Supreme Court New South Wales Medium Neutral Citation: In the matter of Passion Projects (allyouneedislove) Pty Ltd [2014] NSWSC 345 Hearing dates: 6 March 2014 Decision date: 27 March 2014 Jurisdiction: Equity Division - Corporations List Before: Black J Decision: Orders made for statutory demand in proceedings 2013/00294458 to be set aside and statutory demand in proceedings 2013/00294464 to be varied and have effect as varied. Parties to be heard as to issue of costs. Catchwords: CORPORATIONS - winding up - statutory demand - application to set aside creditors' statutory demands under Corporations Act 2001 (Cth) ss 459H and 459J - where originating process initially included claims for relief involving determination of dispute on substantive basis - whether such claims may be advanced in proceedings in which orders setting statutory demands are sought - whether a genuine dispute has been established - whether offsetting claims have been established - whether some other reason for statutory demand to be set aside. Legislation Cited: - Corporations Act 2001 (Cth) ss 459H(1)(a), 459(1)(b), 459H(2), 459E(3), 459J, 459J(1)(b) - Defamation Act 2005 (NSW) s 9 Cases Cited: - Ambassador at Redcliffe Pty Ltd v Barreau Peninsula Property Pty Ltd [2006] QSC 247; (2006) 202 FLR 459; (2006) 58 ACSR 607; [2007] 2 Qd R 199 - BBB Constructions Pty Ltd v Frankipile Australia Pty Ltd [2008] NSWSC 982; 68 ACSR 1 - Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 - Britten-Norman Pty Ltd v Analysis and Technology Australia Pty Ltd [2013] NSWCA 344 - CGI Information Systems & Management Consultants Pty Ltd v APRA Consulting Pty Ltd [2003] NSWSC 728; (2003) 47 ACSR 100 - Chadmar Enterprises Pty Ltd v IGA Distribution Pty Ltd [2005] ACTSC 39; (2005) 190 FLR 466; (2005) 53 ACSR 645 - County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193 - Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 - Gujarat NRE Australia Pty Ltd v Williams [2006] NSWSC 211 - Infratel Networks Pty Ltd v Gundry's Telco & Rigging Pty Ltd [2012] NSWCA 365; (2012) 92 ACSR 27 - Jesseron Holdings Pty Ltd v Middle East Trading Consultants Pty Ltd (No 2) (1994) 13 ACSR 787 - Re Gemaveld Pty Limited [2012] NSWSC 582 - Re Morris Catering (Aust) Pty Ltd (1993) 11 ACSR 601 - Re UGL Process Solutions Pty Ltd [2012] NSWSC 1256 - Royal Premier Pty Ltd v Taleski [2001] WASCA 48 - Scanhill Pty Ltd v Century 21 Australasia Pty Ltd [1993] FCA 618; (1993) 47 FCR 451; 12 ACSR 341 - Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd [1997] FCA 681; (1997) 76 FCR 452; (1997) 24 ACSR 353 - Technology Licensing Ltd v Climit Pty Ltd [2001] QSC 84; [2002] 1 Qd R 566 - Tokich Holdings Pty Ltd v Sheraton Constructions (NSW) Pty Ltd (in liq) [2004] NSWSC 527; (2004) 185 FLR 130 - TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd [2008] VSCA 70; (2008) 66 ACSR 67 - Wildtown Holdings Pty Ltd v Rural Traders Co Ltd [2002] WASCA 196; (2002) 172 FLR 35 Texts Cited: - Farid Assaf, Statutory Demands and Winding Up in Insolvency, (2nd ed 2012, LexisNexis Butterworths) Category: Principal judgment Parties: Passion Projects (allyouneedislove) Pty Ltd (Plaintiff) Broadband Tooling Pty Ltd (Defendant) Passion Projects (allyouneedislove) Pty Ltd (Plaintiff) Concept Moulding Pty Ltd (Defendants) Representation: Counsel: S Bogan (Plaintiff) P Barham (Defendant) Solicitors: Charles G Roth (Plaintiff) Somerville Legal (Defendants) File Number(s): 2013/294458 2013/294464 Judgment 1By Originating Process filed on 30 September 2013 in proceedings 2013/294458, the Plaintiff, Passion Projects (allyouneedislove) Pty Ltd ("Company"), applied to set aside a creditor's statutory demand dated 2 September 2013 issued by the Defendant, Broadband Tooling Pty Ltd ("Broadband Tooling"). The creditor's statutory demand for payment issued by Broadband Tooling claimed the amount of $17,889.50 described in a schedule as follows: "1. Supreme Court Judgment against the debtor company entered by consent on 2 September 2013 in accordance with the consent orders signed by the creditor and the debtor company in proceedings number 2012/222476 on 27 February 2013 in the amount of $13,389.50; and 2. Legal costs of proceedings No 2012/222476 in the amount of $4,500 as agreed by Alejandro de la Vega of the debtor company in am [sic] email dated 28 August 2013." Although the creditor's statutory demand issued by Broadband Tooling did not require verification, so far as it relied upon a judgment debt, it was verified by an affidavit dated 5 September 2013 of Mr Joshua Clark, a director of Broadband Tooling, which verified that the total amount claimed was due and payable by the Company and that the Company had failed to pay the judgment and legal costs as itemised in the schedule to the Demand, and that Mr Clark believed there was no genuine dispute about the existence or amount of the debt. 2By Originating Process also filed on 30 September 2013 in proceedings 2013/294464, the Company also moved to set aside a statutory demand served by Concept Moulding Pty Ltd ("Concept Moulding"). That application was also brought under s 459J of the Corporations Act and was also amended, by leave, to extend to s 459H(1)(a) and s 459H(1)(b) of the Corporations Act. The creditor's statutory demand for payment issued by Concept Moulding was in similar form and claimed the amount of $30,493.12 described in a schedule as follows: "1. Supreme Court Judgment against the debtor company entered by consent on 2 September 2013 in accordance with the consent orders signed by the creditor and the debtor company in proceedings number 2012/222480 on 27 February 2013 in the amount of $25,993.12; and 2. Legal costs of proceedings No 2012/222480 in the amount of $4,500 as agreed by Alejandro de la Vega of the debtor company in am [sic] email dated 28 August 2013." Although the creditor's statutory demand issued by Concept Moulding did not require verification, so far as it relied upon a judgment debt, it was verified by an affidavit dated 5 September 2013 of Ms Catherine Clark, a director of Concept Moulding. 