In the matter of AA Management Co Pty Limited

1. [1]

   HER HONOUR: This is an application under section 459G of the Corporations Act 2001 (Cth) by eight companies to set aside statutory demands served by the defendant, Gabriel Apostolakis. Each of the companies is a family company of the Apostolakis (or Akis) family in which Constantine (Con) and Mary are parents and Gabriel, Andrew and Emmanuel are their sons. Without any disrespect to the family members, I will refer to them by their Christian names. The applications to set aside the statutory demands are brought on the basis of a genuine dispute as to the existence of the debt, an offsetting claim and “for some other reason” under section 459J(1)(b) of the Act. This is one of four proceedings concerning Gabriel and his family members and companies. It is apparent that there is a bitter dispute between well-resourced and sophisticated.

2. [2]

   In 1979, Cabek Pty Limited was incorporated and, in 1984, Nation-Wide Incorporated Co Pty Limited was incorporated. Con and Mary are directors and shareholders of both companies. Cabek is the registered proprietor of Con and Mary’s home. Nation-Wide is the trustee for the Apostolakis Family Trust and owned a property in Ultimo.

3. [3]

   In 2004, four companies were incorporated involving the parents and the sons.

4. [4]

   In 2007, Gabriel bought an apartment in Randwick for $600,000. The purchase was funded by Nation-Wide, which provided $200,000 towards the purchase and stamp duty, $135,000 for fit-out, furniture and appliances, and the balance funded by a loan from National Australia Bank to Nation-Wide which it repaid over time. Gabriel lived in the apartment with his then fiancée. Con also paid Gabriel’s living expenses from time to time, for example, by arranging to pay Gabriel’s credit card debts totalling some $75,000. In 2008, Gabriel married.

5. [5]

   In May 2009, Nation-Wide entered into a contract to sell the Ultimo property for $11.5 million plus GST. Gabriel, who is qualified in construction management and property, says he worked on, and was paid for, obtaining development approval, a construction certificate and preparing marketing materials in respect of the Ultimo property. In May 2009, Gabriel also entered into a contract to sell the Randwick apartment for $750,000.

6. [6]

   In June 2009, GA Management entered into a contract to purchase a property in Kogarah Bay for $877,000. Gabriel says that he was in the process of writing out a cheque for the deposit of $87,700 from GA Management’s bank account but was told by the bank manager that there were insufficient funds in the account to honour the cheque. Gabriel called Con who said he could take the money out of his account and Gabriel did so, withdrawing $90,000. These monies were used to pay the deposit. Con deposed that the cheque butt for the 11 June 2009 cheque was written on his and Mary’s personal account to GA Management and was in Gabriel’s handwriting, not his; the cheque was cashed and the monies came from Con and Mary’s bank account, not as a gift, but as a loan to GA Management. Indeed, the details recorded on the cheque butt were “Loan to GA Management (deposit for Kogarah Bay)”.

7. [7]

   In the general ledger of the Gabriel Apostolakis Family Trust, $90,000 was credited to Gabriel’s loan account. Gabriel says that the entry was made “because it was treated as a gift from my father to me in the ledger”. It was not readily apparent to me why this was so, either according to generally accepted accounting principles or anything which Con said to Gabriel, as described by Gabriel in his affidavit in the first proceedings commenced in the Corporations List in 2018 (2018 Corporations List proceedings). The general ledger is difficult to follow. Payment of wages, distributions and loans to Gabriel increased the loan account balance, whilst one would ordinarily expect such payments to reduce any monies owed by the Gabriel Apostolakis Family Trust to him. In any event, as at 30 June 2009, the balance sheet of the Gabriel Apostolakis Family Trust recorded current liabilities as including “Loans – Related Parties” of $180,445.45, which was the balance of Gabriel’s loan account. The “Related Parties” were not identified in the financial statements. If the general ledger recorded monies owed by the Gabriel Apostolakis Family Trust to Gabriel, then it would make more sense if the “Loans – Related Parties” item appeared in the assets section of the balance sheet rather than the liabilities section.

