be payable by the Company and by Mr Obeid for assessment of fees claimed to be payable by Mr Obeid. CBP conceded those applications had been made within the 12 month period specified in s 350(4) of the Legal Profession Act 2004 (NSW); and CBP accepted that there was a genuine dispute at least as to that part of the amount claimed in the Demand, albeit that genuine dispute had arisen after service of the Demand once the assessment process had been initiated. 16However, CBP maintained that a further application for assessment of its fees claimed to be payable by Streetscape and guaranteed by the Company, was out of time and that the assessment process had not been activated in respect of those invoices. That question remains in issue in this application. CBP contended in those submissions that the Court should make an order varying the Demand so as to delete the description of the debt in the Schedule to the Demand and substitute it with the following: "Legal fees owed by Streetscape Projects Australia Pty Ltd guaranteed by the Plaintiff $512,293.49." 17By the time the matter was argued before me, Mr Newlinds, who appears with Ms Fishburn for CBP, properly accepted that the Court did not have power to vary the description of the debt in the Demand in that manner. Mr Newlinds made clear, in oral submissions, that CBP accepted that, while the Court had power under s 459H of the Corporations Act to recalculate the amount of the debt and to make an order substituting a different amount for the original amount, that section did not extend further to permit the Court to vary the description of the debt in the Demand. CBP instead contended that the Demand should be varied instead under s 459H of the Corporations Act to substitute the amount of $512,293.49 for the amount claimed in the Demand. The issues now in dispute 18The issues between the parties have now crystallised to some extent. The first question is whether it is open to CBP to support the Demand by reference, not to the Deed to which reference was made in the Demand and in the accompanying affidavit, but instead to the 2010 letter. 19In my view, a fundamental difficulty arises from CBP's change in position in respect of the basis on which the Demand is supported. Section 459H(1)(a) of the Act, on which the Company relies, requires the Court to determine whether there is a genuine dispute as to the debt to which the Demand relates, when an application is made to set aside the Demand under that section. Section 459E(1) of the Corporations Act in turn provides that a person may serve on a company a demand relating to a debt that the company owes to the person, that is due and payable and the amount of which is at least the statutory minimum, and the demand must specify the debt and its amount. Section 459E(3) requires that the debt be accompanied by an affidavit which, relevantly, complies with the rules. Rule 5.2 of the Supreme Court (Corporations) Rules 1999 (NSW) in turn requires that the affidavit accompanying a statutory demand relating to a debt owed by a company must be in accordance with Form 7 and state the matters mentioned in that form. Form 7 requires that the affidavit, inter alia: "[state nature of debt or debts, ensuring that what is stated corresponds with the description of the debt or debts, to be given in the proposed statutory demand, with which this affidavit is to be served on the debtor company]". Those requirements are complied with and the debt specified in the Demand was a debt arising from the Deed. 20In the present case, notwithstanding that CBP does not now seek to support the Demand on that basis, but instead by reference to the 2010 letter, it seems to me that the debt to which the Demand relates is the debt that arises, by reason of the Deed, from the invoices issued by CBP. CBP does not now contend that an undisputed debt of that character is established. That seems to be sufficient reason, without more, to find either that a genuine dispute as to the debt exists, so far as CBP concedes that there are issues of construction as to the Deed, or alternatively that the Demand should be set aside for some other reason under s 459J(1)(b) of the Act, so far as CBP no longer seeks to support the Demand on the basis on which it was issued. That is enough, in itself, to require that the Demand be set aside. 21A second issue arises, which it is not strictly necessary to address given the findings which I have reached above, namely whether a debt arising from the 2010 letter would be liable to be set aside on the basis that there is a genuine dispute as to the existence of that debt. The Company contends that this matter gives rise to a genuine dispute for the purposes of s 459H of the Corporations Act because it involves "a plausible contention requiring investigation" in the sense identified in Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785. It is necessary to address the content of the "genuine dispute" standard in order to address this issue. 22Section 459H(1)(a) of the Corporations Act provides that a creditor's 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 that paragraph 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 above at 787; Edge Technology Pty Ltd v Lite-On Technology Corporation [2000] NSWSC 471; (2000) 34 ACSR 301 at [28]. 23 In 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." 24In 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. 25In TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd [2008] VSCA 70; (2008) 66 ACSR 67 at [71], Dodds-Streeton J observed that a company which seeks to establish a genuine dispute or off-setting claim: "... is required to evidence the assertions relevant to the alleged dispute or off-setting claim only to the extent necessary for the primary task. The dispute or off-setting claim should have a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion, and sufficient factual particularity to exclude the merely fanciful or futile. ... It is not necessary for the company to advance, at this stage, a fully evidenced claim. Something 'between mere assertion and the proof that would be necessary in a Court of law' may suffice." 