FEDERAL COURT OF AUSTRALIA

Elevate NSW Pty Ltd v Canada Bay Private Hospital Pty Ltd [2019] FCA 1248

ORDERS

THE COURT ORDERS THAT:

1.    The originating process filed on 8 February 2019 be dismissed.

2.    The plaintiff pay the defendant’s costs, as agreed or assessed.

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

REASONS FOR JUDGMENT

GRIFFITHS J:

1    The plaintiff seeks to set aside a statutory demand under s 459H of the Corporations Act 2001 (Cth) (Corporations Act). The statutory demand is dated 15 January 2019 and is in the amount of $110,863.76 which the accompanying affidavit described as outstanding “rent” under a sublease for a property situated at 57 Burwood Road Concord (Property). The statutory demand identifies 8 invoices, in varying amounts, which give rise to the total amount the subject of the statutory demand. The statutory demand was accompanied by an affidavit dated 15 January 2019 sworn by Mr Peter Mangles, a director of the defendant. He deposes that the plaintiff owes the defendant a debt in the amount claimed “relating to outstanding licence fees under an agreement on the premises known as Concord Private Hospital located at 57 Burwood Road Concord in the State of New South Wales”.

2    The plaintiff contends that it has an offsetting claim equivalent to the amount of the total debt under s 459H(3) of the Corporations Act. The plaintiff did not press its alternative claim that there was a genuine dispute for the purposes of s 459H(1)(a).

3    As will shortly emerge, the plaintiff claims it has three offsetting claims, which will be summarised after the background facts are outlined.

Background facts

4    It is appropriate to emphasise at the outset that the evidence in this proceeding was somewhat obscure and left several questions unanswered or uncertain.

5    The plaintiff relied upon two affidavits affirmed by its chief executive officer, Ms Brookes McTavish. The affidavits are dated 8 February and 15 April 2019 respectively.

6    The affidavits establish the following relevant matters. The plaintiff operated a sleep laboratory business from the ground floor and lower ground floor of the premises at 57 Burwood Road Concord (Property) between February 2018 and December 2018. The Property was owned by a company called Canada Bay Properties Pty Limited (Canada Bay Properties) but the plaintiff paid what it described as “fees” to the defendant. To understand this somewhat peculiar arrangement, it is necessary to explain some of the background history preceding the plaintiff’s purchase of the sleep laboratory business in February 2018.

7    The plaintiff purchased the sleep laboratory business from a company called K Chan Medical Services Pty Ltd (K Chan). K Chan had a written licence agreement with another company called Concord Private Hospital Pty Ltd (Concord Private Hospital). At this time, Concord Private Hospital was both the owner of the Property as well as the holder of the relevant medical licence required to provide medical services at the Property (in particular to keep patients overnight).

8    The licence agreement allowed K Chan to operate a sleep study clinic on the ground floor of the Property, including utilisation of the medical licence held by Concord Private Hospital. Under the licence agreement, K Chan was obliged to pay Concord Private Hospital $25,000 per calendar month, less any rebates paid by private health funds stemming from the accommodation of their patients (bed fee rebates). As Concord Private Hospital was the owners of the medical licence, it was to them that the rebates were due. The licence agreement was for an initial 18 month period, after which it reverted to a monthly period subject to termination for convenience by any party by 6 months’ notice given after the end of the initial 18 month period. The initial 18 month period expired in January 2018.

9    It appears that there was no formal novation of the licence agreement with Concord Private Hospital after the plaintiff’s purchase of the sleep laboratory business from K Chan, but the plaintiff continued to pay fees on the same basis as that provided for in the written licence agreement with K Chan. The other significant change was that the plaintiff began to utilise the lower ground floor, in addition to the ground floor that had been used by K Chan. The plaintiff paid a monthly fee of $3,333.33 plus GST for use of the lower ground floor. The ground floor was used to house consulting suites, while the lower ground floor housed the beds and the sleep laboratory.

10    In April 2018, Concord Private Hospital sold the Property to Canada Bay Properties. However, the medical licence was transferred to the defendant. Therefore, in contrast to the previous arrangement in which both the medical licence and Property were held by the same entity, their ownership was divided – the medical licence with the defendant, and the Property with Canada Bay Properties. Despite this fundamental change in the commercial relationship between the relevant parties, it appears that the plaintiff continued to pay fees on the same basis as under the previous arrangement between K Chan and Concord Private Hospital, but to the defendant (some part of which was presumably in satisfaction of obligations owing to Canada Property).

11    In June 2018, the plaintiff commenced negotiations with the defendant and Canada Bay Properties with a view to the plaintiff purchasing the Property and the medical licence. As part of its due diligence, the plaintiff commissioned the preparation of a report by Consulting Engineers on the state of the Property. Consulting Engineers reported that there was work that needed to be completed in order to comply with various standards required by the Building Code and that there was currently no Occupation Certificate for the lower ground floor, the presence of which was a requirement for maintaining the medical licence needed to operate the sleep laboratory business. The report was provided to the plaintiff in late November 2018.

12    On 14 December 2018, after some correspondence between the plaintiff and the defendant, the defendant excluded the plaintiff from the premises due to unpaid arrears for a series of invoices sent between 2 November 2018 and 6 December 2018. At the hearing it emerged that one of the principal people communicating with the plaintiff on behalf of the defendant, Mr Arthur Stanton, was associated with Canada Bay Properties rather than the defendant. However at the hearing, the defendant stated that Mr Stanton had some limited form of agency that allowed him to represent the defendant in relation to purchase negotiations and the payment of rental arrears.

13    As noted above, on 15 January 2019, the defendant issued a statutory demand based on the unpaid invoices. On 8 February 2019, the plaintiff filed the originating process seeking to set aside the statutory demand, giving rise to the present proceedings.

The plaintiff’s case summarised

14    The plaintiff claims that there was a contract implied by conduct between it and the defendant based on both parties’ actions and conduct following the plaintiff’s purchase of the sleep laboratory business from K Chan Medical, and the defendant’s transaction with Concord Private Hospital. The plaintiff contended that the contract was an agreement that included both the plaintiff’s occupation of the ground floor and lower ground floor, as well as use of the medical licence held by the defendant. The plaintiff claims that this agreement had two components:

(a)    a licensing agreement which allowed the plaintiff to use the ground floor and the defendant’s medical licence on the same or similar terms to those previously between K Chan and Concord Private Hospital; and

(b)    a sublease which allowed the plaintiff to occupy the lower ground floor to house consulting suites for the sleep laboratory.

