Crixus Pty Ltd. v. Ora Banda Mining Ltd. - (27 Feb 2020)

Function of Court is to determine whether there is a genuine dispute, Courts are not expected to undertake an extended inquiry or to weigh the merits of the dispute

Civil

The Plaintiffs filed an application pursuant to Section 459G and Section 459H of the Corporations Act, 2001 to set aside a statutory demand served by the Defendant. The Plaintiffs submits that, the statutory demand must be set aside because there is a genuine dispute as to the existence of the Debt. The Defendant submits that, the evidence relied upon by the Plaintiffs to establish the reduction of the amount owed pursuant to the Loan Agreement is inconsistent with the books and records of the defendant and therefore, there is no genuine dispute as to the existence of the Debt.

The issue on an application to set aside a statutory demand is whether there is a genuine dispute about the existence of the debt. Section 459H of the Act provides that, Court satisfied of dispute or offsetting claim. This section applies where, on an application under section 459G, the Court is satisfied: (a) that there is a genuine dispute between the company and the Respondent about the existence or amount of a debt to which the demand relates. It is not the court's function to resolve the genuine dispute or contested issues of fact.

In Createc Pty Ltd v Design Signs Pty Ltd, it is held that: (a) the test of genuine dispute which has the greatest judicial support describes 'genuine dispute' as connoting 'a plausible contention requiring investigation' and equates it to a 'serious question to be tried' which arises on an application for an interlocutory injunction; (b) an applicant for an order setting aside a statutory demand must establish that the dispute is bona fide and truly exists in fact and that the grounds alleging the existence of the dispute are real and not spurious, hypothetical, illusory or misconceived; and (c) the only function of the court is to determine whether there is a genuine dispute; the court is not expected nor is it appropriate for the court to undertake an extended inquiry or to weigh the merits of the dispute.

While there may be evidence that casts doubt, potentially significant doubt, on the Plaintiffs' contention that the Debt does not exist, such evidence is not the basis for rejection of an application made under Section 459G of the Act

Payment was a pre-condition to the exercise of the Options pursuant to Schedule 1 clause 5 of the Option Rules - it is not in issue that the Options were exercised. Therefore, there is an issue to be tried as to whether the Options were exercised upon the reduction of the loan balance; (b) the contemporaneous email from Ms Coates to Squire Patton Boggs gives rise to a contest on the facts as to what 'debt' was to be set off (and what it was to be set-off against); and (c) the purported novation of the Loan Agreement from Investmet to Azurite gives rise to a legal issue as to whether that was permitted and, if so, a factual issue as to whether that actually occurred.

Present Court is not required to undertake a more detailed enquiry as to the existence of the Debt, or to form a view in relation to the merits of the dispute. There is a genuine dispute. In those circumstances, the Plaintiffs' applications to set aside the statutory demands pursuant to Section 459G of the Act are granted.

Tags : DISPUTE EXISTENCE STATUTORY DEMAND VALIDITY