26In 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." 27In Infratel Networks Pty Ltd v Gundry's Telco & Rigging Pty Ltd [2012] NSWCA 365; (2012) 92 ACSR 27 at [44], Young AJA with whom Hoeben JA and Ward J agreed) referred to Eyota Pty Ltd v Hanave Pty Ltd above and noted that the question for a primary judge, in determining an application to set aside a statutory demand under s 459J(1)(a) is: "To determine whether there was a genuine dispute, that is one in which a plausible contention has been raised by the company on which the statutory demand was served." 28In a recent judgment in Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd [2013] NSWCA 344, the Court of Appeal undertook a detailed examination of the case law relating to whether a genuine dispute was established for the purposes of s 459H(1)(a) of the Corporations Act. Their Honours also referred to the observations of McLelland CJ in Eq in Eyota and of Dodds-Streeton J in TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd to which I have referred above. The Court of Appeal noted that the observations in the case law referring to the requirement for a "plausible and coherent basis" for a genuine dispute required no more than the test stated by McLelland CJ in Eq in Eyota Pty Ltd v Hanave Pty Ltd above, namely that there be a plausible contention requiring investigation and raising the same sort of considerations as a "serious question to be tried" criterion. 29The Company contends that there is a genuine dispute, within this standard, as to whether the 2010 letter was objectively intended to be immediately binding on the Company, or simply a statement regarding its present intention as to a future act. Mr Newlinds, for CBP, submits that, in the context of commercial clients dealing with a firm of solicitors in respect of substantial litigation, where significant costs were being incurred and Streetscape was not paying its bills on time, it is "fanciful" to suggest that the 2010 letter was not intended to be binding and effective when written. That submission has substantial force. Nonetheless, it seems to me that the language "will be guaranteed" in the 2010 letter means that that argument gives rise to a genuine dispute warranting further investigation, although it may well be that CBP has the stronger argument in respect of this issue in the relevant commercial context. 30Second, the Company contends that, if the 2010 letter was intended to be immediately binding, there is a genuine dispute as to whether it was intended only to cover then outstanding invoices or whether it was also intended to cover any future accounts. The Company also contends that, where the 2010 letter is a form of guarantee, its terms should be construed in favour of the surety. I accept that, as Mr Newlinds points out, the language "all costs pertaining to the legal action" is plainly capable of applying to future as well as past legal costs, and the commercial context of the letter, given in the course of substantial litigation where solicitors' fees were unpaid, might well support that reading. On the other hand, I must accept that there are textual indicators in the letter which give rise to at least a degree of ambiguity. The first sentence refers to "costs incurred by Streetscape" and that sentence is capable of being read as directed to costs previously incurred or costs incurred to that date, rather than costs "to be incurred" in the future. The second sentence refers to the outstanding amount, prior to offering the confirmation as to the guarantee of costs by the Company, and the final sentence refers to a schedule for payments of the accounts, which could refer either to a schedule for payments of outstanding amounts or to a schedule dealing both with outstanding amounts and when amounts falling due in future would be paid. 31The question here is not whether CBP's construction of the 2010 letter or the Company's construction of that letter is the preferred construction. Once it is accepted, as I do, that the Company's construction of that letter is properly arguable and gives rise to a genuine issue warranting further investigation, and could be supported by evidence as to the context in which the 2010 letter was provided, then I cannot find that there is no genuine dispute as to the debt claimed to arise from the 2010 letter. This reflects the fundamental proposition that, where a genuine dispute as to a debt exists, then the proper course for the creditor is to commence proceedings to establish its right to payment rather than to issue a creditor's statutory demand. 32Third, the Company relies on the application for an assessment of legal costs made by Streetscape, to which I referred above, to contend that there is a genuine dispute as to the invoices issued to Streetscape. The Company accepts that the relevant invoices were submitted for assessment by Streetscape after the 12 month period specified in the s 350(4) of the Legal Profession Act 2004 (NSW) in which a client or a third party payer must make such an application. Section 350(5) of the Legal Profession Act in turn provides that: "However, an application that is made out of time, otherwise than by: (a) A sophisticated client, or (b) A third party payer who would be a sophisticated client if the third party payer were a client of the law practice concerned, may be dealt with by the costs assessor if the Supreme Court, on application by the costs assessor or the client or third party payer who made the application for assessment, determines, after having regard to the delay and the reasons for the delay, that it is just and fair for the application for assessment to be dealt with after the 12 month period." 