FEDERAL COURT OF AUSTRALIA

Space Touring Pty Ltd v Duxton Entertainment Pty Ltd [2019] FCA 983

ORDERS

THE COURT ORDERS THAT:

1.    The decision of the South Australia District Registrar to dismiss the originating application is affirmed.

2.    The plaintiff pay the defendant’s costs of the interlocutory application filed on 31 May 2019.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

CHARLESWORTH J:

1    On 18 June 2019 I made orders finally determining this proceeding. Oral reasons were given at the time that the orders were made. The Court now publishes written reasons to the same effect.

2    By its originating application the plaintiff, Space Touring Pty Ltd sought an order pursuant to s 459G of the Corporations Act 2001 (Cth) that a creditor’s statutory demand served upon it by the defendant, Duxton Entertainment Pty Ltd, be set aside.

3    By s 35A(1)(h) of the Federal Court of Australia Act 1976 (Cth) (FCA Act) a Registrar may exercise a power of the Court prescribed by the Rules of the Court, which include the Federal Court (Corporations) Rules 2000 (Cth). Such powers include the power to hear and determine an application to set aside a statutory demand. That power is conferred by s 459H and s 459J of the Corporations Act: Corporations Rules, r 16.1(1)(a), Sch 2, item 47.

4    On 27 May 2019 a Registrar of the Court dismissed Touring’s application.

5    Section 35A(5) of the FCA Act provides that a party to proceedings in which a Registrar has exercised any of the powers of the Court under subs (1) may apply to the Court to review that exercise of power: see also r 16.1(2) of the Corporations Rules. Touring now seeks a review of the Registrar’s decision. The review is in the nature of a hearing de novo: Guildford International Group Pty Ltd, in the matter of Aviation 3030 Pty Ltd v Aviation 3030 Pty Ltd [2018] FCA 600; CFB18 v Reader Lawyers & Mediators [2018] FCA 611 at [5].

6    For the reasons that follow the Registrar’s decision to dismiss the originating application should be affirmed.

THE STATUTORY DEMAND

7    The statutory demand was served on Touring on 20 March 2019 together with a copy of an affidavit sown by Mr Edouard Fernen Peter sworn on the previous day. The demand states that Touring owes Duxton the amount of $1,107,078 being the total of the amounts of debts described in a Schedule. The Schedule describes the debt in the following terms:

SCHEDULE

8    As can be seen, the alleged debt is the sum of two amounts said to be owing pursuant to investment agreements made on 25 September 2018 and 15 October 2018. By those investment agreements Duxton invested in the promotion of two concerts to be held in Adelaide in February and January 2019 respectively.

9    The concerts may be referred to as the Supertramp concert and the Prodigy concert.

10    I will refer to the agreements as the first IA and the second IA. Their operative terms are substantively identical. Briefly summarised, they provide for the making of a financial contribution by Duxton (as investor) to Touring (defined as the “Promoter” of the concerts). Upon the staging of the concerts, each agreement provided for a return on Duxton’s investment comprised of the amount of its contribution plus a share of the total profits or less a share of the total losses as the case may be.

11    As it transpired, the Supertramp concert was profitable but the Prodigy concert was not. For reasons that will be explained, it is inarguable that the amounts specified in the statutory demand are the amounts that would be payable by Touring to Duxton in accordance with the terms of the first IA and the second IA, assuming that the parties’ rights and liabilities are governed by those agreements. Touring’s arguments turn not so much on the calculation of the sum payable to Duxton in respect of its investment in the concerts, but on the identity of the company that is liable to pay it.

principles

12    A company may make an application under s 459G(1) of the Corporations Act for an order setting aside a statutory demand served on the company. Such an application must be made within 21 days after the demand is served: s 459G(2). The application is made in accordance with s 459G if, and only if, within those 21 days, an affidavit supporting the application is filed with the Court and a copy of the application and the supporting affidavit are served on the person who served the demand on the company: s 459G(3).

13    Section 459H of the Corporations Act relevantly provides that, on an application made under s 459G, the Court must set aside a statutory demand if it is satisfied that there is a genuine dispute between the company (here Touring) and the respondent (here Duxton) about the existence or amount of a debt to which the demand relates.