8. [8]

   On 19 June 2009, Nation-Wide completed the sale of the Ultimo property and received net proceeds of some $6 million. On 10 July 2009, sale of the Randwick apartment also completed. The net proceeds of sale, being some $166,000, were paid by bank cheque to GA Management. This was on Gabriel’s instructions, which he says he gave as he did not have a bank account himself. A credit entry was made to Gabriel’s loan account with the Gabriel Apostolakis Family Trust, increasing the loan balance to $349,754.

9. [9]

   On 15 July 2009, a further $610,000 was credited to Gabriel’s loan account with the Gabriel Apostolakis Family Trust. The funds came from Nation-Wide. Gabriel says the loan was credited in this way “because it was treated as a gift to me from my father in the ledger”. On 20 July 2009, GA Management completed its purchase of the Kogarah Bay property using the proceeds of sale of the Randwick apartment together with the $610,000. That is, the funds to buy the Kogarah Bay property came from Nation-Wide, either directly or indirectly.

10. [10]

    On 17 September 2009, 6 October 2009 and 13 October 2009, Nation-Wide provided $5,000, $10,000 and $40,000 to GA Management to meet various costs associated with the purchase of the Kogarah Bay property. These amounts were credited to Gabriel’s loan account with the Gabriel Apostolakis Family Trust, according to Gabriel, “because they were treated as gifts to me by my father”. Con deposed that the payments were loans, not gifts, and attached bank statements which recorded, at least in respect of the second and third payments, that the payments were described as “Loan to Ga”. There was no bank statement in evidence for the first payment.

11. [11]

    In about November 2009, Gabriel says that Con gave each of his sons a gift of $1.5 million from the money made on the Ultimo property. The gift was to take into account amounts which had already been paid on behalf of the sons and, in Gabriel’s case, he said the gift would take the form of a repayment of his “debts” to Nation-Wide, where the quotation marks are those of Gabriel. The amount payable to Gabriel, taking into account these “debts” was some $355,000, which was credited to Gabriel’s loan account with the Gabriel Apostolakis Family Trust on 13 November 2009. In the 2018 Corporations List proceedings, the former family solicitor Tracey O’Neill and family accountant Dean Wilcock deposed that they had attended separate meetings with Con where he had said he wanted to make such a gift. Con denied that the monies were a gift but a loan, said he did not author emails sent to his sons on 12 November 2009 in respect of a gift to each of them, and did not say the words attributed to him by Mr Wilcock.

12. [12]

    In late 2009, Gabriel knocked down the dwelling on the Kogarah Bay property and built a new one. The cost of construction was some $475,000. Gabriel and his wife lived at his parents’ home whilst construction works were carried out. They moved back in in about May 2010. During this period, further sums were credited to Gabriel’s loan account with the Gabriel Apostolakis Family Trust including $254,000 on 18 December 2009, $80,000 on 23 March 2010, $50,000 on 7 April 2010 and $70,000 on 20 May 2010 being sums, as I understand it, for the construction works. Gabriel says he met the cost of the construction works “from the balance of the gift that was provided by my father”. However, these monies were provided after Con had apparently paid the balance of the gift of $1.5 million on 13 November 2009 and so this may not necessarily follow.

13. [13]

    Gabriel did not obtain an occupation certificate for the new house. At the time (and today), section 109M(2) of the Environmental Planning and Assessment Act 1979 (NSW) provided:

14. [14]

    By 30 June 2010, Gabriel’s loan account with the Gabriel Apostolakis Family Trust stood at $1,797,195.36. Gabriel understood that this recorded monies owed by GA Management to him as “each time a payment was provided by Nation-Wide, it was recorded as a drawing by my father from his loan account with Nation-Wide and gifted to me, which he then lent to his trust”. I found this difficult to follow. Gabriel’s loan account seems to have recorded the monies provided to him by other family companies or members. The fact that it was recorded as a liability of the Gabriel Apostolakis Family Trust suggests a recognition by the trust that it was obliged to repay the related parties who had provided the funds, being those family companies or members.