15    The plaintiff acknowledges that it did not pay certain invoices issued by the defendant with respect to what it describes as licensing fees between 19 October 2018 and 2 November 2018 and that the statutory demand is based upon those invoices. The plaintiff submitted that the explanation for this was the ongoing negotiations between the plaintiff and the defendant for purchase of the Property. In her second affidavit, Ms McTavish deposed that it was discussed as part of those negotiations that the outstanding debts owed to the defendant (whether described as fees or rent) would be rationalised through incorporation into the negotiated purchase price.

16    The plaintiff contends that on 15 December 2018, on less than 24 hours’ notice, the defendant locked the plaintiff out of the Property and refused to give the plaintiff access to its sleep study equipment. Ms McTavish deposed that the detained equipment was valued at over $700,000. It claims that although it was granted partial access to the Property on 26 January 2019, the time was insufficient for it to remove all its equipment and assets.

17    The plaintiff contends that it was unable to conduct its sleep study business either at the Property or elsewhere between 15 December 2018 and 26 January 2019, but that it would have been able to do so if it had been given reasonable notice of the lock-out. It further contends that it incurred fixed costs for services (including staff) because it was unable to terminate those services on only 24 hours’ notice.

18    The plaintiff further contends that the lower ground floor of the property did not have an Occupation Certificate which was required for the space there to be legally used. It also contends that, for the period that it operated its business at the Property, the defendant did not provide administration for the collation of bed fee rebates, in breach of contract.

19    The three offsetting claims put forward by the plaintiff are as follows:

(a)    a claim for misleading or deceptive conduct arising from the absence of an occupation certificate for the lower ground floor of the Property, and the defendant’s failure to disclose that fact to the plaintiff;

(b)    a claim for conversion and detinue by reason of the defendant’s retention of the plaintiff’s assets from 15 December 2018; and

(c)    a claim (or claims) for breach of contract, by reason of the defendant’s failure to collect bed fee rebates, and to provide reasonable notice prior to termination.

20    In brief, the plaintiff’s contentions in relation to each of these three asserted offsetting claims are as follows.

Misleading or deceptive conduct

21    As to the claim for misleading or deceptive conduct, the plaintiff claimed that, prior to entering into the agreement with the defendant (which it said was an agreement to be inferred from the party’s conduct), the defendant represented to the plaintiff that it had an Occupation Certificate in respect of the lower ground floor or, alternatively, that that area was in such a condition that it would satisfy the requirements for an Occupation Certificate, which was false. An Occupation Certificate was necessary to allow the plaintiff to legally occupy the lower ground floor. The representation was said to have been made in two ways:

(a)    a positive representation, impliedly made by the fact of entry into an agreement with the plaintiff, that the plaintiff could legally occupy the Property. This representation was said to include the subsidiary representation that the lower ground floor either had an Occupation Certificate or was in such state that it would satisfy the requirements for an Occupation Certificate; and

(b)    a representation implied from its silence in failing to disclose that it did not have an Occupation Certificate in respect of the lower ground floor of the Property, or that the lower ground floor was not in a condition where it would satisfy the requirements for an Occupation Certificate.

22    The plaintiff submitted the Court should accept Ms McTavish’s evidence that the plaintiff was risk averse due to its awareness of the stringent regulation of private health facilities, and would not have entered into the agreement with the defendant had it known there was no Occupation Certificate.

23    The plaintiff submitted that it had a legitimate expectation that the lower ground floor did have an Occupation Certificate or was otherwise in a suitable condition to maintain and obtain the relevant medical licence necessary to operate the sleep laboratory business. The plaintiff submitted that the defendant’s silence, or failure to disclose that the lower ground floor did not have an Occupation Certificate, in circumstances where the plaintiff had a legitimate expectation that this would be disclosed to it, amounted to misleading or deceptive conduct, citing inter alia Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd [2010] HCA 31; 241 CLR 357 at [18]-[23] and Henjo Investments Pty Limited v Collins Marrickville Pty Limited (No 1) (1988) 39 FCR 546.

24    If these representations were as to future matters, the plaintiff said that they were made without reasonable grounds.

25    The plaintiff urged the Court to accept Ms McTavish’s evidence that she would not have entered into the agreement if the true position had been known. The plaintiff submitted that it was entitled to ask the Court to make orders under s 236 of Sch 2 of the Competition and Consumer Act 2010 (Cth) (ACL), including declaring the agreement to be void ab initio, ordering a refund of the fees paid by the plaintiff and calculating damages on a “no transaction basis”. The plaintiff said that its loss would be its liability to the defendant and all licensing fees paid by the plaintiff.

Conversion and detinue

26    As to the offsetting claim based on conversion and detinue, the plaintiff contended that the defendant had no entitlement to deprive it of the use of its equipment and that its refusal over approximately six weeks (including the Christmas and New Year period) to enable the plaintiff to retrieve all of its equipment meant that the plaintiff suffered a loss. The plaintiff contended that, if it had had access to its equipment, it could have conducted its sleep study business elsewhere.

27    After the hearing, with the Court’s leave, the plaintiff provided a note setting out its calculations of the loss it suffered by reason of the detention of its equipment in the six week period. Its methodology was to compare what actually occurred with the position the plaintiff would have been in if it had had access to its equipment (the counterfactual position). The plaintiff’s calculation of its counterfactual position was conducted on the following basis:

    gross income of $49,600 per week (based on the average figures from 2018);

    it would continue to incur fixed costs and rental costs; and

    as it incurred fixed costs in the events that actually occurred, the plaintiff’s loss may be calculated by subtracting the rental costs, broadly estimated by using the amounts owed to the defendant under their previous agreement as a comparator, from the gross income it would have earned.

28    Although its equipment was detained for a period of approximately six weeks, the plaintiff quantified its loss by reference to monthly figures for income and fixed expenditure. The plaintiff did not specify why this was so, but it may have been to account for the fact that the relevant period of time straddled the Christmas-New Year period. Nevertheless, using the monthly figures, the plaintiff contended that its loss greatly exceeded the debt the subject of the statutory demand in circumstances where:

(a)    its foregone income was $171,703.64 (i.e. $60,000 more than the debt); and

(b)    even using double the highest charges for licencing fees and rent during the relevant period, the plaintiff’s loss would be approximately $145,000, i.e. $34,000 more than the debt.