14    There is some tension in the authorities about the degree of particularity required in a supporting affidavit filed in accordance with s 459G of the Act: see generally POS Media v B Family [2003] NSWSC 147; Callite Pty Ltd v Peter John Adams & 3 Ors [2001] NSWSC 52; Process Machinery v ACN 057 260 590 [2002] NSWSC 45; Financial Solutions Australasia Pty Ltd v Predella Pty Ltd [2002] WASCA 51. This action does not turn on any difference in expression of principle in the case law. At the very least, it is necessary that the affidavit assert facts essential to demonstrate the existence a “genuine dispute” (as that term is properly understood). The essential facts must either be deposed to in the affidavit or fairly arise by way of inference, whether from the deponent’s testimony or from the annexed documentary evidence upon which the deponent relies.

15    Section 459H has effect subject to s 459J: see s 459H(6).

16    Section 459J provides:

459J Setting aside demand on other grounds

(1)    On an application under section 459G, the Court may by order set aside the demand if it is satisfied that:

(a)    because of a defect in the demand, substantial injustice will be caused unless the demand is set aside; or

 (b)    there is some other reason why the demand should be set aside.

(2)    Except as provided in subsection (1), the Court must not set aside a statutory demand merely because of a defect.

17    It is Touring’s case that there is a genuine dispute about the existence of the debt to which the demand relates within the meaning of s 459H(1)(a) and that there is some other reason why the demand should be set aside within the meaning of s 459J(1)(b). The asserted other reason is considered at the conclusion of these reasons.

18    For the purposes of s 459H(1)(a), Touring bears the onus of establishing that a genuine dispute exists: Moyall Investments Services Pty Ltd v White [1993] FCA 912; (1993) 12 ACSR 320 at 6 (Ryan J). It has been said that the asserted dispute must not be “vexatious or frivolous”, and that it must have “something more than mere assertion”: John Holland Construction and Engineering Pty Ltd v Kilpatrick Green Pty Ltd (1994) 14 ACSR 250 at 253 (Young J); AX Business Systems Pty Ltd (ACN 072 265 635) v Quality Image Pty Ltd (ACN 006 295 825) [2004] FCA 724 at [22] (Goldberg J).

19    McLelland CJ in Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 787 expressed the principle in this way:

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 in 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 [1980] AC 331 at 341), or ‘a patently feeble legal argument or an assertion of facts unsupported by evidence’: cf South Australia v Wall (1980) 24 SASR 189 at 194.

20    In Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452 (Northrop, Merkel and Goldberg JJ) the Full Court, having summarised the authorities, concluded (at 464):

In our view a ‘genuine’ dispute requires that:

•    the dispute be bona fide and truly exist in fact;

•    the grounds for alleging the existence of a dispute are real and not spurious, hypothetical, illusory or misconceived.

We consider that the various formulations referred to above can be helpful in determining whether there is a genuine dispute in a particular case, so long as the formulation used does not become a substitute for the words of the statute.

21    The parties’ submissions employed the expression used by McLelland CJ as governing Touring’s application, namely whether there is a “plausible contention requiring investigation”. In these reasons I will use the same expression as a convenient pointer to the statutory test but not as a substitute for it.

Touring’s affidavit material

22    Touring relies on the affidavit of its sole director and shareholder, Mr Philip Mark Rankine affirmed on 10 April 2019. Mr Rankine’s affidavit was filed with the Court within 21 days of the service of the statutory demand. It is the only substantive “supporting affidavit” filed on behalf of Touring for the purposes of s 459G(3) of the Corporations Act.

23    In addition to his holding office as a director of Touring, Mr Rankine is the sole director and shareholder of another company Space Production Pty Ltd. At least in submissions before the Registrar it was argued that the amounts specified in the statutory demand were not payable by Touring but are instead payable by Production.

24    Mr Rankine does not dispute that Touring and Duxton entered into the first IA and the second IA. The agreements are annexed to his affidavit at PMR2 and PMR3 respectively.

25    The recitals to the first IA are expressed as follows:

A    Space Touring Pty Ltd CAN 628 983 577 (the Promoter) has up to the date of this Agreement negotiated the show currently titled ROGER HODGSON (Show) to be presented at Bonython Park on 6 February 2019 in Adelaide, South Australia (Production).

B    The Investor has agreed to support the Production financially.

C    The Promoter and the Investor wish to enter this Agreement by way of formalising the Investors support for the Show and Production. Accordingly, Duxton Entertainment is hereby referred to in this Agreement as Investor.

D    The Investor has agreed with the Promoter to contribute a financial sum to the Production, and in consideration of the Investor making that Investor contribution, the Promoter has agreed to confer certain benefits on the Investor on the terms and conditions set out in this Agreement.