15. [15]

    In the 2018 Corporations List proceedings, Mr Wilcock, deposed that he made the ledger entries based on bank account statements provided to him. In respect of the deposit of $166,000 made on 10 July 2009, Gabriel instructed the accountant that the deposit was the proceeds of sale of his Randwick apartment deposited to the GA Management bank account as he did not have a personal bank account. Gabriel does not appear to have informed the accountant that the Randwick apartment had been paid for by Nation-Wide and the accountant appears to have proceeded on the basis that Gabriel was entitled to treat the net proceeds of sale as his own. In respect of later credits made to Gabriel’s loan account by the accountant in July, October and November 2009, Mr Wilcock cannot recall who instructed him to credit the payments in this way but considered that the treatment as a credit to the loan account was consistent with Con having made a gift of $1.5 million to Gabriel from the proceeds of sale of the Ultimo property. That may be right, although it would not explain later credits, and the gift is also disputed by Con. In any event, the financial statements for the Gabriel Apostolakis Family Trust for subsequent financial years continued to record a liability for loans from unspecified related parties of $1.8 million in 2011, decreasing to $1.5 million in 2015.

16. [16]

    In 2014, CG Investment Corporation Pty Limited was incorporated. CG Investment is the trustee of the Apostolakis Group Trust. CG Investment acquired a property in Roselands. Con, Gabriel and Andrew were directors and shareholders at various times. In 2015, Creta Constructions Pty Limited was incorporated. Creta Constructions is the trustee of the Akis Group Investment Trust. Con, Mary and Gabriel were directors at various times. Con and Mary are shareholders.

Falling out

1. [17]

   In about May 2017, Gabriel fell out with his father, apparently because shares in CG Investment were issued to Sebavo without Gabriel’s knowledge or approval and a caveat was lodged over the Roselands property in respect of a loan from Sebavo to CG Investment of $2.5 million. Gabriel accused his father of engaging in conduct tantamount to fraud and threatened legal proceedings.

2. [18]

   A change of accountants ensued and financial statement prepared by the new accountants for the Gabriel Apostolakis Family Trust for the year ended 30 June 2017 bore a different description of related party loans, from the previous treatment of recording a current liability as:

3. [19]

   In February 2018, a meeting of directors of GA Management is said to have taken place at which discussion took place as to the repayment of an outstanding debt to Sebavo, the provision of security requested by Sebavo and sale of the Kogarah Bay property. It was resolved to renovate the Kogarah Bay property and place it on the market for sale by no later than 30 June 2018, to allow Sebavo to register a caveat on the property in respect of $2.5 million in borrowings and to issue 200 shares in GA Management to Sebavo. Gabriel says he knew nothing about this meeting. A caveat was lodged over the Kogarah Bay property by Sebavo in respect of cash advances and loans made by it to GA Management of $2.5 million. Gabriel says he was unaware of the caveat at the time.

4. [20]

   In April 2018, Con, Andrew and Emmanuel executed a deed of removal of GA Management as trustee of the Gabriel Apostolakis Family Trust. Creta Constructions was appointed in its stead. Gabriel says he was not aware of this at the time.

5. [21]

   In May 2018, discussions ensued between Con and Gabriel to negotiate his exit from the Apostolakis group. Several drafts of proposed heads of agreement were exchanged. In June 2018, however, Con advised that he needed to review and assess the financial position given a number of issues which had arisen since negotiations began in respect of the expected completion date and sale price of various developments and changing market conditions.

6. [22]

   On 19 June 2018, Con lodged a Form 484 with the Australian Investments and Securities Commission (ASIC) recording the issue of shares in GA Management to Sebavo. Gabriel became aware of this soon after, as well as the caveat and, on 23 June 2018, availed himself of his continuing access to his Sebavo Microsoft Outlook account and saw that his father had recently scanned a number of documents concerning the Gabriel Apostolakis Family Trust, minutes of meeting of GA Management and promissory notes issued by Sebavo to GA Management in respect of amounts earlier credited to Gabriel’s loan account with the Gabriel Apostolakis Family Trust. Gabriel was not previously aware of these documents. Gabriel issued a notice of meeting of GA Management to his parents proposing to remove them as directors of the company and to resolve that the Form 484 lodged with the ASIC in respect of the issue of shares to Sebavo was invalid.