3Each of the applications brought by the Company to set aside the statutory demands was originally brought under s 459J of the Corporations Act 2001 (Cth) but was subsequently amended, by leave, so as to also rely on s 459H(1)(a) of the Corporations Act, in respect of one aspect of the debt claimed, and on s 459H(1)(b) of the Corporations Act. The Company initially also sought orders seeking to set aside consent orders and a Deed of Settlement and Release ("Settlement Deed") dated 27 February 2013, to which each of the Company, Broadband Tooling and Concept Moulding were parties. That application was not pressed, and it may well not have been appropriate to determine that application, had it been pressed, in the same hearing as an application to set aside the statutory demands. It is well established that is generally undesirable for an Originating Process seeking orders to set aside a creditor's statutory demand to include claims for other relief, which would have to be determined on a substantive basis, rather than by reference to a lower threshold of whether there is a genuine dispute or offsetting claim applicable in an application to set aside a statutory demand: Gujarat NRE Australia Pty Ltd v Williams [2006] NSWSC 211 at [3]. 4The evidence in each proceeding was in substantially identical form and an order was made that the evidence in each proceeding be the evidence in the other. I will deal with issues common to both applications first, and then return to a separate issue arising in respect of the application to set aside the demand issued by Concept Moulding. Factual background and the parties' evidence 5By way of background, on 27 February 2013, the Company, Broadband Tooling and Concept Moulding and Mr de la Vega executed the Settlement Deed in respect of proceedings previously brought by the Company to set aside earlier statutory demands served by Broadband Tooling and Concept Moulding and alternative forms of consent order to be made in those proceedings were also agreed. The Settlement Deed relevantly provided that (1) the Company was to pay to Broadband Tooling the amount of an earlier statutory demand dated 21 June 2012 being $13,389.50 by 27 August 2013; (2) the Company was to pay to Concept Mouldings the amount of an earlier statutory demand dated 21 June 2012 being $25,993.12 by 27 August 2013; (3) the Company was to pay 50% of each of Broadband Tooling's and Concept Moulding's legal costs of the two proceedings as agreed or assessed, and that amount was due no earlier than 27 August 2013 unless otherwise agreed; and (4) if the payments were made, the earlier statutory demands would be set aside; if they were not made, then judgment would be entered against the Company by both Broadband Tooling and Concept Moulding for the amounts referred to and the demands would be set aside. The parties gave mutual releases, other than in respect of the matters contained in the deed and Mr de la Vega guaranteed the payments to be made by the Company. 6The Settlement Deed required Broadband Tooling, within 14 days, to deliver "the 'superfoods tools' (diagram attached)". Upon payment of the amounts contemplated by the Settlement Deed, Broadband Tooling and Concept Moulding were also required to make available for collection all other tools manufactured for the Company. A diagram attached to the Settlement Deed provided some limited guidance as to what was meant by the "superfood tools" but not at a level of detail that would indicate whether the insert now in dispute was within or without that concept. Mr de la Vega's third affidavit dated 10 February 2014 deals further with the circumstances in which, he contends, he became aware of the missing insert from the tools delivered to him. It is not necessary to address that evidence for the purposes of this application. 7The Company relies on affidavits of its director, Mr Alejandro Jose de la Vega dated 30 September 2013, 24 January 2014 and 10 February 2014 in support of the application to set aside the demand. Broadband Tooling relies on further affidavits of its director, Mr Joshua Clark, dated 29 January 2014 and 3 March 2014 in opposition to the application. Mr Clark's affidavit dated 29 January 2014 sets out the history of the earlier proceedings and the entry into the Settlement Deed. Mr Clark's evidence is that he is the sole director of Broadband Tooling and an authorised officer of Concept Moulding and that his wife is the sole director of Concept Moulding and that Broadband Tooling and Concept Moulding are operated and run by himself and his wife and the companies are largely interdependent. 8Mr Bogan, who appears for the Company, articulated the basis of its application to set aside the demand in lengthy written submissions, supplemented by oral submissions that added additional matters. By way of broad summary of the issues in dispute, the Company contends, first, that there is a genuine dispute as to the amount of legal costs claimed by Broadband Tooling and Concept Moulding. Second, the Company contends that Broadband Tooling and Concept Moulding breached an implied duty to cooperate in the Settlement Deed, that they tortiously interfered with the Company's contractual relations with Visy, or that they defamed the Company. The Company claims that, in consequence, it has suffered loss and damage at least equal to the amount of the debts claimed by Broadband Tooling and Concept Moulding in the demand. Third, the Company contends that the consent judgment is liable to be set aside for want of consent, and that this is an "other reason" for the demand to be set aside under s 459J(1)(b) of the Corporations Act. Whether a genuine dispute as to the amount of legal costs claimed is established for the purposes of s 459H(1)(a) of the Corporations Act 9The first issue that arises, following the amendment of the Originating Process, is whether there is a genuine dispute for the purposes of 459H(1)(a) of the Corporations Act in respect of the amount of legal costs claimed by each of Broadband Tooling and Concept Moulding in the amount of $4,500. 