E    Ticket Sales as referred to in this agreement are tickets sold by Ticket to the Show, excluding any complimentary tickets.

(original emphasis)

26    The recitals to the second IA are in substantively the same terms save that they identify Touring as the “Promoter” of the Prodigy concert to be held at Bonython Park on 26 January 2019.

27    Under the first IA, Duxton agreed to pay a “contribution” of $397,500 to Touring to financially support a Supertramp concert. Under the second IA, Duxton agreed to pay a contribution of $727,500 to Touring to financially support the Prodigy concert. The agreements then provide for Duxton to be paid “investor benefits” calculated in accordance with cl 2.3 of each agreement. Clause 2.3 of the first IA provides:

The Investor shall receive a financial benefit from the Promoter that is directly linked to the profit or loss position. The Promoter shall ensure that the Investor receives an official ticket sales statement after the Show, which confirms the actual Ticket Sales result. Such benefit shall be as follows:

(a)    At the conclusion of the Show, the Promoter shall reconcile the income generated from patron ticket sales, beverage sales, food commission, merchandising commission and sponsorship, against expenses including artist fees, booking fees, beverage sale costs, marketing and publicity, venue hire, stage and production costs, site costs, liquor licence, insurance, Promoter administration (AUD 20’000) and APRA fees. This will determine a profit or loss position.

(b)    In the event of a profit position, the Investor shall receive 75% of profits which shall be added to the AUD 397’500 Investment and paid on 16 February 2019. For example, if there is a AUD 100’000 profit, 75% of this profit (AUD 75’000) would be added to the Investor contribution and a total of AUD 472’500 paid to the Investor on 16 February 2019.

(c)    In the event of a loss position, the Investor shall incur 75% of losses that shall be removed from the AUD 397’500 Investment and paid on 16 February 2019. For example, if there is a AUD 100’000 loss, 75% of this loss (AUD 75’000) would be deducted from the Investor contribution and a total of AUD 247’500 paid to the Investor on 16 February 2019.

(original emphasis)

28    Clause 2.3 of the second IA is to the same effect, save that the amounts specified reflect the contributions payable by Duxton in respect of the Prodigy concert.

29    Clause 3 of each agreement is titled “Payments to Investor”. In each case, cl 3.1 provides:

All payments due to the Investor in this Agreement shall be made by the Promoter within 10 days after the Show, subject to the completion of the reconciliation in full, and free and clear of deduction, set-off or deferment in respect of, any claims whatsoever and/or, as far as it is legally possible, any taxes imposed by any competent authority. The Director of the Promoter company. Philip Rankine, shall personally guarantee the performance of the Company with regards to making this payment.

30    As can be seen, by this clause Mr Rankine agreed to personally guarantee Touring’s obligation to pay the investor benefits to Duxton. His status as guarantor has factual and legal implications for Touring’s arguments as explained below.

31    In respect of Duxton’s contributions toward the Supertramp concert, Mr Rankine deposes as follows:

9.    The First Investor Agreement provided, in the Schedule to that agreement, that Duxton would pay to Space Touring the amount specified in Item 1 of that Schedule, being $397,500. This amount was to be paid into the Westpac bank account of Space Touring. The following account details are recorded at Item 3 of the Schedule to the First Investor Agreement:

Account Name: Space Touring

BSB: 035039

Account Number: [redacted]

10.    On or about 8 October 2018, Duxton paid the sum of $258,375 into the bank account of Space Production Company Pty Ltd (Space Production) (not Space Touring). This is recorded in a ‘Payee advice’ provided to Space Touring by Duxton and dated 8 October 2018. The details of that bank account, as recorded on the payee advice are:

Payee account name: Space Production Company

Payee account number: 065-115 [redacted]

…

(original emphasis)

32    The deposit of money into an account held in the name of Production rather than into an account held in the name of Touring is said by Mr Rankine to have the following consequence:

13.    … no monies were ever paid by Duxton to Space Touring pursuant to the First Investor Agreement. Monies were only ever paid to Space Productions by Duxton.

14.    As demonstrated above, no monies were ever paid to Space Touring by Duxton pursuant to the First Investor Agreement. Therefore, Space Touring denies any indebtedness whatsoever to Duxton arising from the First Investor Agreement which purported indebtedness (which is denied by Space Touring) constitutes $507,305 of the Statutory Demand.

