Federal Court of Australia

Innovative 3D Systems Pty Ltd (receivers and managers appointed) v RH Capital Finance Co, LLC [2026] FCA 939

ORDERS

THE COURT ORDERS THAT:

1.    The statutory demand served by the respondent on the first applicant on or around 10 November 2025 be set aside under s 459J(1)(b) of the Corporations Act 2001 (Cth).

2.    The statutory demand served by the respondent on the second applicant on or around 10 November 2025 be set aside under s 459J(1)(b) of the Act.

3.    The respondent pay the applicants’ costs of and incidental to this proceeding to be taxed in default of agreement.

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

REASONS FOR JUDGMENT

BEACH J:

1    On 10 November 2025 RH Capital Finance Co. LLC served on Innovative 3D Systems Pty. Ltd. (receivers and managers appointed) a statutory demand for a debt of some $13.5 million. The debt was constituted by an initial advance ($2,369,045) and an additional advance ($11,130,954) payable under a loan agreement (as varied) between RH Capital and Innovative Systems.

2    Further, on 10 November 2025 RH Capital served on Innovative 3D Technology Pty. Ltd. (receivers and managers appointed) a statutory demand for a debt of some $9.5 million. The debt was constituted by an initial advance ($3,158,560) and an additional advance ($6,341,439) payable under a loan agreement (as varied) between RH Capital and Innovative Technology.

3    The Innovative parties have applied under s 459G(1) of the Corporations Act 2001 (Cth) to set aside these statutory demands, their primary position being that the demands should be set aside pursuant to s 459J(1)(b) as an abuse of process. Their fall-back position, although strictly giving rise to questions that are anterior to the operation of s 459J, is that the demands should be set aside on the basis that there is a genuine dispute as to the existence of each of the debts (ss 459H(1)(a), (2) and (5)) and/or that they each have an offsetting claim (ss 459H(1)(b), (2) and (5)) which exceeds the amount of the particular debts demanded in each case.

4    Before proceeding further it is relevant to point out that the Innovative parties are the first and second plaintiffs in a separate proceeding instituted in this Court on 1 March 2023 being proceeding VID125/2023, but on the instructions and under the control of the receivers and managers who were appointed over the assets of the Innovative parties by RH Capital on 11 September 2021.

5    The Innovative parties are also cross-claimants in that separate proceeding but contrastingly under the instruction and direction of Mr Heath Allan, the director and also a cross-claimant. RH Capital is the third cross-respondent to that cross-claim.

6    In the present matter concerning the setting aside of the statutory demands, the Innovative parties are plaintiffs, being also under the instruction and direction of Mr Allan rather than the receivers and managers.

7    RH Capital opposes the present application and asserts that I should make the following orders.

8    First, it says that I should make an order under s 459H(4) that the statutory demand served by RH Capital on Innovative Systems be varied to $2,369,045, and that I should declare that the demand has had effect as so varied from when the demand was served on Innovative Systems.

9    Second, it says that I should make an order under s 459H(4) that the statutory demand served by RH Capital on Innovative Technology be varied to $3,158,560, and that I should declare that the demand has had effect as so varied from when the demand was served on Innovative Technology.

10    Third, it then says that the Innovative parties’ application to set aside the statutory demands as so varied should be dismissed.

11    In summary and for the following reasons, I have acceded to the Innovative parties’ application to set aside the statutory demands. In doing so, I should note the following points.

12    First and by way of addressing the Innovative parties’ primary position, in my view the statutory demands should be set aside under s 459J(1)(b) because there is “some other reason” why they should both be set aside.

13    Section 459J provides:

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.

14    Second, I have rejected the Innovative parties’ fall-back arguments that have sought to invoke s 459H(3). It is convenient to set out the full terms of s 459H at this point which provides:

Determination of application where there is a dispute or offsetting claim

(1)    This section applies where, on an application under section 459G, the Court is satisfied of either or both of the following:

(a)    that there is a genuine dispute between the company and the respondent about the existence or amount of a debt to which the demand relates;

(b)    that the company has an offsetting claim.

(2)    The Court must calculate the substantiated amount of the demand in accordance with the formula:

Admitted total — Offsetting total

where:

admitted total means:

(a)    the admitted amount of the debt; or

(b)    the total of the respective admitted amounts of the debts;

as the case requires, to which the demand relates.

offsetting total means:

(a)    if the Court is satisfied that the company has only one offsetting claim—the amount of that claim; or

(b)    if the Court is satisfied that the company has 2 or more offsetting claims—the total of the amounts of those claims; or

(c)    otherwise—a nil amount.

