The applicant sought to set aside a statutory demand issued by the respondent claiming US$249,216.15 was owed. The applicant argued there was a genuine dispute as to the debt because: (1) tools supplied by the respondent in 2011 were defective, incomplete, and caused the applicant to lose a lucrative contract; (2) in June 2012, the parties entered a compromise agreement with a payment plan, which the respondent later repudiated; and (3) the debt claimed was the same as in the repudiated agreement. The court set aside the statutory demand, finding a genuine dispute existed as to the debt claimed.

1. SUPREME COURT OF QUEENSLAND
CITATION: Welldog Pty Ltd v World Oil Tools Inc [2013] QSC 180
PARTIES: WELLDOG PTY LTD
(applicant)
v
WORLD OIL TOOLS INC
(respondent)
FILE NO: 3405 of 2013
DIVISION: Trial Division
PROCEEDING: Application
ORIGINATING
COURT:
Supreme Court of Queensland
DELIVERED ON: 22 July 2013
DELIVERED AT: Brisbane
HEARING DATE: 15 May 2013
JUDGE: Daubney J
ORDERS: 1. That the statutory demand dated 19 March 2013
served by the respondent on the applicant be set
aside.
2. I will hear the parties as to costs.
CATCHWORDS: CORPORATIONS – STATUTORY DEMAND –
APPLICATION TO SET ASIDE DEMAND – GENUINE
DISPUTE AS TO INDEBTEDNESS – ASSESSING
GENUINENESS – GENERALLY – where the applicant
seeks to have a statutory demand set aside – where the parties
entered into a compromise agreement in June 2012, in which
the debt said to be owing was one and the same as the debt
claimed in the statutory demand – where the respondent
repudiated that agreement – whether there is a genuine
dispute with respect to the debt claimed under the statutory
demand – whether the statutory demand ought be set aside
Corporations Act 2001 (Cth), ss 459G, 459H
Broke Hills Estate Pty Ltd v Oakvale Wines Pty Ltd (2005) 23
ACLC 1266, cited
Rhagodia Pty Ltd v National Australia Bank (2008) 67 ACSR
367, considered
Sewmail (Australia) Pty Ltd v Booby Traps Pty Ltd (1997) 23
ACSR 339, cited

2. 2
Solarite Air Conditioning Pty Ltd v York International
Australia Pty Ltd [2002] NSWSC 411, considered
Trout Farms Australia Pty Ltd v Perpetual Nominees Ltd
[2013] VSC 228, cited
COUNSEL: RM Lawson (Sol) for the applicant
G Coveney for the respondent
SOLICITORS: Porter Davies for the applicant
Shand Taylor for the respondent
[1] This is an application pursuant to s 459G of the Corporations Act to set aside a
statutory demand issued by the respondent and served on the applicant.
[2] By the statutory demand dated 19 March 2013, the respondent claimed that the
applicant owed the respondent US$249,216.15 “being the total of the amounts of
the debts described in the Schedule”. The Schedule to the statutory demand
particularised those debts as follows:
“SCHEDULE
Description of the debt Amount of the debt
($US)
Money due and owing for goods sold and delivered
as particularised in the following tax invoices:
Tax invoice number 17114 dated 1 September 2011 $245,721.00
Tax invoice number 17115 dated 1 September 2011 $43,950.00
Tax invoice number 17119 dated 1 September 2011 $212,848.57
Tax invoice number 17146 dated 18 October 2011 $4,037.20
Tax invoice number 17152 dated 25 October 2011 $2,850.00
Tax invoice number 17223 dated 13 January 2012 $15,705.19
Subtotal $525,111.96
Less payments received from the company as particularised
below:
Wire prepayment dated 18 August 2011 $130,933.05
Wire prepayment dated 18 August 2011 $19,752.50
Payment received 23 February 2012 $2,570.26
Payment received 13 July 2012 $22,640.00
Less credit provided by creditor $100,000.00
Total amount US$249,216.15”
[3] The statutory demand was supported by an affidavit sworn by the respondent’s chief
financial officer, Mr William Heath, who asserted both that the said US$249,216.15