33    Similar facts and contentions are alleged in relation to the second IA. It also contained a term requiring that Duxton’s contribution be paid into a Westpac account held in the name of Touring. Mr Rankine deposes to Duxton having made a series of deposits into an account held in the name of Production. Mr Rankine repeats the assertion that Duxton made no payment to Touring pursuant to the second IA. Mr Rankine’s affidavit concludes with the following assertions:

20.    As set out in this affidavit, no monies were ever paid to Space Touring by Duxton pursuant to Clause 1 of either the First Investor Agreement or Second Investor Agreement. Therefore, Duxton is not entitled to recover from Space Touring the ‘Investor Benefits’ and/or ‘Payments to Investor’ pursuant to Clause’s 2 and 3 of each of the First Investor Agreement or Second Investor Agreement.

21.    For these reasons, Space Touring says that there is a genuine dispute as to whether the debt, the subject of the Statutory Demand served on Space Touring by Duxton on 20 March 2019, is due and payable by Space Touring.

22.    Any claim which Duxton may have in relation to these matters is only against Space Productions, and not against Space Touring.

34    Apart from the reference to the statutory demand itself, Mr Rankine’s affidavit otherwise makes no mention of the concerts having in fact been promoted and staged, no mention of the entity that in fact promoted and staged them, no mention of the profit or loss derived from the staging of the concerts and no mention of any correspondence passing between him or any other person acting on behalf of Touring and any person acting on Duxton’s behalf in relation to the performance or non-performance of either agreement.

DUXTON’S AFFIDAVIT EVIDENCE

35    Ms Jessica Gricks is an analyst employed by Duxton’s holding company Duxton Capital (Australia) Pty Ltd. The holding company manages Duxton’s investment portfolio. In her affidavit sworn on 10 May 2019, Ms Gricks deposes as follows:

(1)    Mr Eduard Peter is a director of Duxton. He and his wife, Mrs Julie Peter are trustees of a family trust (the Trust).

(2)    She is responsible for the day to day management of investments made by Duxton and by the Trust in concerts promoted by Touring and by Production.

(3)    She has had dealings with Mr Rankine since June 2018 in relation to those investments with the approval of Duxton’s directors. The investments include:

(a)    Investments by the Trust in the following concerts promoted by Production:

(i)    Bob Dylan held on 11 August 2018;

(ii)    Foreigner held on 14 October 2018; and

(iii)    Shania Twain held on 2 December 2018.

(b)    Investments by Duxton in the following concerts promoted by Production:

(i)    Bon Jovi held on 4 December 2018;

(ii)    Florence and the Machine held on 16 January 2019;

(iii)    Phil Collins held on 25 January 2019 (originally 8 December 2018);

(iv)    Rudimental (Adelaide) to be held on 2 June 2019 (originally 9 February 2019) and

(v)    Elton John to be held on 4 December 2019 (originally 10 December 2019).

(c)    Investments by Duxton in the following concerts promoted by Touring:

(i)    The Prodigy held on 26 January 2019;

(ii)    Roger Hodgson held on 6 February 2019; and

(iii)    Rudimental (Mount Gambier) to be held on 3 June 2019 (originally 10 February 2019).

(4)    She arranged for Duxton to make payments of money into an account held in the name of Production in relation to the Supertramp concert and in relation to the Prodigy concert. She arranged the payments to be deposited into Production’s account “because payments for the concerts had always been made to this account”.

36    By email communications, Ms Gricks made Mr Rankine aware of the payments that had been made into Production’s account. Receipt of these communications and the payments referred to in them were expressly acknowledged in return correspondence from Mr Rankine.

37    Ms Gricks asserts that Duxton performed its obligations to make the agreed contribution of $397,500 toward the Supertramp concert by depositing $258,375 into Production’s account and by requesting that Mr Rankine make up the balance owing by “rolling over” returns that were owed by Production to Duxton in respect of the Bon Jovi concert. The correspondence shows that Mr Rankine agreed to apply what may be referred to as the Bon Jovi roll over amount toward the sum payable by Duxton in relation to the Supertramp concert as Ms Gricks had requested. It is not disputed that the total of these sums is equivalent to the contribution payable by Duxton under the first IA.

38    Similarly, Ms Gricks asserts that Duxton performed its obligation to pay a contribution of $727,500 toward the Prodigy concert by depositing five amounts totalling $677,500 into Production’s bank account and by requesting Mr Rankine to apply a sum of $50,000 then owed to the Trust by Production in respect of the Trust’s prior investment in the Shania Twain concert. Again, it is not disputed that the total of the deposits together with the amount of the Shania Twain roll over amount is equivalent to the contribution payable by Duxton under the second IA.