2018 Corporations List proceedings

1. [23]

   On 28 June 2018, Gabriel commenced proceedings before the Duty Judge in the Corporations List against GA Management, his parents, Sebavo and Creta Constructions for breaches of director’s duty and oppression. Inter alia Gabriel sought declaratory relief that:

2. [24]

   On 4 July 2018, Con retained solicitors. On 5 July 2018, Con’s solicitor emailed the Associate to Ward CJ in Eq noting that, having reviewed the evidence, he had concerns regarding their ability to file evidence and properly respond to the evidence filed by 9 July 2018, and orders were made by consent to extend the time to do so. In parallel, settlement discussions resumed between the parties and further amendments were made to the heads of agreement which had previously been in circulation. In particular, Gabriel requested the insertion of a clause 3:

3. [25]

   On 10 July 2018, Gabriel’s solicitor served an affidavit of Mr Wilcock and on 12 July 2018 a further extension was sought and obtained by consent from the Court to enable Con to properly consider and respond to Gabriel’s evidence.

Deed of settlement

1. [26]

   On 19 July 2018, Con, Mary, Gabriel, Andrew, Emmanuel and each of the plaintiffs executed a “Deed of Settlement”. The companies, trusts and individuals, other than Gabriel, that were parties to the Deed were described in the Deed as the “Consortium”. Pursuant to clause 1, the Consortium jointly agreed to pay Gabriel $950,000 as follows:

2. [27]

   In respect of the payment of $850,000, clause 3 provided:

3. [28]

   Clauses 4 to 14 dealt with the sale of the Kogarah Bay property. Gabriel agreed to refurbish the property within five weeks and then vacate it. Sebavo agreed to pay reasonable refurbishment expenses up to $50,000. GA Management agreed to then do all things necessary to sell the property. Gabriel was entitled to stay in the property until the earlier of settlement of the sale of the property, six months after the date of the Deed or upon the payments being made in full and the motor vehicle being transferred to him. Sebavo agreed to pay up to $20,000 for Gabriel’s relocation expenses from the Kogarah Bay property. Con and Mary agreed to pay Gabriel $1,000 a week after vacating the Kogarah Bay property until the $950,000 was paid, to be applied to rent or interest repayments on a new property. Sebavo agreed to remove its caveat on the Kogarah Bay property and GA Management agreed that Gabriel was entitled to place a caveat over the property until the Consortium had completed performance of their obligations under the Deed. Further, the Deed provided:

4. [29]

   Also on 19 July 2018, Sebavo, Con and 301 Alison Road Coogee Pty Limited entered into a Share Sale Agreement with Zoran Gajic Pty Limited to sell the shares of 301 Allison Road Coogee to Zoran Gajic for $2.5 million, with completion to take place on 30 November 2018.

5. [30]

   On 24 July 2018, the 2018 Corporations List proceedings were dismissed with no order as to costs and existing undertakings were vacated. Gabriel ceased to be a director and shareholder of GA Management and his shares were transferred to Creta Constructions.

Efforts to sell Kogarah Bay

1. [31]

   In September 2018, GA Management entered into an agency agreement with McGraths to sell the Kogarah Bay property for around $2.99 million. On 3 October 2018, Gabriel and Con signed a variation of the Deed of Settlement under which Sebavo retained Gabriel as project manager to complete the refurbishment works of the Kogarah Bay property for $50,000. GA Management agreed to do all things reasonably necessary to effect the sale of the property and the parties agreed that the property would be sold regardless of whether the building work was completed.

2. [32]

   In early October 2018, Con applied to the ANZ Bank to refinance the National Australia Bank loan facility. In November 2018, CG Investment entered into an agency agreement to sell its property in Roselands. On 24 November 2018, an auction for the Kogarah Bay property was to take place but there were no bids. The property was then listed for sale at $2.59 million. On 30 November 2018, the Share Sale Agreement was completed but the proceeds of sale were not available to pay Gabriel as they went to the National Australia Bank. In January 2019, application was made to St George Bank to refinance the National Australia Bank loan facility.