3. 3
was “due and payable by” the applicant and that he believed “there is no genuine
dispute about the existence or amount of the debt”.
[4] On 11 April 2013, the applicant’s solicitors wrote to the respondent’s solicitors,
stating, inter alia:
“We are instructed that the debt alleged in your client’s statutory demand
(“the Disputed Debt”) is the subject of an ongoing dispute which your
client is well aware of.
In 2011, our client entered into a commercial relationship with your client
for the supply of, inter alia, drilling equipment (“the Tools”). The
Disputed Debt is directly related to your client’s supply of the Tools.
During the period of 2011 – 2012 your client delivered some of the Tools
to our client and within a very short time our client discovered that the
Tools were defective. In some instances the Tools were incomplete and/or
not the correct products ordered by our client (“the Tool Issues”).
In about April 2012 your client conceded the Tool Issues and in June 2012
it agreed to a resolution which included, inter alia, the following terms:
(a) an extended payment schedule for any current invoices; and
(b) any spare parts required by our client, to maintain the operation of the
Tools, would be supplied expeditiously and the cost of those spare
parts would be added to the current balance of invoices and
incorporated into the extended payment schedule.
(“the Agreement”)
In late July 2012 our client was urgently awaiting the supply of spare parts
from your client. Our client’s numerous attempts to contact your client
were unanswered until in August 2012 it finally responded by email
noting:
‘our financial controls were very loose over the past year, and I will be
making a major effort to get our house back in order.’
‘I do not mind carrying the current balance remaining from Welldog.
However, for all new purchases, we will require full payment prior to
shipment.’
On 4 August 2012 our client responded by email noting that your client
was ‘unilaterally voiding this agreement’, in other words our client was of
the view that your client’s conduct was a repudiation of the Agreement.
That email correspondence also referred to other serious complaints by
our client which included your client’s continual delays in providing spare
parts and its failure to provide tools of sufficient quality which had
resulted in a ‘direct loss of customers, embarrassment in the market and
significant delays in earning revenue ...’
Our client requested a prompt reply and did not receive any
communication from your client until some 3 months later on 29
November 2012 when your client sent an email demanding payment of
$249,216.15 and acknowledging that there was an ‘issue with the tools’.
As a result of your client’s conduct which includes (but is not limited to):
(a) delivery of defective products;

4. 4
(b) failure to provide adequate (or any) warranty support of its products;
and
(c) repudiation of the Agreement.
our client has not only suffered a significant loss of income but has been
left with defective tools which have been inoperable since about March
2012.
Clearly in the above circumstances, the debt alleged by your client’s
statutory demand is the subject of a genuine dispute. Please provide us
with written confirmation that your client has withdrawn the statutory
demand by no later than 4pm on Friday 12 April 2013.
If your client refuses or fails to withdraw the statutory demand by the
nominated time, we have instructions to file an application in the Supreme
Court seeking that it be set aside.
Further, in circumstances where your client is fully aware that the debt
alleged is the subject of a genuine dispute and it refuses to withdraw the
statutory demand, our client will seek any costs associated with having the
statutory demand set aside, including any court filing costs, on an
indemnity basis.”
[5] Some correspondence then passed between the solicitors, the upshot of which was
that the respondent’s solicitors contended that there was no genuine dispute as to the
existence of the debt.
[6] The present application was then filed. It was supported by an affidavit by Mr
Michael David Thomas, the applicant’s Chief Operations Officer.
[7] When the matter came on for hearing, the only material relied on by the respondent
was:
(a) an affidavit by the respondent’s solicitor exhibiting copies of the
correspondence which had passed between the solicitors, and
(b) an affidavit by the respondent’s solicitor, filed by leave at the hearing, to
which was exhibited a copy of an affidavit sworn by Mr Heath (who resides
in Canada). The draft of his affidavit was first sent to Mr Heath two days
before the hearing and he emailed the sworn version of it to his solicitors only
on the day before the hearing. Importantly, Mr Heath’s affidavit did not
controvert, or in any way impugn, the matters stated in Mr Thomas’ affidavit,
but was limited to exhibiting copies of documents (emails, invoices and a
credit note) sourced from the respondent’s file.
[8] At the hearing, a further affidavit by Mr Thomas was filed. This had the effect of
correcting an error he had made in his previous affidavit with respect to a particular
date.
Background
[9] The applicant is in the business of coal seam gas testing. In 2011, the applicant
entered into a contract with the respondent, a company incorporated in Canada and
trading from offices in Calgary, Alberta, to purchase certain permeability testing
equipment (described in Mr Thomas’ affidavit as “the Tools”). The applicant
required the Tools in order to provide services under a contract the applicant had

5. 5
entered into with AGL Energy Ltd (“AGL”). That contract required the applicant to
carry out coal seam gas well testing at sites in the Cooper Basin in early October
2011.
[10] In purported performance of its agreement with the applicant, the respondent
supplied equipment to the applicant in early September 2011. It is apparent from
the material, however, that many components were missing. Further investigation
showed that much of the equipment which had been supplied was also defective.
These issues were the subject of emails sent by the applicant to the respondent
containing increasingly urgent complaints and requests for rectification during
September 2011.
[11] The extent of the respondent’s failure to supply in accordance with its agreement is
summarised in an internal email from the applicant’s field engineering supervisor to
Mr Thomas dated 10 October 2011. That email lists no less than 12 broad areas of
defective supply (including the failure to supply manuals, tool drawings and
specification sheets) and lists 29 instances of defects in the products which were
supplied by the respondent.
[12] By October 2011, as a consequence of the defective and incomplete supply by the
respondent, the applicant was constrained to engage a subcontractor to perform the
applicant’s work under its contract with AGL. Mr Thomas says that:
(a) this contract with AGL was for a series of well tests, for which the applicant
was to be paid a total of $350,000;
(b) the applicant was to be paid $60,000 for the first of those tests;
(c) in fact, it cost the applicant $90,000 to have the first of the tests completed on
its behalf.
[13] It is also clear that, by reason of its inability to perform on the first of the AGL well
tests, the applicant lost the AGL contract. An email from AGL to the applicant
dated 14 October 2011 stated:
“As you know, AGL have a further 3 wells in our firm Cooper Basin oil
exploration program. WellDog were invited to undertake DST operations
based upon a few assumptions that you had personally assured me would
be under control. These included that WellDog would have all of their own
gear ready for the program and that Craig would personally be onsite to
oversee the job.
Neither of these things occurred and the communication of these issues to
the AGL representatives happened in an indirect and very last minute
matter. Regarding Craig’s inability to make it out to site, we were notified
indirectly 12 hrs prior to mobilisation via the crew list issued to site.
Despite the fact your guys are experienced, this was a request and requisite
condition of awarding the work.
Regarding gear, WellDog were not tooled up for the job, despite the
program being 3 weeks behind the schedule initially given. As a result,
almost the entire job was farmed out to a competing company, of whom we
had tendered to and did not award the work. The communication of this
issue was also handled poorly, the first time AGL was made aware that
OzDST were undertaking the job was when they contacted us to enquire
about the job specifications. This obviously caused a lot of confusion and
frustration internally, our safety managers nearly pulled the pin on the job