(3)    If the substantiated amount is less than the statutory minimum, the Court must, by order, set aside the demand.

(4)    If the substantiated amount is at least as great as the statutory minimum, the Court may make an order:

(a)    varying the demand as specified in the order; and

(b)    declaring the demand to have had effect, as so varied, as from when the demand was served on the company.

(5)    In this section:

admitted amount, in relation to a debt, means:

(a)    if the Court is satisfied that there is a genuine dispute between the company and the respondent about the existence of the debt—a nil amount; or

(b)    if the Court is satisfied that there is a genuine dispute between the company and the respondent about the amount of the debt—so much of that amount as the Court is satisfied is not the subject of such a dispute; or

(c)    otherwise—the amount of the debt.

offsetting claim means a genuine claim that the company has against the respondent by way of counterclaim, set‑off or cross‑demand (even if it does not arise out of the same transaction or circumstances as a debt to which the demand relates).

respondent means the person who served the demand on the company.

(6)    This section has effect subject to section 459J.

15    Now I accept that absent any order under s 459J(1), I would have made an order in RH Capital’s favour under s 459H(4) varying the statutory demands in each case to back out from the debts demanded the increased indebtedness flowing from the entry into of the variation agreements. And I also accept that with the statutory demands as so varied, there is no “genuine dispute” between RH Capital and each of the Innovative parties as to the existence or amount of the debt(s) to which the statutory demand(s) relate as so varied.

16    Third, in my view the Innovative parties have not established any “offsetting claim” or “offsetting claims” which result in the “substantiated amount” referred to in s 459H(2) cancelling out the debts under the demands (as varied) or such that the “substantiated amount” in each case falls below the statutory minimum.

17    In summary then, the Innovative parties cannot invoke s 459H(3) in relation to such reduced indebtedness and “admitted amount” (s 459H(5)) constituting the “substantiated amount” (s 459H(2)) in each case.

18    But nevertheless I will make orders under s 459J(1)(b) setting aside the statutory demands. And in those circumstances it is not necessary to make any orders under s 459H(4) varying the demands as such orders do not go anywhere given the s 459J(1)(b) orders.

19    Let me give some further background before dealing with the parties’ arguments.

Factual background

20    In relation to Innovative Systems, $2,369,045 was advanced in May 2021 under an initial loan agreement. This loan was advanced to fund the purchase of 3D printers. An additional $11,130,954 was advanced in June 2021, under a variation agreement. This subsequent loan was advanced to fund customs duty and GST payable in order to bring those printers into Australia.

21    In relation to Innovative Technology, $3,158,560 was advanced in May 2021 under an initial loan agreement. This loan was advanced to fund the purchase of 3D printers. An additional $6,341,439 was advanced in June 2021 under a variation agreement. This subsequent loan was advanced to fund customs duty and GST payable in order to bring those printers into Australia.

22    It is not disputed by the Innovative parties that such funds were advanced, although there is a dispute concerning the recoverability of the additional advances in each case.

23    As I have indicated, in March 2023 the Innovative parties by their receivers and managers commenced proceeding VID125/2023 against the director of the Innovative parties, Mr Allan, and other parties. RH Capital is not a plaintiff to that proceeding, and no claim is directly made by RH Capital concerning the indebtedness of the Innovative parties to it.

24    It has been alleged in that proceeding in [15], [17], [27] and [29] of the further amended statement of claim that:

The terms of the Systems Loan Agreement, as amended by the Systems Variation Agreement, included that:

(a)    interest was payable on the outstanding amounts, calculated in accordance with the terms of the Systems Loan Agreement (clause 3 of the Systems Loan Agreement);

(b)    Systems must use any and all funds received from the Australian Taxation Office (ATO) by way of a goods and services tax (GST) refund and duty concessions to repay RH within 24 hours of receipt (clause 6 of the Systems Variation Agreement);

(c)    an event of default occurs under the Systems Loan Agreement if:

(i)    Systems does not comply with any obligation or undertaking under any Security Document (as defined in the Systems Loan Agreement) and, if the non-compliance can be remedied, does not remedy the non-compliance within five Business Days (as defined in the Systems Loan Agreement) (clause 7.1(h) of the Systems Loan Agreement);

(ii)    a representation or warranty made, or taken to be made, by or for Systems in connection with a Security Document (as defined in the Systems Loan Agreement) is found to have been incorrect or misleading when made or taken to be made (clause 7.1(j) of the Systems Loan Agreement); and

(d)    if an event of default occurs under the Systems Loan Agreement, RH may declare at any time by notice to Systems that all monies under the Systems Loan Agreement are either payable on demand or immediately due and payable (clause 7.2(a) of the Systems Loan Agreement).