10Section 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 existence or amount to which that demand relates. That test has been variously formulated as requiring 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: Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 787; Re UGL Process Solutions Pty Ltd [2012] NSWSC 1256 at [6]. In Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd [1997] FCA 681; (1997) 76 FCR 452 at 464; (1997) 24 ACSR 353, the Full Court of the Federal Court held that a "genuine dispute" must be bona fide and truly exist in fact, and the grounds for that dispute must be real and not spurious, hypothetical, illusory or misconceived. In CGI Information Systems & Management Consultants Pty Ltd v APRA Consulting Pty Ltd [2003] NSWSC 728; (2003) 47 ACSR 100 (at [16]), Barrett J helpfully summarised the principle as follows: "[T]he task faced by the company challenging a statutory demand on the genuine dispute grounds is by no means at all a difficult or demanding one. A company will fail in that task only if it is found, upon the hearing of its s 459G 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. Once the company shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow. The Court does not engage in any form of balancing exercise between the strengths of competing contentions. If it sees any factor that on rational grounds indicates an arguable case on the part of the company, it must find that a genuine dispute exists, even where any case apparently available to be advanced against the company seems stronger." 11In TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd [2008] VSCA 70; (2008) 66 ACSR 67 at [71], Dodds-Streeton JA observed that a company which seeks to establish a genuine dispute or offsetting 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. ... [I]t 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." 12In 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 459H(1)(a), is: "[T]o 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." It follows that, in order to establish a genuine dispute as to the legal costs claimed, for the purposes of s 459H(1)(a) of the Corporations Act, the Company need only establish that it has a plausible contention as to the matters to which I refer below so as to give rise to a genuine dispute as to the debt claimed by Broadband Tooling and Concept Moulding in this regard. 13Mr de la Vega's evidence in his first affidavit dated 30 September 2013 is that the Company did not agree to pay the amount of legal costs claimed in the demand in the amount of $4,500. By his further affidavit dated 3 March 2014, Mr Clark gives evidence of a suggested agreement as to the payment of legal costs, arising from an offer made by the solicitors for Broadband Tooling and Concept Moulding dated 6 August 2013 to accept $9,000 in full and final satisfaction of the legal costs of both proceedings and from subsequent emails exchanged with Mr de la Vega. 14The Settlement Deed provides for the payment of costs as "agreed or assessed". Broadband Tooling and Concept Moulding subsequently made an offer, by their solicitors, to accept $9,000 by way of costs. In a subsequent email dated 27 August 2013, Mr de la Vega referred to an intention to make the payments contemplated by the Settlement Deed; Mr Clark's response asked whether that was to include "the $9,000 in legal costs also"; and Mr de la Vega responded "Yes that was my intention". Broadband Tooling and Concept Moulding contend that, if agreement as to costs had not been made before that response, it was made by that response. Broadband Tooling and Concept Moulding point to the fact that a contract may be inferred from the acts and conduct of parties, without necessarily arising from a formal offer and acceptance: County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193 at [151]; Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 at [71]-[74]. On the other hand, Mr Bogan submits that a statement of a person's intention to do an act does not necessarily manifest an intention to be legally bound to do that act, even if made in response to an offer to compromise a particular claim. 15It seems to me that, at least by reference to the low threshold required to establish a genuine dispute, it is arguable that Mr de la Vega's statement did not amount to an acceptance of the offer as to legal costs made by Broadband Tooling and Concept Moulding by the Company, so far as Mr de la Vega may have held the intention to pay those costs, including in his personal capacity, without accepting any obligation on the part of the Company to pay them. For that reason, the demand issued to Broadband Tooling and Concept Moulding would have to be varied to exclude the amounts claimed in respect of legal costs, if they were not otherwise set aside. 16Mr Bogan also contends that, even if there was an agreement to pay an amount in respect of costs, there was no agreement as to the date by which that amount would be paid, where paragraph 3 of the Settlement Deed provided that it was due "no earlier than 27 August 2013 unless otherwise agreed". I do not accept that submission. If agreement had been reached between the Company on the one hand and Broadband Tooling and Concept Moulding on the other as to the amount of the costs due, then a term would have been implied that they be paid within a reasonable time of that agreement, absent any provision of the date for such payment. Offsetting claim in respect of non-delivery of 300 ml insert 17The Company also seeks to establish an offsetting claim arising from the alleged non-delivery of the 300 millilitre insert that it contends was required to be delivered under the Settlement Deed. An "offsetting claim" for the purposes of s 459H(1)(b) of the Corporations Act is the amount of a claim or claims that a company has against the person who served the statutory demand by way of counterclaim, set-off or cross-demand, whether or not that amount arises out of the same transaction or circumstances as the debt to which the demand relates: s 459H(5). If the Court is satisfied that the company has an offsetting claim, then the Court is required to calculate the "substantiated amount" of the demand by deducting any offsetting claim from the admitted amount of the debt: s 459H(2). 18A company can establish an "offsetting claim" if there is a "serious question to be tried" or "an issue deserving of a hearing" as to whether the company has such a claim against the creditor and that claim is made in good faith and is arguable and not frivolous or vexatious: Scanhill Pty Ltd v Century 21 Australasia Pty Ltd [1993] FCA 618; (1993) 47 FCR 451; 12 ACSR 341 at 356-7. In Re Morris Catering (Aust) Pty Ltd (1993) 11 ACSR 601 at 605, in the context of an offsetting claim, Thomas J observed that: "... beyond a perception of genuineness (or the lack of it) the Court has no function. It is not helpful to perceive that one party is more likely than the other to succeed, or that the eventual state of the account between the parties is more likely to be one result than another. The essential task is relatively simple - to identify the genuine level of a claim (not the likely result of it) and to identify the genuine level of an off-setting claim (not the likely result of it)." 