6. 6
as OzDST are also not pre-qualified to work on an AGL site. As a smaller
issue, the fact real time telemetry does not work below 1200m and we had
2 reservoir engineers on standby overnight to monitor a DST at 1590mKB
was a fair oversight also.
All in all Nick we have been pretty disappointed with the way the operation
was handled and a far from premium service was delivered as guaranteed.
As such, AGL will not be engaging WellDog to undertake any further
DST’s as part of the Cooper Basin exploration program, this will not
however exclude you from future tenders.”
[14] The reference in that email to the applicant not being “tooled up” for the job clearly
cross-references to the fact that the respondent had failed in its supply of the Tools
to the applicant.
[15] Mr Thomas’ evidence before me was:
“19. The loss suffered by WellDog from the termination of the AGL
Contract is at least $300,000 but I believe it is significantly more and
up to $1 million dollars by reason of the loss of continued contracts
which ozDST have now secured and WellDog would have been
awarded if the Tools had been delivered on time, complete and not
defective.”
[16] Despite the respondent’s failure to supply the Tools, the applicant persevered in
attempting to deal with the respondent. Mr Thomas’ further uncontroverted and
unchallenged evidence was as follows:
“20. It was not until about Feb, 2012 that WOT delivered the necessary
parts to enable the Tools to function.
21. In about February 2012 WellDog was required to carry out well
testing pursuant to a contract with Senex Pty Ltd (“the Senex tests”).
The Senex Tests were to be carried out in the Cooper Basin in South
Australia.
22. During the carrying out of the Senex Tests the Tools suffered
numerous failures which were a result of the Tools being defective.
23. A representative from Senex Pty Ltd was present during the Senex
Tests and failure of the Tools and noted their concerns that the Tools
were unreliable.
24. Senex refused to engage WellDog to carry out any further well
testing using the Tools until such time that WellDog could assure it
that spare and replacement parts for the Tools were readily
available.”
[17] On 29 February 2012, Mr Thomas sent the following email to Mr Dennis Makar of
the respondent:
“Dennis,
This memo is designed to summarize the problems that we have
encountered with our purchase of a 5″ inflate DST tool and a Slim Hole
inflate DST tool from World Oil Tools in August of 2011. You and I have
had numerous conversations about this situation as well as conversations
with Curtis, Muyi and Bill in your organization. Additionally, Craig
Thorne, Robin Brooks and Dave Ramage have had conversations with your
team many times. I am sending this memo to you now because we believe

7. 7
that we finally have the tools that we purchased from you in a place where
we can actually use them with some confidence. This has not been an easy
undertaking and certainly not what we expected when we bought the tools
from you. Below is an outline of the activities, efforts and the situation that
we have encountered since the purchase in August:
 Tools ordered in August with confirmed delivery by 26 August,
our shipper actually picked up the tools 31 August
 The tools arrived completely unusable, please see attached list
detailing the status of the tools when received. We have also had
extensive problems receiving the correct parts that we have
ordered, very long delays receiving ordered parts and components,
and receiving parts that are not within specifications.
 As a result of the tools not usable (in this situation the SHIF tool),
we delayed a job for a customer in New Zealand two weeks,
causing them and us significant additional costs
 We focused on getting the SHIF tool ready to work, succeeded and
performed the job in New Zealand, with numerous hot shots of still
missing pieces (I picked up some of these from Curtis when I
visited your offices in early October)
 We completed the job and have used the tool one additional time,
but we still have a what looks like an inflation passage leak that we
have yet to be able to correct.
 The 5″ tool was a complete mess, we worked on the tool from
receipt until the end of September to attempt to get it usable, we
were not successful, and had a job commitment that had to be met.
Please see attached equipment status upon receipt and third party
support for defects. You will note that our out of pocket cost to
have corrections made to the tools we received from WOT is
$18,409 to date.
 The job commitment with our 5″ tool could not be met, as a result
we had to sub contract a third party to perform the work. The
work, though successful, was not deemed to be satisfactory by the
customer and the customer cancelled our contract. The contract
value was $462,000 for multiple wells, we earned $70,000 on one
well before cancellation. The customer told us when they
cancelled the contract that they cancelled the contract because they
hired us to do the work and did not like the sub-contractor that we
hired. They felt that we clearly did not have our equipment in a
satisfactory state to perform work for them. We have not been able
to get this customer to allow us to work for them since this event
occurred, moreover, we have had a very difficult time dealing with
the market fallout of this failure.
 From September we have continually focused on getting the 5″ tool
working satisfactorily so that we could perform a job with some
confidence. We used the 5″ tool in January, after extensive work
by us getting the tool ready, many discussions with your staff and
sending a team of people with decades of successful DST test
experience to the job; unfortunately the first test failed because of a
defective pressure seal between the outside recorder carrier and the
inflate gauge. We were able to work around this problem but we