3. [33]

   On 15 January 2019, Gabriel served a statutory demand on Sebavo for $30,000, being the balance owing to him to refurbish the Kogarah Bay property. The amount was paid on 12 February 2019. On 19 February 2019, an auction took place for the Roselands property. There was one bid for $1.9 million, which was not accepted.

4. [34]

   On 22 February 2019, Gabriel’s solicitor wrote to Con’s solicitor noting that the date for payment under the Deed of Settlement was approaching; the family’s efforts to sell the Kogarah Bay property, with a re-scheduled auction to take place on 27 May 2019, would not result in payment to Gabriel by 31 March 2019. Gabriel was said to have entered into a contract to purchase another property and thus required payment when due. On 23 February 2019, GA Management entered into an agency agreement with a new real estate agent for the sale of the Kogarah Bay property.

What loan account?

1. [35]

   On 7 March 2019, Con’s solicitor replied:

2. [36]

   On 11 March 2019, Gabriel’s solicitor declined to provide the requested documentation on the basis that the existence of the loan account was a central issue in the 2018 Corporations List proceedings and the Deed of Settlement was entered into in settlement of inter alia that issue. On 15 March 2019, Con’s solicitor did not accept this and noted that the affidavits filed in the 2018 Corporations List proceedings did not provide sufficient information as to the existence or nature of the alleged loan account:

3. [37]

   On 19 March 2019, Gabriel’s solicitors replied, perhaps unhelpfully suggesting that Gabriel was of the view that his father had acted fraudulently in causing the record of Gabriel’s loan in the books and records of GA Management to be expunged and for a debt to Akis Investment Trust to be recorded in its stead. The suggestion that the Consortium had been misled by a representation about the loan account into entering into the Deed of Settlement was described as extraordinary and without merit. Gabriel relied upon the concession as to the existence of the loan account said to arise from the Consortium’s execution of the Deed of Settlement, after being served with Gabriel’s affidavits and with the benefit of legal advice. Gabriel was said to have provided real value for the payments to be made under the Deed. The letter was inflammatory and unhelpful, as was Gabriel’s refusal to provide any documents to assuage the Consortium’s concern as to the existence of a loan from Gabriel to the Gabriel Apostolakis Family Trust.

4. [38]

   On 20 March 2019, CG Investment executed an agency agreement with a new real estate agent for the sale of the Roselands property and, on 21 March 2019, received an offer on the property for $2.25 million which was accepted but fell through. On 22 March 2019, Con’s solicitors replied to Gabriel’s solicitor:

Occupation certificate

1. [39]

   On 27 March 2019, a second auction was held for the Kogarah Bay property. There were no bids. On 28 March 2019, Con’s solicitor wrote to Gabriel’s solicitor:

2. [40]

   On 31 March 2019, the Consortium did not pay $950,000 to Gabriel. On 1 April 2019, Gabriel issued statutory demands to AA Management, EA Management, GA Management, Cabek, CG Investment Corporation, Creta Constructions, Nation-Wide and Sebavo. On 3 April 2019, Con’s solicitor wrote advising that there was a genuine dispute, in particular, as to the nature of the debt claimed given that Gabriel asserted it comprised repayment of a loan but the Consortium was concerned that no documents evidenced such a loan and Gabriel had failed to verify it despite request. In any event, the Consortium offered to pay Gabriel $960,000 by 30 June 2019 to secure or compound the debt, without accepting that there was any loan in existence. Gabriel was invited to withdraw the statutory demands.

3. [41]

   On 3 April 2019, Gabriel commenced proceedings against his parents, brothers and Sebavo seeking judgment for $950,000 and the transfer of the Mercedes, seeking to enforce, effectively, the Deed of Settlement (2019 Equity proceedings).