29    Finally, the plaintiff filed a short note in reply to the defendant’s response to the plaintiff’s note on quantification. The plaintiff’s short reply note said that the defendant’s submissions on the availability of alternative premises was misguided because the plaintiff was not required to provide “a great deal of evidence to quantify with precision” its offsetting claims, and only needed to show the claim for damages was “reasonably arguable” (relying on Grass Manufactures Pty Ltd v Sraennik Pty Ltd [2003] NSWSC 95 at [19]). As to the defendant’s submission that the plaintiff had failed to discount fixed expenses that would no longer be incurred, the plaintiff said there was no basis for assuming that relevant services (“linen service”, “hospital cleaning” and “administration”) could be terminated on no notice. The plaintiff also said that even discounting the costs of those services, the lost profit would still exceed the debt underlying the defendant’s statutory demand.

Contractual claims

30    As to the offsetting claim for breaches of contract, the plaintiff contended that the agreement by conduct described earlier at [14] included the same terms as the agreement referred to in [8] above. Consequently:

(a)    the defendant was contractually obliged under cl 2.8 of that agreement to collect bed fee rebates on behalf of the plaintiff; and

(b)    the defendant could terminate the agreement on the provision of reasonable notice and would give the plaintiff a reasonable period of time to remove its assets from the Property. The plaintiff submitted that this term was implied in fact in order to give business efficacy to the agreement, in circumstances where there was no express provision for termination in the agreement itself.

31    The plaintiff contended that, in breach of these provisions:

(a)    the defendant did not collect bed fee rebates, which caused the plaintiff to suffer a loss, being the salary of the person employed to collect the rebates between April 2018 and January 2019; and

(b)    in breach of the notice provisions, the plaintiff was provided with less than 24 hours’ notice of termination of the agreement and was refused access to its equipment for approximately six weeks.

The defendant’s case summarised

32    The defendant relied on two affidavits dated 5 March 2019 and 26 April 2019 respectively affirmed by its instructing solicitor, Mr Timothy Dains. Mr Dains deposed that his client issued invoices to the plaintiff in respect of “licence fees” payable pursuant to what he described as a sleep study agreement which had originally been entered into between Concord Private Hospital Pty Ltd and K Chan Medical Services Pty Ltd, which he said was “adopted” by the parties. However, it should also be noted that at various stages of his evidence Mr Dain described the underlying debts for the statutory demand as unpaid rent. For example, annexed to Mr Dains’ first affidavit were copies of various tax invoices, some of which are described as being merely for “Rent” while others are described as for “Rent Consulting Suites”. Similarly, the defendant’s solicitors, in correspondence annexed to Mr Dain’s first affidavit, refer to the debts as “rental arrears” and Mr Dain himself describes a spreadsheet annexed to his second affidavit as “rent reconciliation”.

33    A copy of the spreadsheet in question was attached to an email dated 17 October 2018 which was sent by Mr Peter Browne (the plaintiff’s Chief Operating Officer) to the defendant’s solicitors. Mr Browne described the spreadsheet as a “reconciliation of the amounts outstanding relating to the Sleep Study Licence Agreement and the Sublease Agreement”. He identified the following two “key points”:

(a)    “Elevate completed the acquisition of Concord Sleep Laboratory from K Chan Medical Services on the 15th February 2018. Elevate is responsible for licence fee payments from that date so in our calculation (sic) have included 50% of the amount payable for the month of February”; and

(b)    “The Commencement Date of the Sublease was agreed on 1st April 2018. We have calculated the amount payable based on this commencement date at the rental rate of $4,033.33 per month including outgoings to the end of September”.

34    The reconciliation contains separate figures in respect of the sleep study licence agreement as opposed to the sublease for consulting rooms.

35    The defendant’s submissions broadly focussed on what it said was the inadequacy of the plaintiff’s evidence of loss and the inconsistencies in quantification between the various figures provided in the first and second of Ms McTavish’s affidavits.

36    For the offsetting claim for misleading or deceptive conduct, the defendant submitted that any claim regarding the lack of an Occupation Certificate lay against the owner of the Property, not the defendant. The defendant said that as the plaintiff remained in occupation of the Property for some time after it received the report from Consulting Engineers, there was no evidence that the lack of an Occupation Certificate had created difficulty for the plaintiff in its occupation or that it had suffered any consequential loss during that period. Finally, the defendant submitted that any costs associated with rectifying the Property so that it met the standards necessary for an Occupation Certificate could only crystallise after the plaintiff became owner of the Property. As this has not occurred, the defendant said the offsetting claim has not yet accrued.

37    In its oral submissions, the defendant submitted that there was no obligation of disclosure on it, in circumstances where its relationship with the plaintiff was one of parties negotiating at arms length (referring to Leda Holdings Pty Ltd v Oraka Pty Ltd (1998) ATPR 41-601). The defendant submitted that in any event, no claim in misleading or deceptive conduct lay because the defendant was unaware of the matters which the plaintiff said it had failed to disclose.

38    For the conversion and detinue offsetting claim, the defendant submitted that the estimated loss of $10,000 per day was inadequately particularised, with no basis or method of calculation disclosed in Ms McTavish’s first affidavit. The defendant also submitted that particularising loss by reference to a total gross income figure was inappropriate because the proper measure of loss depended on profitability.

39    In its response to the plaintiff’s note on calculation of loss for the conversion and detinue offsetting clam, the defendant submitted there were two unfounded assumptions that were fatal to the plaintiff’s offsetting claim. The first was said to be the plaintiff’s assumption that, had the plaintiff had access to its equipment, it would have been able to find alternative premises from which to run its business. The defendant said without such evidence (and in light of the necessity of a medical licence for operation of the sleep study business), the plaintiff was not able to show that it had suffered any loss from the denial of access to its equipment. The second assumption was that the plaintiff continues to incur fixed costs at the same rate as its previous fixed costs, when there are expenses which the plaintiff would have ceased to incur such as those characterised as “hospital cleaning”, “linen service” or possibly even “administration”. The defendant submitted that failure to have proper regard to these fixed costs meant that the plaintiff was unable properly to calculate profitability and thus provided no plausible or coherent basis for quantifying the loss claimed.