33The Company contends that, in the present case, the application for assessment has been made and Streetscape has asked the costs assessor to determine whether he will make an application to the Supreme Court. Mr Ashhurst, who appears with Ms Gordon for the Company, submits that: "Until that assessment process is finished, the costs said to be owing by Streetscape are no different than the costs said to be owing by the other parties, that is, they are subject to assessment and that that assessment may include leave to bring the assessment notwithstanding the fact that it's not in compliance with s 350(4)." 34I do not accept that submission. The present position is that an application for assessment has been made by Streetscape, which is plainly not within time under s 350(4) of the Legal Profession Act. The Company has not sought to establish that, first, there is a genuinely arguably case that Streetscape is not a sophisticated client, so that an extension for time could be granted under s 350(5) of the Legal Profession Act; the Company and Streetscape have not themselves applied for or obtained such an extension of time, notwithstanding an indication given to the Court at the earlier directions hearing in June 2013 that such an application was to be made; and the Company has not sought to establish that there is a genuinely arguable case that it would be just and fair for the application for assessment to be dealt with after the 12 month period, so that such an extension should be granted under s 350(5) of the Legal Profession Act. 35In these circumstances, it seems to me that the application made by Streetscape for assessment is not presently open under s 350(4) of the Legal Profession Act; no genuinely arguable case has been shown that an extension of time will or should be granted under s 350(5) of the Legal Profession Act; and no genuine dispute as to the amount of costs claimed is established by the fact that, without more, an application for assessment is made in that situation. However, that finding has no effect on the outcome of this application since I have found above that a genuine dispute is established on other grounds. 36I note that a further claim was advanced by the Company in correspondence that its application for assessment was not out of time because an invoice dated 2 July 2012 was issued in matter number 121344, relating to the bankruptcy and insolvency issues. That submission was not put by Mr Ashhurst in this hearing and it is not necessary for me to address it. Whether the Demand should be set aside under s 459J of the Act 37On the alternative basis that the debt is in the same amount, but arises from the 2010 letter rather than the Deed, a question also arises as to whether the Demand should be set aside either under s 459J(1)(a) of the Corporations Act, on the basis that there is a "defect" in the Demand and substantial injustice will be caused unless the Demand is set aside, or because there is some other reason why the Demand should be set aside for the purposes of s 459J(1)(b) of the Corporations Act. 38The term "defect" is defined in s 9 of the Corporations Act as including, relevantly, "a misdescription of a debt or other matter". In the present case, it seems to me that there was no misdescription of the debt at the time the Demand was served, because CBP then sought to rely upon a debt arising from the Deed, although it no longer seeks to do so. If it were now open to CBP to seek to support the debt on a basis other than that described in the Demand, by reference to the 2010 letter rather than the Deed, it does not seem to me that that would give rise to a defect within the Demand, for the purposes of s 459J(1)(a) of the Act. I reach that conclusion because, at the time the Demand was issued, it accurately described the Debt on which CBP relied. 39Mr Newlinds also contends that, if there is a "defect" in the Demand arising from a misdescription of the debt, then there is no substantial injustice to the Company arising from that misdescription and the Court may not set aside the Demand by reason of s 459J(2) of the Act. Mr Newlinds contends that the Company has led no evidence as to injustice. He contends that the principle in Graywinter Properties v Gas and Fuel Corp Superannuation Fund (1996) 70 FCR 452; (1996) 21 ACSR 581 does not exclude further evidence by the Company to respond to the issue raised in respect of the 2010 letter, because CBP would not have objected to such evidence had the Company sought to lead it. 40This question does not strictly arise in respect of s 459J(1)(a) of the Act since I have not found that a "defect" in the Demand arising from such a misdescription exists. However, I should note that, in my view, it is not necessary for the Company now to call evidence to indicate the evidence that it would have led, had the Demand initially referred to the 2010 letter, in order to establish "substantial injustice" for the purposes of s 459J(1)(a) of the Corporations Act, had that section been relevant. The relevant injustice, which in my view would have been substantial, was that the Company was deprived of the opportunity to know that the 2010 letter was relied upon to establish the debt, at the time Mr Obeid swore his initial affidavit in the application to set aside the Demand. I will address the issue in respect of the Graywinter principle further below. 41Mr Newlinds accepts that, if CBP's reliance on the 2010 letter to support the Demand does not (as I have held) give rise to a "defect" in the Demand, then it is also necessary for CBP to address the question whether (as the Company contends) it gives rise to some other reason why the Demand should be set aside under s 459J(1)(b) of the Corporations Act. The Court's power to set aside a demand for some other reason 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 (1996) 20 ACSR 746; 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. 