4. [42]

   On 8 April 2019, CG Investment received two offers on the Roselands property, the higher of which was accepted but fell through. On 9 April 2019, the Consortium’s solicitors wrote to Gabriel’s solicitor, noting that Gabriel was in charge of the construction of the dwelling at the Kogarah Bay property and should have obtained an occupation certificate:

5. [43]

   On 9 April 2019, the real estate agent engaged to sell the Kogarah Bay property wrote to GA Management advising that they had several parties interested in the property but none were willing to commit to purchase until they had been provided with an occupation certificate. On 11 April 2019, CG Investment received a further offer on the Roselands property which was accepted and contracts were exchange with settlement on 31 July 2019.

These proceedings

1. [44]

   On 18 April 2019, these proceedings were commenced. In an affidavit in support of the application, Con described the 2018 Corporations List proceedings and attached the Originating Process, Gabriel’s affidavit in those proceedings and the Deed of Settlement. Con referred to the “best endeavours” clause of the Deed and set out the efforts which had been made by the Consortium to raise the $950,000 to pay Gabriel, being to refinance the National Australia Bank facility, sell the Kogarah Bay property and sell other properties owned by members of the Consortium. Con also referred to representations made by Gabriel before entering into the Deed that there was a loan from Gabriel to the Gabriel Apostolakis Family Trust and that the amount of $850,000 payable under the Deed was in repayment of that loan. Con said that the Consortium relied on the representation when executing the Deed but, since then, had not been able to find any documents recording or evidencing any amounts payable to Gabriel by the Gabriel Apostolakis Family Trust or any loan from Gabriel to the Gabriel Apostolakis Family Trust. Further, Con referred to the fact that Gabriel did not tell the Consortium that there was no occupation certificate for the Kogarah Bay property at the time that the Deed was executed. The Consortium was said to be relying on funds from the sale of the property to pay Gabriel and the lack of an occupation certificate had meant that interested purchasers are not willing to buy the property.

2. [45]

   On 1 May 2019, a defence was filed in the 2019 Equity proceedings, including:

3. [46]

   On 11 and 12 June 2019, Con swore two further affidavits, being outside the 21 days referred to in section 459G. On 13 June 2019, the plaintiffs’ applications were heard. The plaintiffs gave an undertaking to file a cross-claim in the 2019 Equity proceedings alleging the matters relied upon in these proceedings as to the existence of a genuine dispute or an offsetting claim.

4. [47]

   On 30 July 2019, GA Management commenced proceedings against Gabriel before the Duty Judge, Lindsay J, seeking withdrawal of a caveat over the Kogarah Bay property on terms that the monies owing to Gabriel be paid into Court from the imminent settlement of the Roselands property (Caveat proceedings). On 2 August 2019, Gabriel filed a motion seeking leave to make further submissions in these proceedings as to whether an occupation certificate was required for the Kogarah Bay property and the matter was listed before me for further directions on 5 August 2019 in respect of all three proceedings then on foot. On 9 August 2019, the plaintiffs filed a cross-claim in the 2019 Equity proceedings consistently with the undertaking given in the hearing of these proceedings.

5. [48]

   On 15 August 2019, by consent, Gabriel withdrew his caveat over the Kogarah Bay property on payment by GM Management of $1.05 million into Court and GA Management’s agreement to transfer the Mercedes within seven days. The Court noted GA Management’s undertaking to withdraw the Kogarah Bay property from sale, to not sell the property, and to allow Gabriel to live in it until resolution of these proceedings and the 2019 Equity proceedings by judgment. In the event that there is an offer to buy the property, which Gabriel agrees should be accepted, then GA Management also undertook to pay 50% of the proceeds of sale over $3 million into Court. The Caveat proceedings were thus resolved. The 2019 Equity proceedings remain on foot.