…

By reason of the terms of the Systems Loan Agreement, as varied by the Systems Variation Agreement, Systems held any and all GST refunds and duty concessions remitted to it by the ATO for and on behalf of and as trustee for RH on terms including that:

(a)    Systems must use any and all GST refunds and duty concessions remitted by the ATO to repay the funds advanced by RH;

(b)    that such funds as remitted by the ATO, must be used by Systems to repay RH within 24 hours of receipt of such funds; and

(c)    that such funds as remitted by the ATO would be held by Systems for and on behalf of RH until such time as Systems paid such funds to RH and/or Systems discharged its indebtedness to RH (Systems Trust).

Particulars

The Systems Trust arises by operation of the express terms of the Systems Loan Agreement as varied by the Systems Variation Agreement and by operation of law.

…

The terms of the Technology Loan Agreement as amended by the Technology Variation Agreement included that:

(a)    interest was payable on the outstanding amounts, calculated in accordance with the terms of the Technology Loan Agreement (clause 3 of the Technology Loan Agreement);

(b)    Technology must use any and all funds received by way of GST refunds and duty concessions to RH within 24 hours of receipt (clause 6 of the Technology Loan Agreement);

(c)    an event of default under the Technology Loan Agreement occurs if:

(i)    Technology does not comply with any obligation or undertaking under any Security Document (as defined in the Technology Loan Agreement) and, if the non-compliance can be remedied, does not remedy the noncompliance within five Business Days (as defined in the Technology Loan Agreement) (clause 7.1(h) of the Technology Loan Agreement);

(ii)    a representation or warranty made, or taken to be made, by or for Technology in connection with a Security Document (as defined in the Technology Loan Agreement) is found to have been incorrect or misleading when made or taken to be made (clause 7.1(j) of the Technology Loan Agreement); and

(d)    if an event of default occurs under the Technology Loan Agreement, RH may declare at any time by notice to Technology that all monies under the Technology Loan Agreement are either payable on demand or immediately due and payable (clause 7.2(a) of the Technology Loan Agreement).

…

By reason of the terms of the Technology Loan Agreement as varied by the Technology Variation Agreement, Technology held any and all GST refunds and duty concessions remitted to it by the ATO for and on behalf of and as trustee for RH on terms including that:

(a)    Technology must use any and all GST refunds and duty concessions remitted by the ATO to repay funds advanced by RH;

(b)    that such funds as remitted by the ATO; must be used by Technology to repay RH within 24 hours of receipt of such funds; and

(c)    that such funds as remitted by the ATO would be held by Technology for and on behalf of RH until such time as Technology paid such funds to RH and/or Technology discharged its indebtedness to RH (Technology Trust).

Particulars

The Technology Trust arises by operation of the express terms of the Technology Loan Agreement as varied by the Technology Variation Agreement and by operation of law.

25    In the context of those allegations, the claims made by the receivers and managers in the names of the Innovative parties include relevantly the following claims.

26    First, claims have been made to the effect that by reason of the terms of the loan agreements (as varied) each of the Innovative parties held any GST refunds and duty concessions remitted to them by the ATO for and on behalf of, and as trustee for, RH Capital.

27    Second, claims have been made to the effect that each of the Innovative parties received a GST refund from the ATO, which refunds were paid to Sterling & Freeman Capital Management Pty Ltd, and not to RH Capital, in breach of the trusts created by the loan agreements (as varied), or which formed part of the secured property for the purposes of the general security deeds granted by each of the Innovative parties in favour of RH Capital.

28    Third, claims have been made that Mr Allan breached his statutory and fiduciary duties as a director of each of the Innovative parties, and that he is accessorily liable for breach of trust, by reason of his allowing, or failing to prevent the Innovative parties from making, those payments.

29    Now those claims are being defended by Mr Allan and the defendants related to him. By the Allan parties’ defences, they admit that funds were advanced under the initial loan agreements, and that those funds were advanced to fund the purchase of 3D printers. Further, as for the variation agreements, by the Allan parties’ defences they admit that the variation agreements were entered into, that funds were advanced under those agreements, and that those funds were advanced to fund customs duty and GST payable in order to bring the printers into Australia and also to provide working capital to the Innovative parties.

30    On 21 October 2024, Mr Allan and each of the Innovative parties, but of course not through and under the control of the receivers and managers, brought a cross-claim in the proceeding against RH Capital, the receivers and managers and others.