42In my view, some other reason to set aside the Demand would arise, if it were open to CBP to serve the Demand claiming a debt arising on one basis and to support the debt claimed on another basis, because that process would be inconsistent with allowing the Company a proper opportunity to move to set aside the Demand. That inconsistency arises, as Mr Ashhurst points out, by reason of the operation of the Graywinter principle. Mr Obeid's affidavit sworn in support of the application to set aside the Demand, as required by s 459G(3) of the Act, addressed the question of the obligations assumed by the Company under the Deed. That was hardly surprising, because the Demand relied on the obligations of the Company arising under the Deed. Mr Obeid's affidavit did not address the question of any obligations of the Company arising under the 2010 letter. That was also not surprising, because the Demand did not identify any reliance by CBP on any such obligations. 43The consequence of the Graywinter principle, and more fundamentally s 459G(3) of the Act which that principle reflects, is that it would not now be open to the Company to lead, in further affidavits, evidence as to the circumstances in which the 2010 letter was entered into or other evidence of its commercial context which may be relevant to its construction, because those matters were not raised in the original affidavit filed in support of the application to set aside the Demand. I do not accept Mr Newlind's submission that the relevant principle is merely a matter of evidence or of procedural fairness that can be waived by CBP. It is not open to CBP to waive that principle because s 459G(3) of the Act requires that the initial affidavit support the application to set aside the Demand, and Mr Obeid's initial affidavit would not support an application to set aside a Demand based on the 2010 letter, albeit in circumstances that the Demand was not in fact based on that letter. 44As Mr Ashhurst points out, there would be a fundamental unfairness to the Company, and a fundamental inconsistency with the statutory regime, if CBP could now rely on a basis for supporting the debt not raised in the Demand, in circumstances that the Company was not able to address that matter by further evidence, not having addressed it in its original affidavit in support of the application to set aside the Demand. This would be inconsistent with the intended operation of Part 5.4 of the Act, and that matter is sufficient to give rise to some other reason to set aside the Demand under s 459J(1)(b) of the Act. 45My conclusion in this regard has something in common with the reasoning of Austin J in LSI Australia v LSI Holdings [2007] NSWSC 1406; (2007) 25 ACLC 1602, to which Mr Ashhurst referred. In that case, two statutory demands were issued which described the debt claimed in generic terms and the managing director of the plaintiff addressed his understanding of the relevant matters in his affidavit in support of the plaintiff's application to set aside the demands. An officer of the creditor that issued the demands subsequently made a further affidavit which indicated that the demands were founded on a claim arising in a different manner, which had not been addressed in the managing director's affidavit filed in support of the application to set aside the demands. Austin J accepted a submission that it was not then open to the applicant to file a further affidavit addressing the new issues raised by the creditor, by reason of the Graywinter principle, and held that the demands should be set aside on the basis that their ambiguity would cause substantial injustice unless they were set aside. His Honour's reasoning was addressed to s 459J(1)(a) of the Corporations Act, which does not seem to me to be applicable in this case because, as I have noted, there was no ambiguity in the Demand in this case although CBP now seeks to shift its ground. 46However, the injustice noted by Austin J, arising from the situation where a party that receives a statutory demand moves to set it aside understanding that it is directed to a debt claimed on one basis and the debt is then sought to be supported on another basis, which the debtor will not have the opportunity to address by reason of the Graywinter principle, equally supports setting aside the Demand under s 459J(1)(b) of the Act where that position arises, not from a defect that initially existed in the Demand, but from a subsequent change in the creditor's position. 47Mr Newlinds contends that the fact that the Graywinter point is now raised by the Company gives rise to prejudice to CBP, because the firm has been deprived of the opportunity to withdraw the Demand at an earlier point and issue another creditor's statutory demand, retaining the present hearing date to determine any dispute in respect of that further demand. However, that prejudice may be more apparent than real, given the view that I have expressed above that a genuine dispute would also have been established in respect of a debt founded on the 2010 letter. To the extent that any prejudice does arise, it seems to me that it is a matter that could sufficiently be addressed by an order as to costs. It has no impact on the result in this case since I would have set aside the Demand for the other reasons noted above in any event. Orders and costs 48For these reasons, I order that the creditor's statutory demand for payment of debt dated 9 May 2013 issued by the Defendant to the Plaintiff be set aside. I will hear the parties as to 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: 04 November 2013