40    Finally, for the breach of contract offsetting claim, the defendant claimed the plaintiff had not provided evidence of what loss was attributable to the defendant’s failure to hire a director of nursing, nor had it adequately particularised the estimated loss of $166,096.43 said to arise from a failure to collect bed fee rebates. The defendant said the breakdown of that estimate as comprising “administration”, “linen service” and “hospital cleaning” was not explained adequately and the plaintiff had not disclosed the method of calculation of the figures provided in Ms McTavish’s first affidavit. In summary, the defendant submitted “[t]he state of the plaintiff’s evidence is such that the court has no way of knowing how this offsetting claim is calculated”.

41    For the failure to give reasonable notice aspect of the breach of contract claim, the defendant submitted that the plaintiff’s figures based on total gross income said nothing about the profitability of the sleep study business. The defendant submitted the proper measure of loss was lost profit resulting from an inability to operate the sleep study business. As the gross income figure said nothing about profitability, the defendant submitted the evidence provided no basis for quantifying the plaintiff’s offsetting claim.

Defendant’s objections to plaintiff’s evidence

42    The defendant took objection to various paragraphs in the second of Ms McTavish’s affidavits, including several objections relying upon what is described as the “Graywinter principle” (referring to Sundberg J’s decision in Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund [1996] FCA 822; 70 FCR 452). I said that I would explain my rulings on those particular objections in my final reasons for judgment. Those reasons relate to [5], [6], [8], [10], [13]-[15] of Ms McTavish’s second affidavit, which evidence may be summarised as follows:

(a)    the plaintiff’s engagement on a part time basis of an administrative person, Ms Sharon Stapleton, to collect bed fee rebates, deal with health funds and produce patient records. Her wages were $21,000 per annum. It was deposed that her employment was necessary due to the fact that the defendant did not employ a Director of Nursing “in any meaningful capacity” nor did it provide for the production of patients records in order to meet the requirements of the hospital ([5]-[6]).

(b)    Ms McTavish deposed that she had not been informed by the defendant or any person before its acquisition of the sleep study business that there was no Occupation Certificate for the lower ground floor. The plaintiff also deposed that had she known there was no Occupation Certificate, she would not have allowed the plaintiff to continue to occupy the premises ([8], [10]).

(c)    While the plaintiff has been unable to operate its sleep study business it continued to incur fixed costs, including remuneration of staff, insurance payments and leasing fees associated with specialist sleep laboratory equipment (13]-[15]).

43    I reject the objections for the following reasons.

44    In Aussie Hoist Property Pty Ltd v Mulqueen [2018] FCA 1493 at [47]-[48], I described the nature and rationale of a Graywinter objection as follows:

In Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund [1996] FCA 822; 70 FCR 452 (Graywinter), Sundberg J summarised the following minimum requirements that had to be satisfied by the supporting affidavit required under s 459G(3)(a) of the Act:

(a)    The affidavit must state material facts which show that there is a genuine dispute.

(b)    The affidavit need not include, in admissible form, all the evidence that supports the contention of a genuine dispute.

(c)    Neither a mere assertion that there is a genuine dispute nor a bare claim that the debt is disputed will suffice.

His Honour also held that if the supporting affidavit did not meet the minimum requirements, the Court did not have jurisdiction and this could not be overcome by filing a supplementary affidavit after the 21 day period had expired. Justice Sundberg held, however, that where the minimum requirements had been met, material relied upon in the supporting affidavit could be supplemented by affidavits filed after the 21 day period had expired (but they cannot raise a new ground see [61] below).

45    The defendant submitted that the paragraphs objected to in Ms McTavish’s second affidavit were an attempt to cure deficiencies in her first affidavit that meant that the plaintiff was unable to meet the threshold described by Sundberg J in Graywinter. In response, the plaintiff submitted that the relevant paragraphs in Ms McTavish’s affidavit were no more than an explanation of matters already raised in her first affidavit at [17] and BM4 (the Summary Due Diligence Report prepared by Consulting Engineers).

46    Three general points may be made about the defendant’s Graywinter objections.

47    First, Graywinter objections reflect the statutory limits on the Court’s jurisdiction to set aside an offsetting claim. In that vein, it is important to recognise that there is (Financial Solutions Australasia Pty Ltd v Predella Pty Ltd [2002] WASCA 51; 26 WAR 306 at [34]):

“no settled and universal principle, which must be satisfied by an affidavit before it can be accepted as ‘supporting the application’ within the meaning of s 459G(3)(a) and as satisfying the jurisdictional requirement being considered. The statutory yardstick remains that the affidavit should support the application. The precise nature of the application may well influence what this requires”

48    What must be determined to establish the jurisdictional threshold is that the affidavit supports the application, not whether the affidavit in and of itself is sufficient to establish the offsetting claim.

49    Secondly, evidence adduced in an application of this kind, even if some of it would be ordinarily objectionable on the basis of hearsay or opinion (and unable to be relied upon to prove the facts asserted), is admissible to establish facts relevant to whether there is a genuine dispute about indebtedness (Tokich Holdings Pty Ltd v Sheraton Constructions (NSW) Pty Ltd (in liq) [2004] NSWSC 527; 185 FLR 130 at [21]-[23] per White J; John Holland Construction and Engineering Pty Limited v Kilpatrick Green Pty Limited (1994) 14 ACSR 250 at 253). In the present circumstances, Ms McTavish’s evidence as CEO of the plaintiff, is admissible to establish the genuineness of the plaintiff’s belief that there was a plausible contention requiring investigation (Central City Pty Ltd v Montevento Holdings Pty Ltd [2011] WASCA 5; 29 ACLC 11-011 at [25]; Aussie Hoist at [52]).

50    Thirdly, as I said in Aussie Hoist in the passage above, the supporting affidavit “need not include, in admissible form, all the evidence that supports the contention of a genuine dispute”. An affidavit will satisfy the threshold requirements of jurisdiction in s 459G if it contains the material facts showing the existence of a genuine dispute (at [47]).

51    In this case, most of the relevant paragraphs in Ms McTavish’s second affidavit do not seek to establish any material facts that were not raised in the first affidavit. As the plaintiff submitted, the relevant paragraphs are better characterised as further elaboration of the matters already raised in the first affidavit. Thus, even if the material in the first affidavit is not able to prove the facts necessary to make out the contention of an offsetting claim, it is sufficient that the first affidavit states the material facts that the plaintiff relies on to show there is a genuine dispute (MNWA Pty Ltd v Deputy Commissioner of Taxation [2016] FCAFC 154; 250 FCR 381 at [93]-[97]).

Objections to [5]-[6]

52    These paragraphs concern the plaintiff’s claim that the defendant breached a contractual obligation to it in failing to collect bed fee rebates.