31    By the cross-claim, the Allan parties assert that each of the Innovative parties relied on representations made in April 2021 by Mr Giles Karhan, a director of the Australian subsidiary of RH Capital but on behalf of RH Capital in entering into the initial loan agreements, but they do not seek any relief in relation to those initial loan agreements nor do they dispute the indebtedness arising under them.

32    But the Allan parties do seek orders that the variation agreements be set aside by reason of the unconscionable conduct alleged to have been engaged in by RH Capital. It is alleged that RH Capital engaged in unconscionable conduct by requiring as terms of the variation agreements the payment of establishment fees and an obligation that all GST refunds received from the ATO be used to repay RH Capital. Further, it is said that RH Capital engaged in unconscionable conduct by asserting that the dealing with the GST refunds was a breach of the terms of the loan agreements (as varied) and an event of default under the general security deeds, thereby leading to the appointment of receivers and managers to the property of the Innovative parties.

33    The Allan parties also contend that by reason of the unconscionable conduct they have suffered loss and damage. And they seek compensation, although such compensation has not been quantified or particularised beyond heads of damage. Finally, they seek orders for the taking of accounts.

34    There are other claims in the cross-claim made against the receivers and managers and other parties, but it is not necessary to descend into their detail.

Sections 459H(1)(a), (2) and (3) – genuine dispute

35    In terms of the structure of the statutory provisions, I should begin with the issues concerning s 459H.

36    The Innovative parties say that the demands should be set aside given that there is a genuine dispute as to both the existence and amount of the debts to which the demands relate. The Innovative parties say that there is a low threshold as to what constitutes a genuine dispute, and they point out that the factual background underlying the purported debts is presently being litigated in proceeding VID125/2023.

37    They point out that the Innovative parties, on instructions from the receivers and managers, allege in proceeding VID125/2023 the following.

38    Innovative Systems has not repaid any funds advanced by RH Capital under the terms of its loan agreement (as varied). Innovative Technology has not repaid any funds advanced by RH Capital under the terms of its loan agreement (as varied).

39    It is said that Innovative Systems breached the loan agreement (as varied), as well as the general security deed entered into between Innovative Systems and RH Capital. It is said that the making of payments by Mr Allan for and on behalf of Innovative Systems was in breach of the loan agreement (as varied) and constituted a default under the general security deed. Further, it is said that Innovative Technology breached the loan agreement (as varied), as well as the general security deed. It is said that the making of a payment by Mr Allan for and on behalf of Innovative Technology was in breach of the loan agreement (as varied) and constituted a default under the general security deed.

40    Further, they point out that the Innovative parties, this time under the instructions and direction of Mr Allan, seek orders in their cross-claim in that proceeding in relation to the validity, binding operation, and enforceability of the variation agreements underlying the statutory demands made. They also seek a taking of accounts and the making of all necessary inquiries as to the debts secured by the general security deeds.

41    It is said that these factual and legal issues warrant further investigation, and that this justifies the demands being set aside. But with due respect, these submissions are vague and at a level of abstraction that is not helpful.

42    Now as to whether there is a genuine dispute as to the existence of a debt, there must be a bona fide and real dispute concerning a reasonably arguable issue of fact justifying a forensic inquiry, or a reasonably arguable issue of law the ultimate resolution of which in favour of the debtor would undermine the creditor’s foundation for asserting the debt.

43    And it may be accepted that the Court is neither undertaking the process of resolving the merits of that dispute nor weighing or examining where the likely merits may lie. But it is entitled to engage in some evaluative process. Of course, it may be correct to say that the Court will not embark on an extensive inquiry as to the existence of the debt or a genuine dispute as to its existence, but that does not entail that the Court should not critically appraise vague assertions, particularly where such assertions are inconsistent with contemporaneous and unexplained documents, including earlier written admissions made by the debtor.

44    The Court is not bound to accept subjective, vague or argumentative statements as to the genuineness or reality of the dispute. Some objective reality, substance and precision to the existence of the dispute must be shown. Further, to show that the dispute is not frivolous may be to satisfy a necessary condition for showing that there is a genuine dispute, but it is not a sufficient condition for showing a genuine dispute of the type referred to in s 459H(1)(a) or as that concept is used in the definition of “admitted amount” in s 459H(5).

45    I agree with RH Capital that it is plain that there is no genuine dispute with the Innovative parties about the existence or amount of the debts the subject of the advances made under the initial loan agreements, as distinct from the additional advances made under the variation agreements.