39    The contemporaneous emails passing between Ms Gricks and Mr Rankine clearly show that the payments and roll overs to which Ms Gricks refers were referable to the financing of the Supertramp and Prodigy concerts. The contributions are expressed to be made for that purpose and the correspondence shows that Mr Rankine expressly confirmed how much remained to be paid at times by Duxton in respect of each show.

40    The contemporaneous correspondence shows that the Supertramp concert and the Prodigy concert were in fact staged. Email communications then passed between Ms Gricks and Mr Rankine by which Ms Gricks complained about a delay in receiving a reconciliation of the returns payable to Duxton and then complained about the non-payment of the amounts owed. Communications from Mr Rankine show that he performed calculations of the amounts payable in respect of each concert in early March 2019. The calculations performed by him are consistent with the calculations required to be performed under each of the first IA and the second IA. There is no assertion by Mr Rankine in the correspondence to the effect that Duxton was not owed the sums yielded by the reconciliations he performed.

SUBMISSIONS

41    In written submissions dated 22 March 2019 it was submitted that Touring’s covenant to pay a return to Duxton was dependent upon Duxton’s performance of its promise to pay its contributions to Touring by means of a deposit into a specified bank account held in Touring’s name. Touring contended that Duxton “did not strictly perform, or adhere to, its obligations under the Investor Agreements”. It was further submitted that Duxton’s demand was founded on an alleged entitlement to contractual damages that did not have the character of a “debt”. There could be no relevant “debt”, it was submitted, because Duxton had made no payments to Touring so as to enliven Touring’s promise to pay Duxton the investor benefits.

42    By its written submissions, Duxton contended that if the payment of its contributions into a bank account in the name of Production constituted a breach of each of the first IA and the second IA, then the breach was not such as to absolve Touring of its promise to pay the agreed returns. It was submitted that by the conduct of its director, Mr Rankine, Touring had affirmed the first IA or the second IA notwithstanding that Duxton had not made its contributions by the method the parties had contracted for.

43    Written submissions in reply were filed on behalf of Touring on 27 May 2019. By those submissions, Touring advanced a different case to that which had been originally put forward. In short, it was alleged that there had been a novation of the first IA and the second IA, such that it was Production and not Touring that was liable to pay the debt referred to in the statutory demand. In oral submissions before the Registrar it was submitted that Mr Rankine had, by [22] of his affidavit, accepted (as a director of Production) that Duxton had a claim against Production and that Touring was not to be regarded as “engaging in some sort of Machiavellian exercise”.

44    In its written and oral submissions on this application for review, Touring did not emphasise its case founded on contractual principles of novation, nor was that aspect of its case expressly withdrawn. Counsel confirmed that Touring continued to rely on the written submissions advanced before the Registrar. In addition, to the case founded in novation, counsel submitted that the first IA had been “probably frustrated” and that the conduct of the parties was consistent with there being an “arrangement” between Duxton and Production in respect of the staging of the concerts. The latter submission, as I understood it, was that Touring was not liable to pay the debt whether or not Production was liable pursuant to a novated agreement.

45    It is convenient to deal first with the submission that there was a novation of the first IA and the second IA.

46    As the majority of the High Court said in ALH Group Property Holdings Pty Ltd v Chief Commissioner of State Revenue (NSW) (2012) 245 CLR 338, “A novation, in its simplest sense, refers to a circumstance where a new contract takes the place of the old”. The majority continued (at [12]):

… It is not correct to describe novation as involving the succession of a third party to the rights of the purchaser under the original contract. Under the common law such a description comes closer to the effect of a transfer of rights by way of assignment. Nor is it correct to describe a third party undertaking the obligations of the purchaser under the original contract as a novation. The effect of a novation is upon the obligations of both parties to the original, executory, contract. The inquiry in determining whether there has been a novation is whether it has been agreed that a new contract is to be substituted for the old and the obligations of the parties under the old agreement are to be discharged.

47    Rescission of the original contract, their Honours said, is essential to is novation: ALH at [27]. Their Honours continued:

The term is applied to two classes of case: where the parties to a contract make a new contract, with new obligations, impliedly rescinding an existing contract; and, more commonly, to tripartite agreements, where ‘the obligation of a third person is by express agreement accepted by one party to an existing contract with the consent of such third person and of the other party to the contract, in lieu of the obligation of such other party, who, by the new contract, is released from his obligation under the original contract.