19The amount of an offsetting claim is the amount claimed by a party in good faith, so long as that claim as so quantified is not fictitious or merely colourable: Jesseron Holdings Pty Ltd v Middle East Trading Consultants Pty Ltd (No 2) (1994) 13 ACSR 787 at 790. In Royal Premier Pty Ltd v Taleski [2001] WASCA 48 at [57], Ipp J observed that it is not necessary, for a company to establish an offsetting claim, that it lead evidence as to the damages claimed in "meticulous detail"; however, it is necessary that: "there must be at least some material upon which the court can conclude that some damage has been sustained and which will enable the court to make a reasonable assessment as to the amount thereof": 20The test for an offsetting claim was summarised by Brereton J in BBB Constructions Pty Ltd v Frankipile Australia Pty Ltd [2008] NSWSC 982; 68 ACSR 1 at [4] as follows: "The test for determining whether there is a genuine offsetting claim is whether the Court is satisfied that there is a serious question to be tried that a party has an offsetting claim (Scanhill Pty Ltd v Century 21 Australasia [1993] FCA 618; (1993) 47 FCR 451) or that the claim is not frivolous or vexatious (Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37). In other words, the claim must be bona fide and a truly existing fact and not spurious, hypothetical, illusory or misconceived (Ozone Manufacturing Pty Ltd v DCT [2006] SASC 91; (2006) 94 SASR 269 at [46]). In Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743, Palmer J put it in the following terms (at [18]): In my opinion, a genuine offsetting claim for the purposes of [Corporations Act] s 459H(1) and (2) means a claim on a cause of action advanced in good faith, for an amount claimed in good faith. "Good faith" means arguable on the basis of facts asserted with sufficient particularity to enable the Court to determine that the claim is not fanciful. In a claim for unliquidated damages for economic loss, the Court will not be able to determine whether the amount claimed is claimed in good faith unless the plaintiff adduces some evidence to show the basis upon which the loss is said to arise and how that loss is calculated. If such evidence is entirely lacking, the Court cannot find that there is a genuine offsetting claim for the purposes of s 459H(1) and (2)." 21The matters necessary to establish an offsetting claim were recently summarised by the Court of Appeal in Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd [2013] NSWCA 344 at [30]: "It is settled law that s 459H requires the court to be satisfied that there is a "serious question to be tried": see Scanhill v Century 21 Australasia at 467, or "an issue deserving of a hearing" as to whether the company has such a claim against the creditor: see Chase Manhattan Bank Australia Ltd v Oscty Pty Ltd [1995] FCA 1208; 17 ACSR 128 at [42] per Lindgren J; Eumina Investments Pty Ltd v Westpac Banking Corp [1998] FCA 824 ; 84 FCR 454 per Emmett J (as his Honour then was). The claim must be made in good faith: Macleay Nominees v Belle Property East Pty Ltd. In that case, Palmer J observed, at [18], that good faith, in this context, meant that the offsetting claim was arguable on the basis of facts that were asserted "with sufficient particularity to enable the court to determine that the claim is not fanciful". The Court there observed that evidence necessary to satisfy the test of a "serious question to be tried" or "an issue deserving of a hearing" or a "plausible contention requiring investigation" need not conclusively prove a claim or be substantially non-contestable. 22Mr de la Vega's first affidavit dated 30 September 2013 identifies an offsetting claim against Broadband Tooling and Concept Moulding which is said to arise out of a failure to deliver a particular insert which was to be used for the proposed production of plastic bottles by the Company. Mr de la Vega's second affidavit dated 24 January 2014 sets out further detail as to the development of the plastic bottle which appears to have given rise to the dispute between the parties and the engagement of Broadband Tooling to prepare concept drawings and Concept Moulding to manufacture plastic components in respect of that plastic bottle. Mr de la Vega gives evidence as to the form of a tool which is used to make the plastic bottle, the middle section of which is described as the "insert", and gives evidence that a Settlement Deed agreed between the parties required that Broadband Tolling deliver a twin cavity insert for a 300 millilitre tool used to make a 300 millilitre bottle, and had not delivered that insert as contemplated by that Settlement Deed. That affidavit annexed an invoice issued by Broadband Tooling to produce what was described as a "2 x cavity Maverick Hero bottle", which Mr de la Vega contends is the tool required to make the original 300 millilitre bottle, in the amount of $14,500, plus an invoice for the larger insert required to make a 700 millilitre bottle in the amount of $9,500. Mr de la Vega contends that Broadband Tooling failed to deliver the twin cavity insert for the 300 millilitre bottle, which it appears is contended to be part of the item referred to in the first invoice. 23Mr Clark's evidence, in his affidavit dated 29 January 2014, is that he had delivered to the Company all components of the "superfood tools" as described in the diagram attached to the Settlement Deed and he also refers to further correspondence seeking payment from the Company in accordance with the Settlement Deed and to the entry of judgment against the Company, purportedly in accordance with the Settlement Deed. By his further affidavit dated 3 March 2014, Mr Clark also gives evidence as to the function of the 300 millilitre insert that has, it appears, not been delivered and contends that that insert does not form part of the "superfood tools" as defined in the Settlement Deed. Mr Clark also refers to a letter dated 24 February 2014 sent to the Company's solicitor offering to deliver the relevant insert. The offer made to deliver the insert seems to me to have little impact on the matters in dispute, so far as the Company's claim to establish an offsetting claim arises from costs