46    In proceeding VID125/2023, neither RH Capital nor the receivers and managers seek recovery of the amounts advanced by RH Capital. And there is no genuine dispute that the Innovative parties are indebted to RH Capital in respect of the advances made under the initial loan agreements. Further, although Mr Allan deposes to the Innovative parties having relied on representations made by Mr Karhan on behalf of RH Capital prior to entering into those initial agreements, those matters are not relied upon for the purpose of seeking to set aside or otherwise impugn the initial loan agreements.

47    Generally, the Allan parties do not dispute that the initial loan agreements were entered into, nor that funds were advanced under those agreements. Accordingly, there is no genuine dispute about the existence or amount of the debts the subject of those advances.

48    But in my view there is a genuine dispute about the existence or amount of the debts the subject of the advances made under the variation agreements, which rightly appears to have been accepted by RH Capital.

49    Accordingly, RH Capital seeks an order under s 459H(4) that the statutory demand served by RH Capital on Innovative Systems be varied to $2,369,045, which corresponds with the amount advanced under the initial loan agreement between them.

50    Further, RH Capital seeks an order that the statutory demand served by RH Capital on Innovative Technology be varied to $3,158,560, which corresponds with the amount advanced under the initial loan agreement between them.

51    As I have indicated at the outset, I accept RH Capital’s position on this aspect but will not make an order under s 459H(4) in light of my views concerning the application of s 459J(1)(b) to this case.

Sections 459H(1)(b), (2) and (3) – offsetting claim

52    The Innovative parties also say that the demands should be set aside given that there is an offsetting claim that they each presently have against RH Capital in proceeding VID125/2023 which equals or exceeds the “admitted amount” in each case, which admitted amount is referable to the initial advances in each case, backing out the additional advances under the variation agreements.

53    The Innovative parties say that in proceeding VID125/2023 they each have an offsetting claim against RH Capital seeking an order under s 12GF of the Australian Securities and Investments Commission Act 2001 (Cth) and relief concerning breaches of ss 21 and 22 of the Australian Consumer Law that RH Capital pay compensation to the Innovative parties and Mr Allan referable to the unconscionable conduct alleged.

54    The Innovative parties accept that there must be some evidence to indicate the nature of each offsetting claim and the way in which it is calculated, including any loss which is said to arise. But they say that it is not necessary to particularise each offsetting claim to the last dollar and cent. They say that the evidence need only be sufficient for the Court to make an estimate of the amount of the offsetting claim, which must be capable of being quantified in monetary terms.

55    Now there is no doubt that on the face of s 459H(2), the offsetting claim, whether by way of cross-claim, cross-demand or set off, does not have to arise out of the same circumstances let alone the same transaction as the debt to which the statutory demand relates; see also s 459H(5) that confirms this.

56    But clearly the offsetting claim must be genuine (s 459H(5)), which can be taken at the least to mean that it is advanced in good faith.

57    But the structure of s 459H(2) presupposes and necessarily requires some form of quantification by reference to “the amount of that claim” or “the total of the amounts of those claims”. Indeed the simplistic formula in s 459H(2) “Admitted Total — Offsetting Total” also presupposes and requires this.

58    So there must be some cogent evidence to quantify the “amount” or “the total of the amounts” and so the “Offsetting Total”. There must be sufficient material to enable a prima facie calculation, although it may be sufficient if the supporting affidavit asserts on some identified basis that the offsetting claim exceeds the amount of the debt demanded. But the affidavit should not merely pluck out of the air a fictitious figure. The deponent should set out the basis for the calculation or assertion in order for the Court to be able to determine that it is a genuine and non-fanciful estimate. Now there is usually no difficulty with liquidated sums. But where the offsetting claim involves an unliquidated claim for damages, some realistic estimate must be given whether as to a point estimate, a range, or say an estimate expressed as being not less than the amount of the debt demanded by the creditor. But the bare assertion that “the offsetting claim is for more than the debt demanded” without any cogent statement as to the grounds for that assertion is not in and of itself sufficient. There must be some evidence to indicate the nature of the offsetting claim and the way in which it is calculated, including any loss which is said to arise. But I accept that it is not necessary to particularise the offsetting claim to the last dollar and cent. The evidence need only be sufficient to make an estimate of the amount of the offsetting claim.

59    Now the problem for the Innovative parties is that Mr Allan’s supporting affidavit says nothing of substance about the offsetting claim that even meets the relatively low threshold required. He deposes to the cross-claim made by the Innovative parties against RH Capital in proceeding VID125/2023, and to the orders sought in that proceeding that RH Capital pay compensation to the Innovative parties and himself.