(footnotes omitted)

48    As Powell J said in Scruples Imports Pty Ltd v Crabtree & Evelyn Pty Ltd (1983) 1 IPR 315 at 320:

Being, in essence, but a contract – albeit, perhaps, a special kind of contract – a novation, to be effective in law, must exhibit the usual phenomena of contract, that is, offer and acceptance, the fact of acceptance being communicated to the offeror, unless communication has been expressly or impliedly dispensed with.

49    See also SVI Systems Pty Ltd v Best & Less Pty Ltd (2001) 187 ALR 302 (Einfeld J).

50    I do not consider the affidavit of Mr Rankine to be sufficient to support a plausible contention founded on novation principles. In other words, the supporting affidavit does not demonstrate, to the requisite degree, that the words and conduct of the parties were such that there existed a tri-party agreement to the effect that Production and not Touring would perform the obligations of the Promoter under either the first IA or the second IA.

51    In accordance with the recitals to reach agreement, it was Touring that had negotiated the performance of the concerts with the relevant artist and it was Touring that had the obligation to stage them. The supporting affidavit does not suggest that the obligation to promote and stage the concerts was in fact performed by Production pursuant to the terms of any novated agreement. Nor is there anything to suggest that Mr Rankine in fact formed any state of mind concerning his own personal contractual obligations as guarantor of Touring’s obligations, to the effect that he would guarantee the performance of the obligations by Production instead. Mr Rankine has not deposed to anything said or done by him from which the existence of any such agreement in his personal capacity may be inferred. His supporting affidavit is silent on the question. The submissions advanced on behalf of Touring do not identify the words or conduct said to constitute an offer, or the words or conduct said to constitute communication of the acceptance of any offer sufficient to form a new three or four party agreement.

52    The contention that there was a meeting of minds between those entities and Duxton in my view is an assertion founded solely upon the circumstance that Duxton made its agreed contributions to each concert in part by the deposit of funds into a bank account other than the bank account specified in each agreement. That circumstance may supply evidence of breach, but it is not sufficient to raise a plausible contention that there was a meeting of minds necessary for the formation of a novation agreement, whether by inference or otherwise.

53    It is also relevant to have regard to the written submissions originally filed on Touring’s behalf presumably on the instructions of the sole director of both Touring and Production. Those submissions alleged a complete failure by Duxton to perform its obligation to pay contributions to Touring referable to each concert. Nothing is said of the existence of a new and substituted agreement pursuant to which the obligation to pay a return on Duxton’s investment fell upon any entity other than Touring. In short, what is said in the principal submissions to be an act of breach is later said in the reply submissions to be an act from which an offer and acceptance necessary for the formation of a novated agreement might arguably be inferred. In my view, these alternative bases for relief are factually inconsistent. Proof of novation of the agreements would require evidence of some actual advertence to the formation of a new and substituted agreement to which Production would be bound but not Touring.

54    As a question of fact, Mr Rankine either formed an intention to bind Production and himself personally to such an agreement or he did not. Whether or not he formed that intention is a question of fact, to be objectively discerned from all of the circumstances. As I have said, it is unclear from the supporting affidavit and submissions which of the parties is said to have made an offer for the formation of a novated agreement, nor is it clear which of the parties is said to have communicated acceptance of any such offer. Mr Rankine does not identify any particular communication by which Duxton is said to have agreed to a novated agreement. The only conduct alleged against Duxton is the payment of money into an account other than the account specified in the agreements. Of itself, that conduct is not sufficient to support a plausible contention that there was a novation of the first IA and the second IA.

55    I now turn to consider whether the debt referred to in the statutory demand is a debt that is presently payable to Duxton by Touring.

56    Touring’s submission that the asserted obligation to pay upon which the statutory demand is founded does not have the necessary character of “debt” should be rejected. A debt is a liquidated sum in money presently due, owing and payable by one person, called “the debtor” to another person called “the creditor”: Rothwells Ltd v Nommack (No 100) Pty Ltd (1988) 13 ACLR 421 McPherson J (at 422).

57    In the present case, a “debt” arises because there is a contractual promise made by Touring to pay Duxton a sum the amount of which is ascertainable by reference to the terms of the contract. On the facts, the amount owing has been calculated by Touring in accordance with a contractual term requiring that the calculation be performed. As I have said, Touring has not disputed that the amount specified in the statutory demand is equivalent to the total amount that would in fact be payable under the first IA and the second IA if Touring presently has a contractual obligation to make good on its promise to pay.