which it claims to have incurred as a result of the non-delivery of that item, or Broadband Tooling's dealings with Visy (to which I will refer below) before that offer was made. 24Broadband Tooling and Concept Moulding contend that the claim for breach of the Settlement Deed requires the insertion of terms into the Settlement Deed that go beyond interpretation and relies upon the subjective view of Mr de la Vega in an impermissible manner. Broadband Tooling and Concept Moulding also contend that the attached drawing depicted a lid tool and two bottle tools that were delivered. They also point out that the obligation for delivery fell upon Broadband Tooling and not upon Concept Moulding. They contend that the words "diagram attached" qualify the term "superfoods tools" which is not, in any event, defined. The latter proposition does not assist them, because it emphasises the extent to which the definition of that concept will require reference to evidence of the surrounding circumstances, which is capable of giving rise to a genuine dispute. They also contend that the Settlement Deed has not been terminated and, if the insert is required, Broadband Tooling has offered to deliver it. That, however, will not be an answer to any loss that has already been suffered by the Company by reason of an earlier non-delivery of the tool. 25It seems to me that an arguable case exists, to the level that would be sufficient to give rise to an offsetting claim, that there was a breach of the obligation to deliver "superfood tools" on the basis that the insert was one of those tools. The words "superfood tools (diagram attached)" are plainly ambiguous. The ambiguity in that definition is exacerbated by the fact that, as the Company points out, the text below the diagram is unclear, with uncertainty as to the use of singular and the plural, reading "single and a twin cavity tools", and it also appears that the pictures in the diagram may not correspond to the order of the reference to those two concepts in the text. There is room for dispute both as to whether the diagram confines the concept of "superfoods tools" used in the Settlement Deed; if it does not, whether the insert is one of the "superfoods tools" even if it is not identified by the diagram; and, if the diagram does confine that concept, whether the insert is nonetheless contemplated to be provided by the diagram. It would be necessary to have regard to evidence of surrounding circumstances to construe them, and there is plainly a significant dispute as to the conclusions that should be drawn from those surrounding circumstances as to whether the insert was or was not within that definition. 26Broadband Tooling and Concept Moulding also contend that, where the Company's case is that only Visy could have manufactured using the tools provided by Broadband Tooling, and Visy has in fact declined to manufacture for the Company, the Company can suffer no substantive loss as a result of non-delivery of the tool which could have been put to use if delivered. The evidence on which the Company relies does not seem to me to provide any basis for a finding that the absence of the insert prevented it from manufacturing the relevant bottles, although it may have prevented the manufacture of two of the bottles at the same time, or gave rise to the damages which the Company claims. To the contrary, Mr de la Vega's evidence suggests that those damages result from Visy's unwillingness to manufacture the bottles on the Company's behalf, which he attributes to the comments made by Mr Clark to Visy, to which I will refer below. Offsetting claim in respect of dealings with Visy 27The Company contends that it also has an offsetting claim arising from certain dealings between Mr Clark and a third party ("Visy") which it contends give rise to a breach by Broadband Tooling of an implied duty to cooperate under the Settlement Deed, a claim for interference with its contractual relations with Visy, and an arguable case for defamation leading to economic loss by way of the additional costs incurred using substitute packaging. The Company contends that it has a claim that Mr Clark's advice given to Visy was defamatory. It appears that the Company would not have been prevented by bringing such a claim by s 9 of the Defamation Act 2005 (NSW) which limits a corporation's ability to bring a claim for defamation in some circumstances, since the Company would have been an "excluded" corporation (as defined) for the purposes of the Defamation Act. The Company also relies on a claim for a breach of an implied duty to co-operate under the Settlement Deed and claim for interference with its contractual relations with Visy. 28Mr de la Vega's first affidavit dated 30 September 2013 identifies a further offsetting claim arising because, he contends, Mr Clark had placed limits on the use of material supplied to Visy which he contends were to manufacture the relevant bottles; had informed Visy of the court proceedings between Broadband Tooling and the Company and, according to Mr de la Vega , had advised Visy that it should not deal with the Company because the Company was litigious and Visy had thereafter not dealt with the Company. Mr de la Vega also gives hearsay evidence in that affidavit as to conversations between Mr Clark and Visy, and as to Visy's decision not to deal with the Company as a result of those conversations. Hearsay evidence is admissible in an application of this kind: Tokich Holdings Pty Ltd v Sheraton Constructions (NSW) Pty Ltd (in liq) [2004] NSWSC 527; (2004) 185 FLR 130 at [21]-[22]; Britten-Norman above at [37]. 