53    At [22]-[25] of her first affidavit (in the parts read), Ms McTavish deposed that:

(a)    under the agreement with Concord Private Hospital, Concord Private Hospital as holder of the licence was entitled to the bed fee rebates of the sleep study clinic’s in-patients, but it was the plaintiff who incurred the costs associated with administration and collation required to collect the bed fee rebates and excess payments, by remuneration of the staff who provided those services;

(b)    during 2018, the only patients being treated in the Property were those housed as part of the sleep study clinic;

(c)    she estimated the cost of providing the administrative services necessary for the defendant to collect the bed fee rebates was $166,096.43. These costs were particularised in BM-5 as follows:

(i)    $61, 659.38 for “administration”;

(ii)    $29, 478.59 for “linen service”; and

(iii)    $74, 958.46 for “hospital cleaning”.

54    It is implicit in this evidence that when the defendant assumed Concord Private Hospital’s position as licensee it continued to collect the bed fee rebates as it was entitled to do as licensee. At [28], Ms McTavish deposed that the defendant did not employ a Director of Nursing or administration for the collection of bed fees. By implication, these are services required to be provided in order to collect bed fee rebates under the relevant medical licence.

55    Although the precise relationships between the Director of Nursing, the administrative and collection services and Ms Stapleton are a little opaque, it is clear enough that the matters raised at [5]-[6] of Ms McTavish’s affidavit are an attempt to particularise the matters raised in Ms McTavish’s first affidavit which have been outlined above. For example, at [5], Ms Stapleton is described as “an administrative person” whose role is “dedicated to collecting bed fees, dealing with private health funds and producing clinical records”. Moreover, the necessity for her employment is attributed at [6] to the fact that the defendant has not engaged a Director of Nursing or provided for the production of patient records.

56    I am satisfied that the material in [5]-[6] of Ms McTavish’s second affidavit does not attempt to introduce material facts not raised in the first affidavit. Accordingly, the Graywinter objection to these paragraphs fails.

Objections to [8] and [10]

57    These paragraphs concern the plaintiff’s claim that the defendant engaged in misleading or deceptive conduct by failing to disclose the absence of an Occupation Certificate.

58    At [17]-[18] in her first affidavit, Ms McTavish deposed that

(a)    she understood the defendant, as licensee, was in compliance with all regulatory requirements, including those under the Private Health Facilities Regulation 2017 (NSW); and

(b)    the fees owed by the plaintiff to the defendant were in consideration for permission to operate its sleep study clinic under a valid medical licence and provision of a physical space (namely, the Property), governance and administration services necessary to conduct the sleep study clinic under the medical licence.

59    Consulting Engineers reported that:

(a)    an Occupation Certificate had not been issued for the lower ground floor;

(b)    an Occupation Certificate was required for the legal use of the space; and

(c)    the lower ground floor could not be used as a Class 9 space (Health Care) under the Building Code of Australia and so could not be used to house recovery beds or overnight accommodation.

60    Taken together, the matters outlined at [58]-[59] establish that:

    the plaintiff entered into contractual relations with the defendant on the basis that it would be able to operate a sleep clinic at the Property under a valid medical licence in a physical space suitable for that purpose; and

    in fact, the physical space was not suitable and there may have been no valid medical licence presently in operation.

61    Those matters are relevant to establishing a genuine belief that there was a plausible contention as to indebtedness requiring investigation. Furthermore, as the plaintiff submitted, the material in [8] and [10] of Ms McTavish’s second affidavit does no more than elaborate on the matters already raised in her first affidavit at [17]-[18] and in BM4. The objections are rejected.

Objections to [13]-[15]

62    These paragraphs concern quantification of the plaintiff’s losses arising from their conversion and detinue offsetting claim.

63    At [38] in her first affidavit, Ms McTavish deposed that she estimated the plaintiff’s loss arising from the detention of its equipment and inability to operate the sleep clinic to be $10,000 a day.

64    In support of its Graywinter objection to [13]-[15], the defendant relied on the following proposition in Broke Hills Estate Pty Ltd v Oakvale Wines Pty Ltd [2005] NSWSC 638; 23 ACLC 1,266 at [26] per Gzell J:

…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.

65    In Broke Hills at [31]-[32], Gzell J concluded that it was fatal in that case that the evidence filed within the 21 day period was insufficient to enable the Court to calculate the quantum of the offsetting claim and that the Graywinter principle prevented that void being cured by evidence in a supplementary affidavit. Thus, it was contended that [38] of Ms McTavish’s first affidavit had the same defect as that identified in Broke Hills, and the further evidence in [13]-[15] of Ms McTavish’s second affidavit could not be relied on to cure that defect.

66    In response, the plaintiff submitted that Broke Hills was no longer good law and that it is permissible in an application of this kind for the supplementary affidavit to contain the only evidence on quantification of the offsetting claim (relying on MNWA at [94] per Rares J and Pravenkav Group Pty Ltd Diploma Construction (WA) Pty Ltd [2014] WASCA 132; 46 WAR 483 at [43], [52]-[64] per Newnes JA, Murphy JA and Edelman JA).

67    I accept the plaintiff’s submissions. In Pravenkav at [57], the Court of Appeal of Western Australia expressly rejected Broke Hills and other first instance authorities to the extent they stood for the proposition relied on by the defendant. The Court of Appeal held that “the initial supporting affidavit under s 459G does not require evidence from which the Court can calculate the substantiated amount of the demand” (at [57]). Section 459G only requires that the affidavit support the offsetting claim. The section does not require expressly or impliedly that an affidavit can only support an application under s 459H, if the affidavit itself contains all the material needed to establish the offsetting claim (Pravenkav at [58]-[60]). Pravenkav has been followed in this Court in MNWA at [94] per Rares J and NT Beverages Group Pty Ltd v PT Bromo Tirta Lestari, in the matter of NT Beverages Group Pty Ltd [2017] FCA 775 at [23] per Gleeson J).

68    Therefore, while it may be accepted that the evidence at [38] of Ms McTavish’s first affidavit does not allow the Court to calculate the quantum of the plaintiff’s offsetting claim, this does not mean her first affidavit is not an “affidavit supporting the application” for the purposes of s 459G. The Court has jurisdiction to determine the plaintiff’s application and the plaintiff was able to supplement Ms McTavish’s first affidavit with the evidence in her second affidavit.