8. 8
are still solving problems, the latest problems we have detected are
premature wear of the pump sleeve, excessive washing observed on
the sleeve housing and bottom sub insert and the packer mandrel
showing excessive wear. Pictures attached, please note the tool has
only performed 4 tests! Please see attached spreadsheet detailing
the man days spent working on this corrective action for both tools.
Note this spreadsheet does not include over-time, just basic 8 hour
days though many days the crew was working well into the night to
complete a task. You will note that our labor cost to correct
problems with both tools is $82,621 to date.
 We paid a deposit of $144,000 but have not paid any additional
monies for the original order because of the significant problems
encountered since receiving the tools.
 We would like to move forward on the business relationship
between World Oil Tools and WellDog for the following reasons;
o We believe that we basically have the tools finally working
nearly acceptably, not at the level we need them to work
but better, such that we can use them to perform jobs
o We would like to order some spare parts from WOT but
feel that we need to restart the business relationship to do
this
o We need to settle our economic relationship. We owe you
money and we need you to take responsibility, in some
fashion, for the business losses we have experienced; the
out of pocket costs; and the internal labor that we have
expended to get these tools operational
o We anticipate that we will be purchasing additional tools
and need to get past the problems that we have encountered
thus far
Dennis, Please review this information and then let’s discuss. Please
contact me anytime at the contact details below or by return email.
Best regards,
MIKE THOMAS”
[18] Negotiations then ensued via emails and in meetings between representatives of the
parties with a view to settling the amount which the applicant would pay to the
respondent for goods supplied to date and the terms on which the parties would
trade in the future.
[19] Mr Thomas deposes, and it is not contradicted, that in June 2012 the parties agreed
that:
(a) the sums which had been invoiced to the applicant for the Tools would be
payable by instalments over a period of 12 months;
(b) the invoiced sums would be reduced by $100,000;
(c) any further spare or replacement parts related to the Tools and which were
required by the applicant to operate the Tools would be added to the current
balance of the invoices and incorporated into the extended payment
arrangement.

9. 9
[20] It is also clear from the correspondence between the parties that this June agreement
was intended to be a compromise of the claims which the applicant had against the
respondent arising out of the failure to supply the tools under the original contract –
see, for example, the email from Mr Heath of the respondent to Mr Thomas on 9
April 2013, in which Mr Heath said:
“Assuming that we are able to agree to a resolution of our past shipments
and billings, I believe that we can guarantee a better ongoing business
relationship than you have experienced in the past.”
[21] This email also referred to Mr Heath requiring further information from Mr Thomas
in order to determine the “amount of the financial responsibility that [the
respondent] is willing to accept”, said that the respondent was looking forward to
working with the applicant in the future and said that Mr Heath was “sure that we
can get this unfortunate situation behind us”.
[22] On 13 July 2012, the applicant made the first instalment payment to the respondent
pursuant to the June compromise agreement.
[23] On 27 July 2012, the respondent sent the applicant a “current statement of account
and calculation of monthly payments”. That statement recorded:
“DATE INVOICE CREDIT NOTE OUTSTANDING
NO. AMOUNT APPLIED BALANCE
USD
1-Sep-11 IN17114 $ 114,787.95 -50,000.00 $ 64,787.95
1-Sep-11 IN17115 24,197.50 24,197.50
1-Sep-11 in17119 212,848.57 -50,000.00 162,848.57
18-Oct-11 IN17146 4,037.20 4,037.20
25-Oct-11 IN17152 2,850.00 13,134.93
TOTAL $ 371,856.15 -100,000.00 $ 271,856.15
PAYMENT RECEIVED JULY 13, 2012 $ (22,640.00)
OUTSTANDING BALANCE AS OF JULY 27, 2012 $ 249,216.15
CALCULATION OF MONTHLY PAYMENTS AS FOLLOWS:
12 MONTHLY INSTALLMENT – JULY 2012 – JUNE 2013
$271,856.15 ÷ 12 22,654.68 MONTHLY PAYMENTS”
[24] Whilst formatted differently, it is clear that the balance of $249,216.15 referred to in
that statement is the same as the debt calculated in the Schedule to the statutory
demand.
[25] The July compromise agreement was short-lived, and was effectively repudiated by
the respondent on 3 August 2012 when Mr Makar of the respondent sent the
following email to Mr Thomas:

10. 10
“Mike, sorry about taking so long to reply. We are currently in a very
difficult situation with your company. Quite frankly our line of credit at
the bank is maximized and we too are hurting financially. Our financial
controls were very loose over the past year, and I will be making a major
effort to get our house back in order.
Two other customers from Australia currently purchase DST equipment
from our company. Both of these provide full payment prior to shipment
of tools from Calgary. In addition, inspection and approval for shipment of
tools take place in Calgary prior to submitting the final payment. This
works out very well for both sides, and the equipment appears to function
very well after arrival in Australia.
I do not mind carrying the current balance remaining from WellDog.
However, for all new purchases, we will require full payment prior to
shipment.”
[26] In his response of 3 August 2012, Mr Thomas said:
“Thanks for your reply. Firstly, I agree that the way to purchase equipment
from you is to have it inspected and tested in Calgary prior to shipment. In
fact when we had conversations with your staff early in the year,
attempting to get a back-up pump for the 5″ tool, we had someone standing
by in Calgary ready to inspect and test before shipment. It turned out that
you either would not or could not accommodate the testing and shipment of
the pump so we still do not have a spare.
I have two serious issues with the other position that you have identified in
your email:
1. I sat in your office with yourself and Bill at the end of June and
discussed/negotiated the payment schedule which included adding
to the current amount owing the new spares that we required. You
and Bill agreed that if we begin making payments (which, in good
faith, we have) you would add any spares that were shipped to
WellDog to the amount owing and amortize the new balance over
the months remaining on the payment plan (ending June 30, 2013).
It appears that by your statements below you are unilaterally
voiding this agreement, which if so is a serious problem. Is this
what you are saying?
2. When in your office in June we also discussed the urgent need we
had for a spare pump for each of our tools. After discussing this
with Curtis on the phone, you committed to me that you would have
both spare pumps available to pick up by the end of July. I have
been trying to find out the status of these pumps for over two weeks
and so far no one has even responded to my questions as to the
availability of the pumps. Dennis, are the pumps available and
ready to be picked up now?
As a final note, please remember that the reason we are having the
discussions we have been having over the last 10 months is because of the
extremely poor quality of the tools that were delivered to us last fall by
World Oil Tools. Regardless of the issues, we have been trying to
re-establish the relationship between World Oil Tools and WellDog for
many months with multiple personal visits by myself, Dave Ramage and
Robin Brooks. Additionally we have been trying to find workable
solutions to allow us to work together, regardless of the fact that the poor
tool quality cost us the direct loss of customers, embarrassment in the

11. 11
market and significant delays in earning revenue for this business line in
Australia. Please note that the credit World Oil Tools provided WellDog
only covers a small portion of the losses WellDog has incurred as a result
of receiving such poor quality equipment from World Oil Tools.
Dennis, I look forward to your prompt reply to my two questions above.”
[27] The applicant received no further communication from the respondent until 29
November 2012, when Mr Makar sent an email to Mr Thomas saying:
“An outstanding amount of $249,216.15 still payable from WellDog to
World Oil Tools and we have received no payment for some time now.
Clearly if there is an issue with the tools, then have that equipment returned
to us. Otherwise, we require full payment to be made immediately. Legal
documents will be prepared and served to your Australia and US offices if
this is not resolved within seven days.”
[28] The statutory demand was then issued on 19 March 2013.
Application to set aside statutory demand
[29] The applicant submitted that the statutory demand ought be set aside because:
(a) there was a genuine dispute between the applicant and the respondent about
the existence of the debt to which the demand related; or
(b) alternatively, the applicant has an “off-setting claim” (as that term is defined
in s 459H) of such an amount as would lead to the “substantiated amount”
being less than the “statutory minimum”, i.e. $2,000.1
[30] For the respondent, it was submitted simply that on the applicant’s material “there is
nothing to suggest that the amounts claimed by the respondent in the statutory
demand are not genuinely due and owing” and that no challenge was made to the
invoices claimed or to their amounts. Having so disposed of the applicant’s primary
contention, the respondent turned to argue at some length that the applicant’s
material did not substantiate an off-setting claim.
[31] Section 459H of the Corporations Act provides:
“459H Determination of application where there is a dispute or
offsetting claim
(1) This section applied where, on an application under section 459G, the
Court is satisfied of either or both of the following:
(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;
(b) that the company has an offsetting claim.
(2) The Court must calculate the substantiated amount of the demand in
accordance with the formula:
Admitted total – Offsetting total
Where:
admitted total means:
1
Section 9, Corporations Act.