29In his second affidavit dated 24 January 2014, Mr de la Vega also gives evidence that, as a consequence of Visy refusing to produce the bottles, the Company was required to arrange the design, documentation and manufacture of a new set of containers which are now being used and has written off the tools made by Broadband Tooling; has redesigned documentation and manufacture of the outer display boxes for the bottles; and has redone photography, brochures, display paper and the website for the product. Mr de la Vega's evidence is that the costs of the new bottles which have been obtained are significantly higher than those which would have been made and supplied by Visy; that the Company has had to pay an additional amount to its contract packer in respect of a machine to put metal lids on containers, known as a can seamer, and quantifies the additional costs which it has incurred as in excess of $9,000 in respect of the new containers, in excess of $13,000 in respect of the can seamer and approximately $9,200 for additional packing costs incurred, and total costs in the order of $41,500, which is in excess of the amount claimed in the creditor's statutory demand by Broadband Tooling. Mr de la Vega also gives evidence of additional costs claimed in respect of the Company's employees, being himself and his wife, and claims costs thrown away in respect of payments to Broadband Tooling for tools manufactured, although this evidence does not extend to justifying the basis on which time costs are charged by his wife or himself or the basis on which he contends that the costs of all tools supplied by Broadband Tooling have been thrown away. 30By his evidence, Mr Clark, in effect, denies that he made the comments that are alleged to have caused Visy not to deal further with the Company. 31In submissions, Mr Bogan places particular weight on the decision of the New South Wales Court of Appeal in Britten-Norman above. In particular, Mr Bogan relied on the Court of Appeal's observation that the test for an "offsetting claim" is whether there was a plausible contention requiring investigation; and to its further observation (at [60]) that: "The existence of evidence that casts doubt, even significant doubt, on an applicant's contention that there is a disputed debt or an offsetting claim, is not the basis for a rejection of an application under s 459H". The Court of Appeal at [70] also identified a question whether the asserted claim is "sufficiently implausible as not to merit further investigation", and note that only a limited assessment of the credibility and weight of the evidence is required in determining whether s 459H of the Corporations Act is satisfied. Much may turn upon the meaning to be given to the words "significant doubt" in the observation quoted above. I would not necessarily read that decision as intending to suggest that, if the only evidence in support of a suggested offsetting claim is the claimant's affidavit and all other evidence is inconsistent with that claim, it should nonetheless be treated as "genuine" so as to give rise to an offsetting claim. However, that issue does not arise in this case, given Mr de la Vega's affidavit evidence and the emails exchanged between himself and Mr Clark and with Visy. 32Whether or not any binding agreement had been reached between the Company and Visy as to the manufacture of the relevant bottles, prior to the alleged conversations between Mr Clark and Visy of which Mr de la Vega gives hearsay evidence, it is clear from emails exchanged between Visy, the Company and Broadband Tooling that Visy ceased to be willing to manufacture the bottles after those alleged conversations had occurred. That position emerges clearly from an email sent by a representative of Visy to Mr de la Vega to the effect that: "I advise that [Visy] has made a commercial decision NOT to take on your work, particularly with the news of late regarding the bottle declaring to be biodegradable with virgin resin. There is far too much litigation surrounding these moulds and the current circumstances. We need to step away from this unfortunately." Mr de la Vega then emailed Mr Clark protesting his communication with Visy; Mr Clark subsequently communicated further with Visy; and Visy then sent a somewhat self-serving email stating that: "... [Broadband] has in no way influenced our decision not to take on this work. The business has made the decision not to deal with [the Company] therefore we retract all previous offers and conditions. We have not started work with [the Company] and we will not be manufacturing product for [the Company]". 33Broadband Tooling and Concept Moulding rely on Visy's statements to contend that no loss is demonstrated by any communication by Mr Clark to Visy; however, that turns upon a disputed factual question that cannot be determined in an application of this kind. Mr Clark also denied, in oral evidence, that he had made comments of the kind attributed to him; however, Mr de la Vega's evidence on the one hand and Mr Clark's evidence on the other indicates that there is a factual dispute as to this matter, so that Mr Clark's denial cannot exclude an offsetting claim. Broadband Tooling and Concept Moulding also point to various other matters that may have influenced Visy's decision not to manufacture the bottles or have had the result that Visy would not have manufactured the bottles in any event. In particular, they point to the fact that Visy's minimum run for each of the bottles was 10,000 units and that it had indicated that it needed to inspect the condition of the relevant moulds, and contend that there is no evidence that it had inspected those moulds and that no single run would exceed 10,000 units. It seems to me that these are also factual matters that may provide an answer to the claim asserted by the Company but do not exclude the existence of an offsetting claim. 34The question for the Court is not, of course, whether the Company is more likely to succeed in a claim against Broadband Tooling in this respect or Broadband Tooling is more likely to succeed in defending that claim. Once it is clear that there is a genuinely arguable claim by the Company against Broadband Tooling, for an amount of damages exceeding the amount of the Demand, then the creditor's statutory demand issued by Broadband Tooling must be set aside under s 459H(1)(b) of the Corporations Act. It seems to me that, as the Company contends, it has at least an arguable case for a breach of an implied duty to cooperate under the Settlement Deed, albeit the scope of such a duty may be open to argument; it has a possibly weaker claim for interference with its contractual relations with Visy, although such a claim may well fail if it cannot establish any relevant contract with Visy; and it has an arguable case for defamation leading to economic loss by way of the additional costs incurred using substitute packaging. Mr de la Vega's evidence sets out, in some detail, a quantification of the losses claimed. That evidence may not be sufficient to establish those losses at a final hearing, but it is sufficient to establish an arguable case as to those losses for the purposes of an application of