69    The defendant’s Graywinter objection to [13]-[15] of Ms McTavish’s second affidavit fails.

Relevant legal principles summarised concerning offsetting claims

70    There was substantial agreement as to the relevant legal principles which guide the assessment of an asserted offsetting claim. They may be summarised as follows.

71    First, if the Court is satisfied that an offsetting claim exists that is equal to, or greater than, the amount of the debt the subject of the statutory demand, the statutory demand must be set aside (s 459H(3)). If the offsetting claim is of a lower amount than the debt, the Court must vary the statutory demand in accordance with the formula provided in s 459H(2) to (5).

72    Secondly, “offsetting claim” is defined in s 459H(5) to mean “a genuine claim that the company has against the [defendant] 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”.

73    Thirdly, in determining whether or not there is an offsetting claim for the purposes of s 459H, the Court is not required to find that the asserted offsetting claim is a good one or that it has been made out. Rather, nothing more is involved than the need for there to be a finding by the Court that there is a serious question as to the existence of an offsetting claim or an issue deserving of a hearing as to whether the company has such a claim against the creditor, that the claim is made in good faith and is arguable and is not frivolous or vexatious (see, for example, Grandview Aust Builder Pty Ltd v Budget Demolitions Pty Ltd [2019] NSWCA 60 at [8] per Bell P (with whom White JA and Sackville AJA agreed)). As White JA observed in Re Citadel Financial Corporation Pty ltd [2019] NSWSC 65 at [30], it is sufficient if there be a “plausible contention requiring investigation” and the “offsetting claim should have a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion and not be merely fanciful or futile”.

74    Fourthly, as Palmer J held in Macleay Nominees v Belle Property East [2001] NSWSC 743 at [18], a genuine offsetting claim means a claim on a cause of action advanced in good faith, for an amount claimed in good faith. For a claim to meet this requirement the claim needs to be arguable on the basis of facts asserted with sufficient particularity to enable the Court to determine that the claim is not fanciful or mere assertion. His Honour added at [18]:

18.    … In a claim for unliquidated damages for economic loss, the Court will not be able to determine whether the amount claimed is claimed in good faith unless the plaintiff adduces some evidence to show the basis upon which the loss is said to arise and how that loss is calculated. If such evidence is entirely lacking, the Court cannot find that there is a genuine offsetting claim for the purposes of s.459H(1) and (2).

75    This passage from Macleay Nominees was approved by the Full Court of this Court in First Equilibrium Pty Limited v Bluestone Property Services Pty Limited (in liq) [2013] FCAFC 108; 95 ACSR 654 at [21] per Gordon, Griffiths and Farrell JJ. That said, determining the existence of a genuine offsetting claim does not require particularisation of the claim to the last dollar and cent. As Barrett J explained in Elm Financial Services Pty Ltd v MacDougal [2004] NSWSC 560 at [19], the ultimate question is whether there is

a plausible and coherent basis for asserting a claim to a sum which, despite elements of uncertainty, can be seen to be, in any event, greater than the amount of the debt the subject of the statutory demand. Of course, the narrower the margin between he alleged debt and the plaintiff’s estimate or initial quantification, the greater will be the need for particularity in assessing the amount of the offsetting claim.

Consideration and determination

76    It is convenient to address each of the three offsetting claims advanced by the plaintiff and explain why I consider that only the claims for breach of contract meet the requisite threshold. However, before I do so, there is a preliminary issue concerning the different interests in the Property that needs to be considered. The precise commercial arrangement between the plaintiff, defendant and possibly Canada Bay Properties is important context for understanding the offsetting claims advanced by the plaintiff.

The arrangements between the plaintiff, defendant and Canada Bay Properties

77    As previously noted, the evidence before the Court was somewhat obscure and left several important questions unanswered or uncertain. The most significant of these concerned the nature and scope of the various parties’ interests in the Property.

78    The evidence and submissions presented by both parties at various stages described the plaintiff’s rights to use the ground floor and lower ground floor as a “sublease” and the debts underlying the statutory demand as “rent” or “rental arrears”. It appears there was some inaccuracy in this language. The defendant’s counsel (Mr Marshall SC) acknowledged at the hearing that there was no sublease. He said the language and references to a “sublease” and “rent” were in reality references to the obligations owed under the implied agreements between the plaintiff, defendant and Canada Bay Properties (as to the distinction between a lease and a licence see Radaich v Smith (1959) 101 CLR 209 at 222 per Windeyer J).

79    This unwritten commercial arrangement may be characterised as a contract with three parties (the plaintiff, the defendant and Canada Bay Properties), with terms mutatis mutandis to those in the written agreement between K Chan and Concord Private Hospital. On the other hand, it may be that the plaintiff’s occupation of the ground floor and lower ground floor was pursuant to agreement with the defendant only, who had authority to contract on behalf of Canada Bay Properties to allow the plaintiff use of the ground floor and lower ground floor. In both scenarios, it appears to be presumed that the defendant had authority to collect fees for use of the Property (whether as agent or otherwise), despite the fact that Canada Bay Properties was the owner of the Property. The true position is unclear. As noted earlier, these contractual arrangements were wholly unwritten and the evidence adduced has provided little clarity.

80    Based on the invoices, correspondence annexed to Mr Dain’s first affidavit, and other evidence I accept generally the plaintiff’s description of the commercial arrangement between the plaintiff and defendant implied by their conduct.

81    The plaintiff operated a sleep study clinic on the ground floor, paying the defendant a fee of $25,000 less any bed fee rebates. These licence fees reflected the prior arrangement between K Chan and Concord Private Hospital, and represented consideration for both use of the defendant’s medical licence (which was necessary to house patients overnight) and physical use of the ground floor of the Property. In addition, the plaintiff paid a flat monthly fee of $3333.33 to the defendant in consideration for its use of the lower ground floor to house consulting suites. Although it is unclear how if any portion of these licence fees are remitted to Canada Bay Properties, the owners of the Property, that information is ultimately not necessary for assessment of the plaintiff’s offsetting claims.

(a) Misleading or deceptive conduct

82    Although the plaintiff described this offsetting claim as based on two representations, one positive and one by silence, the plaintiff’s submissions in reality alleged one misrepresentation implied from the circumstances. There was no evidence that the defendant made any express representation that the lower ground floor had an Occupation Certificate, or was in sufficient condition to obtain one. K Chan had not used the lower ground floor when it had operated the sleep study business. The presence or absence of an Occupation Certificate for the lower ground floor only became an issue of importance once the plaintiff took over operation of the sleep study business and determined to use the lower ground floor to house consulting suites.