12. 12
(a) the admitted amount of the debt; or
(b) the total of the respective admitted amounts of the debts;
as the case requires, to which the demand relates.
offsetting total means:
(a) if the Court is satisfied that the company has only one offsetting
claim – the amount of that claim; or
(b) if the Court is satisfied that the company has 2 or more offsetting
claims – the total of the amounts of those claims; or
(c) otherwise – a nil amount.
(3) If the substantiated amount is less than the statutory minimum, the
Court must, by order, set aside the demand.
(4) If the substantiated amount is at least as great as the statutory
minimum, the Court may make an order:
(a) varying the demand as specified in the order; and
(b) declaring the demand to have had effect, as so varied, as from
when the demand was served on the company.
(5) In this section:
admitted amount, in relation to a debt, means:
(a) if the Court is satisfied that there is a genuine dispute between
the company and the respondent about the existence of the debt
– a nil amount; or
(b) if the Court is satisfied that there is a genuine dispute between
the company and the respondent about the amount of the debt –
so much of that amount as the Court is satisfied is not the subject
of such a dispute; or
(c) otherwise – the amount of the debt.
offsetting claim means a genuine claim that the company has against the
respondent by way of counterclaim, set-off or cross-demand (even if it
does not arise out of the same transaction or circumstances as a debt to
which the demand relates).
respondent means the person who served the demand on the company.
(6) This section has effect subject to section 459J.”
[32] In Rhagodia Pty Ltd v National Australia Bank Ltd2
, Robson J usefully collated the
following judicial expositions on the proper approach to be adopted in determining
whether there is a genuine dispute as to the existence of a debt or whether there is an
off-setting claim (omitting footnotes and citations):
“[91] In TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd
Dodds-Streeton JA (with whom Neave and Kellam JJA concurred) said:
‘[56] The court, in the context of an application to set aside a statutory
demand, must determine whether there is a genuine dispute about the
2
(2008) 67 ACSR 367.

13. 13
existence or amount of the debt or whether the company has a genuine
off-setting claim.
[57] No in-depth examination or determination of the merits of the
alleged dispute is necessary, or indeed appropriate, as the application is
akin to one for an interlocutory injunction. Moreover, the
determination of the “ultimate question” of the existence of the debt
should not be compromised.’
[92] Dodds-Streeton JA further said:
‘[71] As the terms of s 459H of the Corporations Act 2001 and the
authorities make clear, the company is required, in this context, only to
establish a genuine dispute or off-setting claim. It is required to
evidence the assertions relevant to the alleged dispute or off-setting
claim only to the extent necessary for that 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. As counsel for the appellant conceded however, 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. A selective
focus on a part of the formulation in South Australia v Wall, divorced
from its overall context, may obscure the flexibility of judicial
approach appropriate in the present context if it suggests that the
company must formally or comprehensively evidence the basis of its
dispute or off-setting claim. The legislation requires something less.’
[93] In Eyota, McClelland CJ of the Supreme Court of New South Wales
said:
‘It is, however, necessary to consider the meaning of the expression
“genuine dispute” where it occurs in s 450H. In my opinion that
expression connotes a plausible contention requiring investigation, and
raises much the same sort of considerations as the “serious question to
be tried” criterion which arises on an application for an interlocutory
injunction or for the extension or removal of a caveat. This does not
mean that the court must accept uncritically as giving rise to a genuine
dispute, every statement in an affidavit “however equivocal, lacking
precision, inconsistent with undisputed contemporary documents or
other statements by the same deponent, or inherently improbable in
itself, it may be” not having “sufficient prima facie plausibility to merit
further investigation as to [its] truth” (cf Eng Mee Yong v
Letchumanan), or “a patently feeble legal argument or an assertion of
facts unsupported by evidence”: cf South Australia v Wall.’
But if it does mean that, except in such an extreme case, a court required to
determine whether there is a genuine dispute should not embark upon an
inquiry as to the credit of a witness or a deponent whose evidence is relied
on as giving rise to the dispute. There is a clear difference between, on the
one hand, determining whether there is a genuine dispute and, on the other
hand, determining the merits of, or resolving, such a dispute. In Mibor
Investments Hayne J said, after referring to the state of the law prior to the
enactment of Div 3 of Pt 5.4 of the Corporations Law, and to the terms of
Div 3:
‘These matters, taken in combination, suggest that at least in most
cases, it is not expected that the court will embark upon any extended