60    The sum total of what Mr Allan said in his affidavit on the topic was the following:

The Plaintiffs have an offsetting claim against RH Capital that is currently also the subject of the Federal Court Proceeding and has requested in the Cross-claim, an order under s 12GF of the ASIC Act, further or alternatively s 23 [sic] of the ACL that RH Capital pay compensation to Systems, Technology and myself.

I verily believe that 3D Systems and 3D Technology have a good claim against the Receivers for loss and damage, these claims are set out in the Cross-claim.

61    I accept that in the statement of cross-claim it is alleged that each of the Innovative parties and Mr Allan suffered loss and damage by reason of unconscionable conduct alleged to have been engaged in by RH Capital. And particulars of loss and damage said to have been suffered by the Innovative parties are given in the form of heads of damage including the loss of their businesses, the loss of the capacity to undertake research and development activities, the loss of opportunities to commercialise products and services identified by or during research and development, the loss of profits from those activities and opportunities, the costs of appointing the receivers and managers, and their increased indebtedness to RH Capital by the accrual of interest charges.

62    But no attempt is made in the notice of cross-claim, the statement of cross-claim or the supporting affidavit to quantify or properly particularise the alleged offsetting claim. And simply referring to or annexing a statement of claim or cross-claim to a supporting affidavit is not sufficient evidence of the existence of an offsetting claim or its quantum.

63    The Innovative parties have not made out in my view any “offsetting claim(s)” such as to ultimately warrant a s 459H(3) order.

Section 459J(1)(b) – some other reason why the demands should be set aside

64    The primary ground on which the Innovative parties seek to set aside the statutory demands is under s 459J(1)(b), on the basis that the statutory demands are an abuse of process because they are being used improperly to obtain a collateral advantage. Section 459J(1)(b) permits the Court to set aside a statutory demand where there is “some other reason” for it to do so.

65    The Innovative parties accept that RH Capital is not a plaintiff in proceeding VID125/2023, and that RH Capital does not seek recovery in that proceeding of the debts the subject of the statutory demands. But they emphasise that since 21 October 2024, RH Capital has been the third cross-respondent in that proceeding. Further, the loan agreements and variation agreements asserted to underpin the statutory demands are the subject of specific allegations in that proceeding. Further, there is a cross-claim for loss suffered that is or is likely to exceed the amount of the debts, backing out the additional advances.

66    Now RH Capital accepts that it will likely be an abuse of process for a party to invoke the statutory demand procedure if at the same time it sues for the relevant debt in another proceeding. But it says that three features of proceeding VID125/2023 relevantly distinguish it. First, by that proceeding the receivers do not seek recovery of the asserted debts that are the subject of the statutory demands. Second, the Innovative parties do not seek to set aside the initial loan agreements. Third, the debts arising under the initial loan agreements are not in dispute.

67    And RH Capital says that although it is accepted that the debts arising under the variation agreements are disputed, there is no dispute concerning the existence or amount of the debts arising under the initial loan agreements. Accordingly, RH Capital says that at least to the extent of the debts arising under the initial loan agreements, there is no abuse of process.

68    Further, RH Capital says that in the circumstances any delay in it seeking to obtain payment of debts which are not disputed cannot, without more, amount to an abuse of process. Further, it says that the relatively advanced stage of proceeding VID125/2023 does not speak to the statutory demands being an abuse of process.

69    Now the Innovative parties say that the only inference which can be drawn is that RH Capital did not issue the demands for the purposes for which Pt 5.4 of the Act exists. They contend that RH Capital issued the demands in an attempt to either receive payment despite the dispute raised in proceeding VID125/2023 or to wind-up the Innovative parties so as to bring an end to that proceeding.

70    As to the first asserted collateral purpose, RH Capital says that at least to the extent that the statutory demands seek payment of the debts arising under the initial loan agreements to which there is no dispute, that is a legitimate purpose sought to be achieved by the demands.

71    As to the second asserted collateral purpose, RH Capital says that the evidence does not permit an inference to be drawn that the purpose of the demands was to wind up the Innovative parties and to bring to an end proceeding VID125/2023. It says that a winding up order would only mean that the proceeding against the Innovative parties would be stayed, but such an order would not bring that proceeding including the Innovative parties’ cross-claim to an end. First, a liquidator may well elect to continue the Innovative parties’ cross-claim. Second, if a liquidator elected not to, Mr Allan would have standing to apply for leave to derivatively bring or continue the proceeding under the Court’s inherent jurisdiction.