83    The plaintiff submitted that the positive representation was made by the mere fact of the defendant’s entry into an agreement which carried with it an implied representation that the plaintiff could legally occupy the space. In circumstances where there is no written or oral agreement any representation said to arise by mere entry into an agreement could only be implied from the circumstances.

84    When understood in that way, it is evident that the plaintiff’s claim based on silence or non-disclosure is identical to the case advanced on positive misrepresentation. As Black CJ explained in a leading case in this area (Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 32):

Silence is to be assessed as a circumstance like any other. To say this is certainly not to impose any general duty of disclosure; the question is simply whether, having regard to all the relevant circumstances, there has been conduct that is misleading or deceptive or that is likely to mislead or deceive. To speak of “mere silence” or a duty of disclosure can divert attention from that primary question. Although “mere silence” is a convenient way of describing some fact situations, there is in truth no such thing as “mere silence” because the significance of silence always falls to be considered in the context in which it occurs. That context may or may not include facts giving rise to a reasonable expectation, in the circumstances of the case, that if particular matters exist they will be disclosed.

85    When understood in this way, the defendant’s silence is understood properly as but one aspect of the factual matrix claimed by the plaintiff to establish the positive representation implied by the circumstances as a whole.

86    The fundamental difficulty with the plaintiff’s claim, however it is framed, is that the evidence does not establish that the defendant knew that there was no Occupation Certificate in respect of the lower ground floor or that the lower ground floor did not satisfy the requirements necessary to obtain an Occupation Certificate.

87    Ms Campbell, who appeared for the plaintiff, accepted the evidence did not establish any knowledge on the defendant’s part, but submitted that that was irrelevant to the enquiry under s 18. She submitted several times in oral argument that, for the plaintiff to succeed on this matter, the Court would have to (and should) accept the legal proposition that a plaintiff can establish misleading or deceptive conduct by silence, even if the person making the representation by silence is unaware and has no knowledge of the information being withheld. Ms Campbell submitted that this was because intention and the alleged contravener’s state of mind are irrelevant for this cause of action..

88    Those submissions are rejected. They raise significant problems at a level of principle and are flatly inconsistent with binding authority, including Henjo at 557 per Lockhart J (with whom Burchett and Foster JJ agreed) and BMW Australia at [21] per French CJ and Kiefel J. Whether or not an alleged contravener has knowledge of a particular fact which the aggrieved party says ought to have been disclosed but was not is a necessary aspect of the circumstances and context in which the characterisation of the impugned conduct in commercial dealings is to be undertaken (see, for example, BMW Australia at [20] per French CJ and Kiefel J and Henjo at 555 per Lockhart J). To accept the proposition advanced by the plaintiff would give s 18 an expanded operation well beyond the limits identified by the High Court (see BMW Australia at [21] per French CJ and Kiefel J).

89    In support of her submission that it is irrelevant whether the defendant had knowledge that there was no Occupation Certificate, the plaintiff relied upon a passage in Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 at 223 per Stephen J. In particular, it was stated by the plaintiff that intent and the state of mind of the person making the representation is not relevant. There is nothing at 223 of Hornsby Building which supports that submission. Ms Campbell may have had in mind Stephen J’s statements elsewhere in that case to the effect that nothing turns upon the intent of the alleged contravener for the purposes of s 52(1) of the Trade Practices Act 1974 (Cth) (see, for example, Hornsby Building at 228). Without doubt this principle is correct but nothing said by Stephen J suggests that, in a case based on silence giving rise to a representation, the knowledge or otherwise of the alleged contravener of the fact or matter which has not been disclosed is irrelevant.

90    Thus, while it is true that an intention to mislead or deceive is not an essential element for the cause of action under s 18 of the ACL, a representation based on silence necessarily focusses attention on whether the impugned conduct of its nature constitutes misleading or deceptive conduct and knowledge or absence of knowledge of the undisclosed matter by the alleged contravener will be relevant.

91    For those reasons, the claim based on misleading or deceptive conduct does not meet the low threshold required to be an offsetting claim under s 459H.

(b) Claim for conversion and detinue

92    Two points should be made at the outset. First, the defendant’s case was limited to contesting quantification of the damages, relying on Macleay Nominees, in claiming that the plaintiff’s evidence was insufficient to allow the Court an estimation of the claimed loss.

93    Secondly, although there are different types of damages recoverable for conversion and detinue, the plaintiff has advanced its case solely on the basis of consequential loss to its business flowing from an inability to use the equipment to operate the sleep study business. For example, the plaintiff did not claim damages for the mere fact of the defendant’s detention of its equipment from 15 December 2018 to 26 January 2019 and the attendant infringement of its proprietary rights of use and possession (see Bunnings Group Limited v CHEP Australia Limited [2011] NSWCA 342; 82 NSWLR 420 at [175]-[175]), nor did it assert a claim in detinue seeking recovery of the value of the equipment that remains detained (General and Finance Facilities Ltd v Cooks Cars (Romford) Ltd [1963] 1 WLR 644 at 650 per Diplock LJ).

94    It may be accepted that for the purposes of establishing an offsetting claim, Ms McTavish’s hearsay evidence was sufficient to show that, when operational, the sleep study business had an approximate weekly income of $49,600. That said, as it was in Macleay Nominees, the proper measure of the plaintiff’s loss are the profits it would have derived had the defendant not tortiously detained its equipment from 15 December 2018 to 26 January 2019.

95    In this regard, assessing the plaintiff’s claimed loss is made difficult by some of the assumptions upon which it calculated its claim and the commensurate deficiencies in its evidence. The main assumption was that if the plaintiff had been able to retrieve its equipment in mid-December 2018 when it was locked-out, it would have been able to continue its sleep study business at some other premises with little to no delay. As the defendant pointed out, however, there is a complete absence of any evidence that alternative premises were available to the plaintiff for that purpose (see Macleay Nominees at [18] per Palmer J).

96    In circumstances where the alternative premises required a medical licence and it was nearing Christmas and New Year, I do not think it can be assumed alternative premises would have been available immediately, in the near future or without significant transaction costs. The absence of evidence on this issue is significant because in a trial on the merits of the claim, if the plaintiff could not establish the availability of an alternative location during the 6 week period its equipment was detained, there would be no damages for consequential loss, as this part of the case proceeds on the assumption the defendant was entitled to prevent the plaintiff from using the Property. The issue of reasonable notice of exclusion from the premises does not feature in this counterfactual because that requirement arose from the breach of contract offsetting claim, not the claim in conversion.