this kind. Whether any other offsetting claim is established 35The Company seemed also to seek to establish an offsetting claim on the basis that, in filing the consent orders without the condition precedent of delivery of the "superfoods tools" having been met, Broadband Tooling and Concept Moulding breached the Settlement Deed, with the consequence that the consent judgment is liable to be set aside on the basis that there was no consent. As I will note below, it appears clear, and Broadband Tooling and Concept Moulding did not contest, that that matter, if established, would establish some other reason to set aside the statutory demand under s 459J of the Corporations Act. It does not seem to me that it would give rise to an offsetting claim, since the Company can presently have no basis for recovery of money due pursuant to the consent orders that it has not in fact paid. Whether some other reason to set aside the creditor's statutory demand is established 36The Company also relies on s 459J(1)(b) of the Corporations Act in order to seek to set aside the demand. In Re UGL Process Solutions above at [43], I observed that: "The 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: ... A statutory demand may be set aside under that section where it involves conduct which is unconscionable or an abuse of process: .... 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." [references omitted] 37The Company contends that the consent judgment entered by Broadband Tooling and Concept Moulding pursuant to the Settlement Deed is liable to be set aside for want of consent, and that this is an "other reason" for the demand to be set aside under s 459J(1)(b) of the Corporations Act. Broadband Tooling and Concept Moulding properly conceded that, if there was a seriously arguable case that the consent judgment was liable to be set aside, then that would give rise to an "other reason" to set aside the demand, although contending that no such serious question was established. 38It does not seem to me that any arguable basis exists for the proposition that the consent orders were not properly entered. The Settlement Deed provided that judgment was to be entered against the Company in favour of Broadband Tooling and Concept Moulding in stated amounts if the required payments were not made by the Company by the required dates. Those payments were not made and the Settlement Deed authorised the entry of the consent judgment in that situation. Mr de la Vega sought to give evidence as to his subjective understanding of the Settlement Deed, which was not admissible in the absence of any application for rectification of the Settlement Deed and was not admitted. Even if that evidence had been admissible, it would have provided no assistance in establishing that the Settlement Deed was not to be construed in accordance with its terms. Mr de la Vega did not give any evidence suggesting that there was any representation made by Broadband Tooling consistent with his understanding of the Settlement Deed, so as to support any representational claim or any claim in estoppel, nor was such a claim identified by the Company as the basis of an offsetting claim. 39It does not seem to me that there is any arguable basis for the Company's contention that compliance by Broadband Tooling with its obligation to deliver the "superfood tools" was a condition precedent to the obligation for payment under the Settlement Deed, such that a partial failure by non-delivery of one of those tools would have the consequence that the Company was not obliged to meet the payment requirements under the Settlement Deed. The Settlement Deed did not provide that that provision was a condition precedent to the obligation to make payment under the Settlement Deed. The only basis identified by Mr Bogan for the proposition that the provision was a condition precedent, namely that the tools were to be delivered two weeks prior to the payment, does not seem to me to support any such argument, absent any provision to that effect, or any basis for a claim that damages would not have been an adequate remedy for a breach of that obligation. 40The Company also contends that another reason to set aside the demand under s 459J of the Corporations Act arises because the demands are dated 2 September 2013 and the supporting affidavits are dated 5 September 2013 and assert that the total amount of the alleged debts "is due and payable". The Company contends that those affidavits do not demonstrate that the debt was due and payable as at the date of the demand, some 3 days earlier, on 2 September 2013. 41Mr Bogan contends that the affidavit accompanying a statutory demand should be sworn on the same day as the date of the statutory demand and refers to case law and to an observation by Mr F Assaf in his useful text, Statutory Demands and Winding Up in Insolvency, 2nd ed at [3.36], to the effect that: "It is suggested that both the affidavit and statutory demand be finalised contemporaneously to avoid challenges to the demand". I accept that s 459E(3) of the Corporations Act requires that the demand be verified by an affidavit that speaks to the circumstances existing when the demand is made: Technology Licensing Ltd v Climit Pty Ltd [2001] QSC 84; [2002] 1 Qd R 566 at [24]. However, the decisions to which Mr Bogan refers generally deal with the position where an affidavit verifying a demand is sworn prior to the demand, a position that raises the difficulty as to how an affidavit can verify a demand that has not yet been made. Even in that situation, the Court may not set aside a demand for that reason, if the demand and the affidavit are substantially contemporaneous: Re Gemaveld Pty Limited [2012] NSWSC 582. By contrast, in Chadmar Enterprises Pty Ltd v IGA Distribution Pty Ltd [2005] ACTSC 39; (2005) 190 FLR 466; (2005) 53 ACSR 645, which also dealt with an affidavit sworn prior to the date of the demand, Higgins CJ observed at [14] that: "An affidavit that verifies a previously formulated and drafted notice of demand could rationally verify the date mentioned therein as at the date of that subsequent affidavit." Other case law has also recognised the possibility that a demand may be supported by an updating affidavit sworn after the date of the demand, but within the 21 days available to the debtor to set aside the demand: Wildtown Holdings Pty Ltd v Rural Traders Co Ltd [2002] WASCA 196; (2002) 