14. 14
inquiry in order to determine whether there is a genuine dispute
between the parties and certainly will not attempt to weight the merits
of that dispute. All that the legislation requires is that the court
conclude that there is a dispute and that it is a genuine dispute.’
In Re Morris Catering (Aust) Pty Ltd Thomas J said:
‘There is little doubt that Div 3 ... prescribes a formula that requires the
court to assess the position between the parties, and preserve demands
where it can be seen that there is no genuine dispute and no sufficient
genuine offsetting claim. That is not to say that the court will examine
the merits or settle the dispute. The specified limits of the court’s
examination are the ascertainment of whether there is a “genuine
dispute” and whether there is a “genuine claim”.
It is often possible to discern the spurious, and to identify mere bluster
or assertion. But 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 offsetting claim (not the likely result of it).’
I respectfully agree with those statements.
[94] In TR Administration, Dodds-Streeton JA (with whom Neave and
Kellam JJA concurred) cited this passage with apparent approval and noted
it was also cited by the Full Federal Court in Spencer Constructions Pty Ltd
v GAM Aldridge Pty Ltd:”
[33] I note that this summary of the applicable principles was recently referred to with
approval by the Victorian Court of Appeal in Troutfarms Australia Pty Ltd v
Perpetual Nominees Ltd3
.
[34] On the facts of this case as I have outlined them above, it is, with respect, difficult
to see how it can blithely be said by the respondent that there is no genuine dispute
with respect to the debt claimed in the statutory demand. As is apparent from the
facts of this case, the debt claimed in the statutory demand is one and the same as
the debt said to be owing pursuant to the compromise agreement entered into by the
parties in June 2012. The respondent itself repudiated that agreement. The
applicant, in Mr Thomas’ email of 3 August 2012, challenged that repudiation and
sought further information from the respondent. That further information was never
forthcoming. The only further contact from the respondent was to demand payment
of the amount said to be owing under the compromise agreement which the
respondent itself refused to perform. Contrary to the submissions of the respondent,
it is clear that there is a genuine dispute as to the ongoing existence of any debt
pursuant to the June compromise agreement.
[35] The respondent would, it seems, seek to airbrush the dispute about the June
compromise out of existence, and focus rather on amounts said to be owing for the
delivery of goods pursuant to the original supply contract. Even if it were able to do
that, it is equally clear that there was a genuine dispute between the parties as to the
3
[2013] VSC 228.

15. 15
debt claimed by the respondent for the original delivery of those goods. It is clear
enough that, by reason of the respondent’s failure to supply in accordance with its
original agreement, there was a dispute between the parties as to the applicant’s
indebtedness to the respondent, and the extent to which the applicant itself had
claim against the respondent for the damages suffered as a consequence of the
respondent’s breach of the supply agreement. That there was such a genuine
dispute is undoubted, in light of the fact that the parties then entered into extended
settlement negotiations, the outcome of which was the June 2012 compromise
agreement.
[36] In Solarite Airconditioning Pty Ltd v York International Australia Pty Ltd4
, Barrett J
said that the tests for establishing the existence of a genuine dispute must:
“[be applied in the context of a] summary procedure where ‘it is not
expected that the Court will embark on any extended inquiry’, [and] 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.
The company will fail in that task only if it is found upon the hearing of its
section 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.”5
(emphasis added)
[37] For the reasons I have mentioned, it seems to me that the applicant has clearly
demonstrated that there is a genuine dispute with respect of the existence of the debt
claimed in the statutory demand, given, as I have repeatedly observed, that this is
one and the same as the debt owing under the June 2012 compromise agreement
which the respondent, by its conduct, repudiated.
[38] In light of my clear view as to the existence of a genuine dispute, it is unnecessary
for me to dwell on the respondent’s arguments concerning the sufficiency of the
evidence adduced by the applicant as to the existence of off-setting claims. The
points sought to be made on behalf of the respondent were that:
(a) the applicant had not disclosed any invoices or other supporting material to
substantiate the claim for costs incurred of $90,000 to carry out the first AGL
test, and
(b) the applicant had not disclosed a contract or any other material to support the
claim made by Mr Thomas that the losses from the AGL contract were
between $300,000 and $1 million.
[39] In support of these arguments, counsel for the respondent relied particularly on the
observations of Burley J in Sewmail (Australia) Pty Ltd v Booby Traps Pty Ltd6
where his Honour, on the facts of the case before him, was satisfied by the
4
[2002] NSWSC 411.
5
At [23].
6
(1997) 23 ACSR 339.