58    As for the case founded on Duxton’s “non-performance”, the Court proceeds on the basis that Duxton did not observe the terms of either the first IA or the second IA in respect of the manner in which it promised to make its financial contributions toward each of the concerts. Rather than deposit funds into a bank account in the name of Touring, it deposited funds into a bank account in the name of Production. There can be no genuine dispute that Duxton did not comply with its obligations under the first IA and the second IA in that regard. But it does not follow that there exists a genuine dispute as to the existence of the debt specified in the statutory demand. On that enquiry, additional questions arise.

59    Before proceeding further, it is necessary to comment on the sums referred to in submissions as the “Bon Jovi roll over” or the “Shania Twain roll over”. Evidence in relation to those sums is given by Ms Gricks. In his affidavit, no reference was made by Mr Rankine to the setting off of those sums against the contributions otherwise payable by Duxton under the agreements.

60    Having regard to s 459G(3) of the Corporations Act, I do not consider it to be available to Touring to assert a genuine dispute about the existence of the debts by reference to the fact or circumstances of the roll overs. Nonetheless, in oral submissions on this application for review, the existence of the roll overs was relied upon by Touring as evidence that it was Production and not Touring that was liable to perform the obligations of the “Promoter” under the agreements or otherwise to the effect that privity in the agreements was uncertain. Even if that argument were available to be made by reference to the supporting affidavit, I would not accept it. There can be no real dispute that by his email communications in connection with the applied figures, Mr Rankine acted both in his capacity as the sole director of Production and also in his capacity as the sole director of Touring. Similarly, it may be accepted that Ms Gricks, in respect of the Shania Twain roll over, acted on behalf of and with the authority of the Trust (to which a payment was owed). As I have said, Mr Rankine’s supporting affidavit does not itself depose to any facts which these roll overs might be characterised. Nothing is said by Mr Rankine that would enable the Court to consider the roll over arrangements as anything other than an agreement by Touring (in writing and evidenced by the email communications) to receive Duxton’s contribution other than by means of a deposit of money into Touring’s bank account. Duxton and the Trust agreed to have money otherwise payable to it by Production applied to reduce the money payable by it to Duxton under the first IA and the second IA. The circumstance that that agreement necessarily required the consent of Production, Touring and the Trust does not of itself support a finding that Production was a party to either the first IA or the second IA. Nor does it plausibly support a finding that Touring was not liable to perform its obligation to pay the returns to Duxton. As I have said, the facts upon which Touring relied in its affidavit supporting its application to set aside the statutory demand did not include the fact of the application of the roll over sums. The “payment in part by Duxton of its contribution by that means was not asserted by Mr Rankine to constitute a breach of contract (whether novated or otherwise).

61    I return to the critical fact upon which Touring relied: the deposit by Duxton of payments into an account other than that specified in the agreements. Those deposits may evidence a breach, but the breach does not, of itself, define the legal relations between the parties from the time that the breach occurred. Whether or not the breach was such as to absolve Touring of its obligation to pay a return to Duxton is to be answered by reference to ordinary contractual principles.

62    For the purposes of what follows it will be assumed that non-performance by Duxton of its obligation to pay its contributions into a specified bank account was a breach giving rise to a right in Touring to terminate the first IA and the second IA. That right of termination is inconsistent with Touring’s concurrent right to keep the agreements on foot. It was for Touring to elect between those inconsistent rights. As Gavan Duffy CJ and Starke J said in Wendt v Bruce (1931) 45 CLR 245 (at 253):

... a man who has his option whether he will affirm a particular act or contract must elect either to affirm or to disaffirm it altogether; he cannot adopt that part which is for his own benefit, and reject the rest: he cannot blow hot and cold. And the election once made is finally made.

63    See also Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 641 (Stephen J, McTiernan ACJ agreeing), 655 – 656 (Mason J).

64    In my view the email communications of Mr Rankine following the deposit by Duxton of funds into the Production bank account are entirely referable to the first IA and the second IA remaining on foot. The emails constitute express communication by Touring of its affirmation of the agreements notwithstanding Duxton’s failure to strictly comply with the terms specifying the method of paying the contributions. Of particular importance is Mr Rankine’s confirmation to Ms Gricks, following initial payments, that certain balances remained owing by Duxton in respect of the Supertramp concert and the Prodigy concert. If the initial payments made by Touring were not regarded as part-performance then Mr Rankine’s confirmation that certain balances remained owing simply cannot be explained. Moreover, the concerts were in fact staged and there is no suggestion by Touring that the funds to finance each concert did not include the funds invested by Duxton. As has already been observed, the reconciliation of profits and losses and the reporting of the amount of money payable to Duxton following the staging of the concerts is consistent with the first IA and the second IA remaining on foot as an agreement binding on Touring.