72    I should interpolate here that Part 2F.1A of the Act does not apply to companies in liquidation. But the Court has inherent jurisdiction to grant derivative leave for an appropriate person to bring a proceeding on behalf of a company in liquidation. This is not a remote proposition given that Mr Allan has purportedly brought the cross-claim on behalf of the Innovative parties in what he alleged is his residual power as a director and in respect of which he has given security for costs. I should also note for completeness that I am not here talking about the “right of a person at general law” within the meaning of s 236(3), and in any event s 236 is within Part 2F.1A that does not apply to companies in liquidation.

Analysis

73    The power in s 459J(1)(b) is broad and is not confined to traditional categories such as abuse of process, although such concepts may by analogy apply. But although the discretionary power is broad it is not unlimited, and its exercise must conform to the statutory purpose for which the power was conferred.

74    Now as I have said, one dimension that might justify the exercise of this power is where there was a scenario analogous to an abuse of process, even though s 459J(1)(b) is not so limited.

75    In Accordent Pty Ltd v RMBL Investments Ltd (2009) 105 SASR 62, Doyle CJ (Bleby and Kelly JJ agreeing) said that (at [55] to [57]):

I accept that the power conferred on the court by s 459J(1)(b) of the CA is widely expressed. No doubt the power is to be exercised taking into account the purposes of Pt 5.4 of the CA. However, on an application to set aside a statutory demand it may be that the concept of an abuse of process is relevant only by way of analogy. A creditor who serves a statutory demand does not invoke the process of a court. A debtor who applies to have a statutory demand set aside does invoke the process and powers of a court, but whether in that setting it is appropriate to speak of an abuse of process by the creditor is another thing. A court that considers an application under s 459J(1)(b) must also be careful not to allow the ordinary incidents of the service of a statutory demand, which might sometimes seem to operate harshly, to become a basis for setting aside a statutory demand. Care is also called for in using the notion of “pressure” to recover a debt, because there is no doubt that the service of a statutory demand will put pressure on a debtor company.

Of course, on an application by the creditor to wind up the debtor, the concept of abuse of process is relevant, but once again it is necessary for the court to recognise the manner in which the statutory regime relating to statutory demands operates.

Be that as it may, I accept that the concept of impropriety of purpose may be relevant to the application of s 459J(1)(b).

76    In Diakou v Yeo (liquidator) [2026] FCA 896 in discussing the various dimensions of abuse of process, which is not simply focused on propriety of purpose, I said (at [156]):

[The] concept of abuse of process covers various classes of cases including, first, the case where the Court’s processes are being used or invoked for a predominantly improper or collateral purpose, second, where the Court’s processes are being used or invoked in a manner that is unfairly or disproportionately oppressive on one of the parties and, third, where the Court’s processes are being used or invoked in a manner directly or indirectly inconsistent with or amounts to an interference with the proper administration of justice. There are no bright lines between these categories, although each category does to some extent have its own independent sphere of operation.

77    Clearly in the present context, only the first and second classes of case would be potentially relevant to the giving of a statutory demand. Moreover, one must be careful of using the label of abuse of process. The service of a statutory demand itself is not a legal proceeding, although if there is another legal proceeding on foot between the same creditor and debtor or their privies concerning the same debt the subject matter of the statutory demand, then the act of such service might involve an abuse of or in the context of that other proceeding. Further, no abuse of process is constituted simply by asserting that there are duplicated processes involving the same subject matter, that is, the underlying debt, in terms of the statutory process for giving the demand and the separate legal proceeding. If Barrett AJA in Re Zarzar Pty. Ltd. [2017] NSWSC 93 at [22] is to be taken as saying anything different, then with respect I disagree.

78    Further, and to be clear, in my view there could be two perfectly legitimate purposes for serving a statutory demand.

79    First, one legitimate purpose could be to trigger the presumption of insolvency (s 459C(2)(a)) as a step or means to facilitate a winding up application and to obtain a winding up order.

80    Second, another legitimate purpose could simply be to endeavour to have the debt paid. After all, the relevant instrument is a demand for payment; that is how the statute describes it (s 459E(2)(c)), and it is not using this as a fictional concept. There is nothing wrong with using the statutory demand to achieve payment, with the secondary objective being to create the presumption of insolvency if the debt is not paid. If that all puts pressure on the debtor, which is obviously foreseeable and no doubt partly intentional, so be it.

81    Third, what about the scenario where the creditor has issued a legal proceeding to recover the debt, which is contested, and then the creditor/plaintiff issues a statutory demand? You may then get closer to an abuse of process type scenario, particularly in the second type of case that I referred to in Diakou, with perhaps a scintilla of an argument under the first type of case that I there discussed. The inefficiency, additional expense and pressure being placed on the debtor may be oppressive to it, and so fitting within the second class at least.