172 FLR 35 at [58]; Ambassador at Redcliffe Pty Ltd v Barreau Peninsula Property Pty Ltd [2006] QSC 247; (2006) 202 FLR 459; (2006) 58 ACSR 607; [2007] 2 Qd R 199 at [21]. The passage from Mr Assaf's text quoted above is in the nature of sound practical advice, rather than a proposition of law. 42In the present case, it seems to me that the affidavits accompanying the statutory demands are directed to the verification of the demands, which were dated 2 September 2013, and at least convey that the amount of the debt claimed is due and payable as at the date that it was claimed, namely the date of the demand, albeit that they may also contain a further confirmation that the debt remained due and payable on the date on which the affidavit was sworn, namely 5 September 2013. There seems to me to be no reason, in principle, why a person cannot, by an affidavit sworn after the demand is signed, verify the content of the demand. While I do not doubt the prudence of Mr Assaf's recommendation that the demand be signed first, and the affidavit of verification sworn within a short time thereafter and on the same day, it does not seem to me that the approach adopted in this case gives rise to any reason to set aside the demand for some other reason. Claim to set aside the creditor's statutory demand issued by Concept Moulding 43I have held above that a genuine dispute is established in respect of the amount of legal costs claimed in the creditor's statutory demand issued by Concept Moulding, and that demand would need to be varied accordingly if not otherwise set aside. 44An offsetting claim would be established in respect of that demand, if Mr Clark's dealings with Visy were attributable to Concept Moulding, but not otherwise on the basis of the findings that I have reached above. So far as an offsetting claim is based on a claimed obligation to deliver the insert under the Settlement Deed, there is a further reason why no arguable question could be established that Concept Moulding was in breach of any such obligation, since the obligation as to delivery of the "superfood tools" was imposed on Broadband Tooling rather than Concept Moulding under that agreement. The fact that a first person is party to an agreement does not mean that a second person's breach of an obligation applying only to that second person is to be attributed to the first person. 45The Company seeks to attribute Mr Clark's conduct, including his dealings with Visy, to Concept Moulding and relies in that regard on Mr de la Vega's evidence that he only ever dealt with Mr Clark and did so at Broadband Tooling's factory, and contends that Mr Clark was therefore the representative of Concept Moulding and acted with its actual or ostensible authority. It does not seem to me that there is sufficient basis to support an offsetting claim against Concept Moulding in respect of Mr Clark's dealings with Visy. Generally, the fact that a person may be, for example, an officer of two related entities and have authority to act for each of them does not mean that all actions he or she takes in his or her role as an officer of one entity are to be attributed to the other. Specifically, it does not follow from the fact that (as Mr de la Vega contends) Mr Clark may have acted on behalf of Concept Moulding in dealings with Mr de la Vega that he also acted in respect of Concept Moulding in respect of every other dealing he had with every other entity, including Visy. Even if Mr Clark had authority to act on behalf of Concept Moulding in at least some respects or generally, there does not seem to me to be any evidence capable of founding a suggestion that he in fact did so in respect of his communications with Visy. As Concept Moulding points out, there is no evidence to suggest that Concept Moulding has any commercial relationship with Visy. The emails from Visy refer only to Broadband Tooling and not to Concept Moulding. It does not seem to me that the basis for any offsetting claim against Concept Moulding has been established. There is also no reason to set aside the demand issued by Concept Mouldings under s 459J of the Corporations Act, for the reasons noted above in respect of Broadband Tooling. 46I have, however, found that a genuine dispute has been established in respect of the amount of $4,500 claimed by Concept Moulding for legal costs. It follows that the "admitted amount" of Concept Moulding's debt, for the purposes of s 459H(5) of the Corporations Act, is $25,993.12 (being the amount claimed of $30,493.12 less $4,500) and the admitted "total" for the purposes of s 459H(2) of the Act is the same amount. In these circumstances, I am satisfied that the proper order is to vary Concept Moulding's demand, by reducing it by the amount of $4,500, and to declare the demand to have that effect, as so varied, as and from when the demand was served on the Company in accordance with s 459H(4) of the Corporations Act. Orders and costs 47Accordingly, I make the following orders: 1. The Statutory Demand issued by Broadband Tooling Pty Ltd dated 2 September 2013 be set aside. 2. The Statutory Demand issued by Concept Moulding Pty Ltd dated 2 September 2013 be varied to the amount of $25,993.12 and have effect, as so varied as and from when it was served. 48My preliminary view is that the outcome set out above is such that, in the ordinary course, the Company would be ordered to pay Concept Moulding's costs of the proceedings and Broadband Tooling would be ordered to pay the Company's costs of the proceedings, although an argument could have been put that the latter costs should be discounted to exclude the costs of the several arguments put by the Company that have failed. Since the arguments were substantially in common as between the two matters, it is very likely that the amount of costs payable by the Company to Concept Moulding and by Broadband Tooling to the Company would in any event be the same or substantially the same. While the basis for a set-off would not be established, where those amounts are due as between different entities, there may be no practical utility in such an order where Broadband Tooling and Concept Moulding are, as the evidence indicates, largely interdependent and the better approach may be to make no order as to the costs of the applications. However, I will hear the parties as to the issue of 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 April 2014