16. 16
plaintiff’s evidence that a genuine off-setting claim existed, but was not satisfied of
the amount of that claim. His Honour said7
:
“To support the genuineness of an offsetting claim amounting to $50,000,
the plaintiff relies upon the unsubstantiated assertion of Mr Taylor, a
director of the plaintiff, that the offsetting claim amounts to $50,000. That
in my view is not sufficient. There needs to be evidence supporting the
quantum of the offsetting claim so that the court may determine whether or
not there is a genuine offsetting claim of a given amount. It is not
necessary that the evidence be such as might be advanced at a trial but it is,
in my view, necessary to adduce some evidence in that regard: Scanhill Pty
Ltd v Century 21 Australasia Pty Ltd (1993) 47 FCR 451 at 460 and 463;
120 ALR 173; 12 AQCSR 341; Graywinter Properties Pty Ltd v Gas &
Fuel Corp Superannuation Fund (1996) 21 ACSR 581; 14 ACLC 1703 at
1706. In the absence of such evidence it is impossible for the court to
determine whether or not the statutory demand must be altered or set aside
in accordance with the provisions of s 459H of the Law. For these reasons
the ground relied upon by the plaintiff in relation to the offsetting claim
must fail.”
[40] It is not immediately clear from the report of that case whether there was any
evidence at all, or any sworn statement at all, to support the quantification of the
off-setting claim. Immediately preceding the passage from the judgment I have just
quoted are the following observations by Burley J:
“The plaintiff contends that it has an offsetting claim amounting to some
$50,000 but there is no evidence to support the contention that the
offsetting claim may amount to something in the vicinity of $50,000.
Indeed, the evidence does not even permit an estimate that the offsetting
claim is greater than $13,699.60 which amount represents the difference
between the lowest amount referred to in the statutory demand
($15,699.60) and the statutory minimum of $2,000.”
[41] In Broke Hills Estate Pty Ltd v Oakvale Wines Pty Ltd8
, the affidavit filed in support
of the application to set aside a statutory demand contended that the company had
suffered loss and had an off-setting claim, but said nothing at all about the quantum
of that claim or whether it exceeded the debt. Gzell J said:
“[26] In my view, the task required of a court by the Corporations Act
2001 (Cth), s 459H(2) requires evidence to be put on within the statutory
21-day period enabling the Court to make a determination of the offsetting
total. That means that some evidence of quantum must be contained in the
affidavit to enable the Court to take that course.
[27] Minimum requirements of an affidavit in support of a disputed debt
under the Corporations Act 2001 (Cth), s 459H(1)(a) were described by
Sundberg J in Graywinter Properties at 459:
‘An affidavit which exhibits an exchange of correspondence between
the parties or between their solicitors from which it appears that a
claim is made and rejected for reasons given can qualify as a
supporting affidavit. And an affidavit verifying the pleadings in an
action may qualify.’
7
At 342-343.
8
(2005) 23 ACLC 1266.

17. 17
[28] It was submitted that an affidavit in support that is more than a mere
assertion but less than final proof is insufficient. In my view it is
insufficient if it does not contain material from which a Court, in a case
under the Corporations Act 2001 (Cth), s 459H(1)(b), can make an estimate
of the amount of an offsetting claim.
[29] I was invited not to follow my decision in National Telecoms Group. I
decline that invitation.
[30] In Fords Principles of Corporation Law, Butterworths, Australia, 2000
at p 27, 162 the authors say this:
‘Because the court is required by s 459H(2) to determine ‘the amount
of the claim’ or ‘the total of the amounts of those claims’, a company
which alleges that it has an offsetting claim must adduce some
evidence to show the basis upon which its loss is said to arise and how
that loss is calculated.’
[31] That does not mean that a party is required to swear to matters of final
proof. What it does require is sufficient material indicating the nature of the
offsetting claim and the way in which it is calculated to enable the statutory
exercise under the Corporations Act 2001 (Cth), s 459H(2) to be carried out
by the Court.
[32] In this case, there is no evidence in the statutory affidavit that answers
that requirement and I have excluded evidence by supplementary affidavit
to fill that void. The consequence must be that the applicant has failed. I
dismiss the originating process.”
[42] In the present case, the respondent’s objection that the applicant did not disclose
invoices or other supporting material to substantiate its claim for costs of $90,000
cannot be sustained. The applicant was not required to adduce final proof of those
costs. The uncontroverted, and unchallenged, evidence of Mr Thomas deposed to
the nature of that part of the off-setting claim, and the way in which it was
calculated. That evidence would, in my view, have been sufficient for present
purposes.
[43] With respect to the objection that the applicant had not disclosed a contract or any
other material to support the claim that the losses from the AGL contract were
between $300,000 and $1 million, it is to be noted that the material exhibited to Mr
Thomas’ affidavit clearly evidences the loss by the applicant of the benefit of its
then contractual arrangement with AGL. At the very least, in addition to the extra
costs of $90,000 that evidence of the loss of the AGL contract indicates the nature
of that component of the off-setting claim. Mr Thomas’ evidence also permits a
calculation of the base loss as a consequence of the loss of that contract of
$300,000.
[44] Later in his affidavit, Mr Thomas deposed to the following:
“I estimate that the loss and damage arising from the failure of the Tools
and failure by [the respondent] to properly warrant the Tools and supply
spare and replacement parts exceeds $1 million.”
[45] In my view that bare assertion is insufficient for the purposes of the Court making a
determination with respect to an off-setting claim. It is nothing more than a
contention, and in no way indicates the way in which the claimed losses are
calculated.

18. 18
[46] Be that as it may, the combination of the claim for costs of $90,000 and the
uncontroverted loss of the benefit of the AGL contract, and the loss of revenue as a
consequence, would likely have been sufficient for the purposes of the applicant
mounting an off-setting claim of a sufficient quantum to exceed the amount of the
statutory demand. It is, however, not necessary for me to reach a final conclusion
on this matter, in light of my finding that there was a genuine dispute with respect to
the debt claimed under the statutory demand.
[47] It follows that there will be an order that the statutory demand be set aside.
[48] There will be the following orders:
1. That the statutory demand dated 19 March 2013 served by the respondent on
the applicant be set aside.
2. I will hear the parties as to costs.