82    But even if it be said that serving a statutory demand for the predominant purpose of bringing pressure to bear on a corporate debtor to pay a debt, instead of the predominant purpose of invoking the statutory presumption of insolvency on which to base a winding up application, is an improper purpose, that is not this case. The Innovative parties are in receivership, and clearly this could not be the purpose of RH Capital given that the receivers control and can realise the assets of the Innovative parties.

83    Let me state some other propositions.

84    First, duplicative proceedings arising from the service of a statutory demand may provide the basis for an order under s 459J(1)(b), without one necessarily having to describe or characterise the proceedings as an abuse of process or oppressive to achieve a favourable exercise of power.

85    Second, s 459J(1)(b) may be utilised where it was clear to the creditor at the time of making the demand that a substantial part of the debt the subject of the demand was genuinely disputed, although usually other aspects of the legislative regime are designed to address such a scenario more directly.

86    Third, to utilise s 459J(1)(b), the debtor does not need to show bad faith on the part of the creditor in giving the statutory demand.

87    Fourth, the debtor to invoke s 459J(1)(b) does not need to establish substantial injustice to it if the demand was not set aside; such a requirement is only stipulated in s 459J(1)(a).

88    Generally, there are many and varied circumstances under which s 459J(1)(b) can be utilised, and there are no closed categories or exhaustive circumstances which define its boundaries and content. Clearly, the exercise of power under s 459J(1)(b) will very much depend on the context and the particular circumstances before the Court.

89    Now it seems to me that a lot of time could be wasted by discussing abuse of process type scenarios or seeking to shoe-horn the present case into such categories. But such a categorisation is inapposite in the present context.

90    First, the statutory demands are not being used improperly to achieve payment, particularly as the receivers appointed to the Innovative parties have control of the assets.

91    Second, it would seem that RH Capital’s objective is to wind up the Innovative parties using the presumption of insolvency established by the non-payment of the statutory demands. But that objective in and of itself is quite legitimate. And further, there are in any event other relatively straight-forward ways for RH Capital or the receivers to proceed to endeavour to wind up the companies, without the need for the presumption of insolvency arising from non-payment under the statutory demands. After all, one does not simply need to rely on the s 459C(2)(a) scenario. There are other limbs of s 459C(2) that could be utilised such as s 459C(2)(c). It was not suggested to me that the general security deeds did not give rise to circulating security interests.

92    But why is RH Capital doing this now? And what does it hope to achieve? Does it consider that any liquidator will somehow bring the defence or the cross-claim in the other proceeding to an end? But that is unlikely given the other Allan parties’ involvement. Moreover, the liquidator could get a free ride on their coat-tails in terms of letting them proceed with funding the defence and cross-claim and taking some of the fruits (if any) from that proceeding if they were successful.

93    In my view, in terms of finding “some other reason” under s 459J(1)(b), it seems to me that this is constituted not so much by an abuse of process type characterisation but rather by the combination of the following factors.

94    First, proceeding VID125/2023 between the parties deals with, at the least, substantially overlapping issues. Further, the proceeding is advanced. Amended pleadings have been filed, discovery has been completed by most parties, and orders providing for lay and expert evidence have been timetabled.

95    Second, RH Capital has substantially delayed serving these statutory demands after that proceeding was issued, without any convincing explanation for that delay.

96    Third, RH Capital has not been fully transparent as to why it has served these statutory demands now and what benefit it hopes to achieve.

97    Fourth, RH Capital suffers no prejudice whatsoever if I set aside the statutory demands. Further, if it is concerned about time limits expiring for the operation of statutory claw-back provisions, voidable transactions or voidable preference transactions under any potential future winding up scenario, it can protect that risk through other means in terms of lodging winding-up applications; whether they would be temporarily stayed now given the current legal proceeding on foot is of course another matter, but at least the position would be protected.

98    Fifth, in my view the service of these statutory demands is disruptive of the current legal proceeding and the Allan parties’ position as litigants thereunder.

Conclusion

99    For the foregoing reasons I will set aside each of the statutory demands under s 459J(1)(b). And in the circumstances there is no utility in amending the statutory demands under s 459H(4). Further, I should note that RH Capital has not sought the imposition of any conditions under s 459M.

100    As to costs, RH Capital should pay the Innovative parties’ costs pursuant to s 459N, but there is no basis to make any indemnity costs order which was a possibility floated by the applicants.

Associate:

Dated:    17 July 2026