65    Expressed another way, the communications show that Touring accepted Duxton’s contributions as having been made in due performance of Duxton’s obligation to pay them, notwithstanding that the payments were made by a method other than that which was contractually agreed. To the extent that express written agreement from Touring was required for payments to be made by alternative means, the express agreement is to be found in the affirmatory emails to which I have referred.

66    For the same reason, I would reject the contention that there is a genuine dispute as to whether Duxton’s contributions were paid pursuant to an “arrangement” with Duxton, thus leaving the first IA and the second IA wholly unperformed by the original parties to them but terminated by neither of them. I confess to having some difficulty comprehending what the legal nature of the alternative arrangement might be and how its existence might be reconciled with the other legal arguments advanced on Touring’s behalf. When pressed on the issue, Counsel for Touring submitted that the first IA and the second IA were, on this alternative scenario, “probably frustrated” but did not identify the frustrating event. I consider this alternative scenario to add little of substance to Touring’s principal submissions, which I reject.

67    I conclude that the case founded on non-performance does not arise to the level of a plausible contention requiring investigation and so reject this aspect of Touring’s case.

The case under s 459J

68    In supplementary submissions filed on this review Touring advanced an argument not previously raised in the hearing before the Registrar. Reliance was placed on cl 10 of each agreement. It provides:

If a dispute arises out of or relates to this Agreement, a party to the Agreement may not commence any court proceedings relating to the dispute unless it has complied with this clause. A party claiming that a dispute has arisen under or in relation to this Agreement must give written notice to the other parties specifying the nature of the Dispute. On receipt of that notice by the other party the parties must endeavour to resolve the Dispute expeditiously using informal dispute resolution techniques such as mediation, expert evaluation or determination or similar techniques agreed by them.

69    Touring’s position is that the service of the statutory demand is to be regarded as the commencement of a court proceeding relating to a dispute arising under first IA and the second IA for the purposes of this clause. In the alternative, it was submitted that equitable or discretionary considerations favoured the setting aside of the statutory demand, having regard to the presence of an alternative dispute resolution clause in the agreement upon which Duxton relies.

70    These arguments should be rejected for three reasons, each of which I consider to be sufficient.

71    First, on the facts, I do not consider Duxton to be “a party claiming that a dispute has arisen under or in relation to” the first IA or the second IA within the meaning of cl 10. To the contrary, Duxton denies the existence of any genuine dispute concerning Touring’s obligation to pay the debt.

72    Second, and relatedly, there is nothing to suggest that Duxton was made aware of Touring’s asserted position in relation to the debt at any time prior to the service of the statutory demand. When it sought payment of the sums promised, Mr Rankine said nothing to suggest that Duxton was not entitled to the payments. Nothing was said to suggest that Duxton had not performed its own obligations under the first IA or the second IA. On the facts, Duxton could not have given Touring “written notice specifying the nature” of a dispute of which it was unaware. In short, the dispute resolution clause does not apply on its terms.

73    Finally, to the extent that s 459J involves the exercise of a discretion (as Touring submitted it does), I do not consider the circumstances warrant the discretion being exercised in Touring’s favour. It is to be borne in mind that Touring’s primary position in oral submissions before the Registrar was that it is Production and not Touring that is liable to pay the debt by virtue of the novation of the agreements. The submissions in that regard may be fairly understood as having been made on the instructions of Mr Rankine, being the sole director of both companies. Submissions were made to the effect that Touring was not seeking to make any disingenuous use of the corporate veil. Nonetheless, on Touring’s argument the question arises: with which corporate entity is Duxton obliged to mediate?

74    The argument founded on novation was not abandoned at the hearing of this review, although as I have said, hardly any emphasis was placed on it in oral argument. Touring’s insistence that the dispute resolution clause be complied with cannot be comfortably reconciled with its claim that it is Production that owes obligations (and to whom obligations are owed) under the agreements (which must include the obligation under cl 10). To the extent that Production has asserted (through its sole director) that it is liable and thus willing to pay the debt, there is no evidence before the Court to inform any consideration as to whether it is ready and able to do so. In the circumstances I would not set aside the statutory demand served on Touring by reference to cl 10 of the agreements especially whilst the novation argument is maintained.

75    The decision of the Registrar to dismiss Touring’s originating application should be affirmed.

Associate:

Dated:    18 June 2019