97    Moreover the potential costs associated with moving to new premises were not factored into the calculations. Similarly, it is not clear that the plaintiff’s fixed costs remained the same and that there were not costs saved by reason of it being unable to use the Property. While the plaintiff correctly submitted that there was no evidentiary basis that justified an assumption adverse to it, the fundamental point is that the plaintiff bears the burden of establishing the offsetting claim. For completeness, I would add that I am prepared to accept the history of the licence fees owed to the defendant as a reasonable comparator for the rental expenses associated with the alternative premises.

98    Nevertheless, I have found that the plaintiff has not established an offsetting claim for conversion. The deficiencies in the evidence and particulars of loss, especially in relation to the critical matter of the availability of alternative premises are of such significance that the amount which could be plausibly claimed requires considerable speculation and conjecture. For those reasons, the offsetting claim in conversion fails.

(c) Breach of contract

99    As previously mentioned, there are two aspects to this offsetting claim. The first relates to the alleged breach of cl 2.8 and the collection of bed fee rebates. Although, $166,096.43 was initially claimed by reference to Ms McTavish’s first affidavit, the plaintiff narrowed its claim to the costs of engaging and remunerating an administrative person (Ms Sharon Stapleton) to collect bed fee rebates, deal with health funds and produce patient clinical records. Ms McTavish said that Ms Stapleton’s remuneration was approximately $21,000 per annum gross and that she was employed on a part-time basis. As the relationship between the plaintiff and defendant began in April 2018, the plaintiff claimed $15,570 as the salary of a person employed to collect bed fee rebates between April 2018 and January 2019.

100    The defendant submitted that it is unknown what part of Ms Stapleton’s income related to her role in collecting bed fee rebates and dealing with private health funds, as opposed to her other duties. Although, Ms McTavish’s evidence was that Ms Stapleton’s role was “dedicated” to collecting bed fees, dealing with health funds and producing patient records, that evidence does not sufficiently explain what part of her remuneration was incurred by the plaintiff to collect bed fee rebates for the defendant. While dealing with health funds and producing patient records may have been incidental to the collection of rebates, they are also tasks the plaintiff would have needed to complete to run its sleep study business. In those circumstances, and in the absence of sufficient evidence to support this aspect of the claim there is no basis on which the $15,570 can be broken down to identify what part of it was incurred due to the defendant’s failure to make provision for the collection of bed fees itself. I find that the plaintiff has not met the threshold required to establish an offsetting claim in the amount of $15,570.

101    The second alleged breach relates to the defendant’s failure to give reasonable notice of termination of the agreement and the exclusion of the plaintiff from the Property on 15 December 2018. Although the plaintiff contended that the obligation to give reasonable notice was a term implied to give business efficacy to the contract, it appears there was a clause in the contract between K Chan and Concord Private Hospital that dealt expressly with the obligations associated with notice and termination. Clause 2.2 provided that after the initial period of 18 months had expired, the agreement would revert to a monthly period terminable on 6 months’ notice. Accepting, as I do, that the terms of the agreement between the plaintiff and the defendant with respect to licensing of the ground floor mirrored the earlier written agreement, it seems a notice of 6 months was required.

102    The focus of the defendant’s submissions was again on quantification rather than breach, but it may be that the length of the notice required may have had some implications for the calculation of damages flowing from breach. Nevertheless, as the claim was argued as an implied obligation to give reasonable notice that is the basis upon which I will proceed.

103    The plaintiff’s only submissions on quantification of loss on this point were that the loss it suffered was the same as that which had been described in its conversion claim. This must mean that the plaintiff claims that had the defendant given it reasonable notice before termination, it would have been able to relocate its sleep study business to alternative premises. The plaintiff’s calculation of its loss on this basis was $171,703.64, derived from its average monthly income ($198,400) and the highest of its monthly fees to the defendant ($26,696.36).

104    There remain, however, the same evidentiary difficulties discussed earlier in relation to the conversion claim. Assuming reasonable notice had been given, there remains no evidence concerning the availability of alternative premises from which the sleep study business could have operated or the transaction costs associated with moving. As noted earlier, in view of the need to have a medical licence, it cannot be assumed alternative premises would have been obtained without difficulty. Although reasonable notice would have given the plaintiff a better opportunity to relocate its sleep study business to alternative premises, it remains speculative how long this would have taken and how much it would have cost. Without any evidence on these matters, not even a broad estimate of these costs is possible.

105    Furthermore, as the defendant submitted, the evidence does not disclose that the fixed costs incurred after being barred from the Property were the same as those that would have been incurred had the business been allowed to operate. Although Ms McTavish’s evidence provides some particulars of the plaintiff’s ongoing costs, it is never claimed that all of the fixed costs have continued (eg. the hospital cleaning and linen services costs referred to by the defendant). While the plaintiff is correct in saying the evidence does not show any costs ceased (ie the services referred to by the defendant may not have been terminable at will), the evidentiary lacuna introduces a further element of uncertainty into the validity of the plaintiff’s headline figure of claimed loss.

106    In those circumstances, even though the plaintiff’s initial estimate of loss allows for some tolerance for elements of uncertainty (MacDougal at [19]), the evidentiary deficiencies outlined above are too significant for the plaintiff to establish the offsetting claim.

107    For those reasons, I am not satisfied the plaintiff has established an offsetting claim in breach of contract sufficient to warrant the setting aside of the statutory demand.

Post hearing developments

108    After the hearing, the defendant’s counsel wrote to my associate stating that it had come to his instructors’ attention that the plaintiff had been placed into voluntary administration. He also indicated that should the Court wish to relist the matter he would be able to appear. My associate replied stating that absent an application from a party, the Court did not see any need to relist the matter.

109    The well known stay of proceedings pursuant to s 440D of the Corporations Act applies to proceedings against a company in administration. As these proceedings are brought by the company in administration, I do not see that section as applying to the present proceedings. For that reason, I did not regard the plaintiff’s entry into voluntary administration as relevant. Different considerations might arise if the defendant seeks to enforce the judgment and/or the order for costs in its favour.

Conclusion

110    For these reasons, the application to set aside the statutory demand will be dismissed, with costs.

Associate:

Dated:    12 August 2019