6. [49]

   Section 459G(2) of the Corporations Act provides that an application to set aside a statutory demand may only be made within 21 days after the demand is served, and section 459G(3)(a) provides:

7. [50]

   In The MCF Group Pty Ltd v G.J.B. Legal Pty Ltd trading as Byles Anjos Lawyers [2019] NSWSC 333, I reviewed the authorities on the extent to which affidavits served after the 21 days can expand upon or propound further disputes or offsetting claims which may not have been readily apparent from the “supporting affidavit”. In short, the affidavit filed within 21 days must raise the grounds on which the applicant seeks to have the demand set aside either expressly, or by inference from the affidavit or documents annexed to it: Hansmar Investments Pty Ltd v Perpetual Trustee Co Ltd (2007) 61 ACSR 321; [2007] NSWSC 103 at [34] per White J. As Ward J explained in Hopetoun Kembla Investments Pty Ltd v JPR Legal Pty Ltd (2011) 87 ACSR 1; NSWSC 1343 at [36] (citations omitted):

8. [51]

   In Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (in liquidation) [2015] VSCA 330, the Court noted the following learned observations:

9. [52]

   Gabriel objected to Con’s evidence in his second affidavit that, when the Deed was executed, the defendants in the 2018 Corporations List proceedings had been focussing attention on attempting to resolve the dispute with Gabriel and the Consortium had not properly reviewed the affidavits of Gabriel, Ms O’Neil or Mr Wilcock or the exhibits. Having now done so, Con said that he did not write or send the emails of 12 November 2009 to his sons in respect of the gifts to them, nor say the words attributed to him by Mr Wilcock. Gabriel objected to the whole of Con’s third affidavit where Con deposed that the 11 June 2009 cheque was a loan, as were the payments made to GA Management in October 2009, attaching cheque butts and bank statements. It was submitted by Gabriel that these portions of Con’s affidavits amounted to the suggestion of fraud rather than misrepresentation. The plaintiffs disclaimed this, saying what was suggested was fraud in the equitable sense: In the matter of Spartan Sporting Goods Pty Limited [2017] NSWSC 1146 at [10].

10. [53]

    It seems to me that the nub of the material objected to in Con’s second and third affidavits is whether the monies paid to Gabriel in June, October and November 2009 were gifts or loans. Con did not refer to this issue in his first affidavit but did annex the Originating Process in the 2018 Corporations List proceedings, Gabriel’s affidavit in those proceedings and the Deed of Settlement. The issue as to whether monies provided to Gabriel were loans or gifts was referred to in the annexed documents and, as emphasised by Gabriel’s solicitor in correspondence also exhibited to Con’s first affidavit, was a central issue in the 2018 Corporations List proceedings. Thus, whilst Con did not refer to the character of these payments in his first affidavit, the issue was sufficiently raised by necessary or reasonably available inference from the documents annexed to it. But the point does not really arise because the ground relied on by the plaintiffs was whether the loan account recorded monies owed by the Gabriel Apostolakis Family Trust to Gabriel, and this was squarely raised in the first affidavit. The additional matters described in Con’s later affidavits were simply supportive of the ground already raised. Accordingly, the objected portions of Con’s second and third affidavits can be relied upon by the plaintiffs in their application to set aside the statutory demands, and I have therefore taken them into account in the foregoing chronology.

11. [54]

    As to whether there is “a genuine dispute” within the meaning of section 459H of the Corporations Act, in Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd (2013) 85 NSWLR 601; [2013] NSWCA 344 at [31], the Court of Appeal approved McLelland CJ in Eq’s consideration of a “genuine dispute” in Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 787 as involving a plausible contention requiring investigation, raising much the same sort of considerations as the “serious question to be tried” criterion that applies in the case of an interlocutory injunction. As McLelland CJ in Eq stated at 787:

12. [55]

    The characteristics of a “genuine dispute” were described in similar terms by the Victorian Court of Appeal in TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd (2008) 66 ACSR 67; [2008] VSCA 70, by Dodds-Streeton JA (with whom Neave and Kellam JJA agreed), at [71]:

13. [56]

    As to the genuine dispute relied upon in this case, the plaintiffs pointed to two matters.

14. [57]

    First, the plaintiffs submitted that although clause 26 of the Deed provided that the payment of $950,000 was to be made by 31 March 2019, clause 33 provided that where a party was required to perform an obligation under the Deed then, unless the context required otherwise, the party must use its best endeavours to perform that obligation. The plaintiffs submitted that the obligation on them was to use their best endeavours to make the payment of $950,000 by 31 March 2019, citing Cypjayne Pty Limited v Babcock & Brown International Pty Ltd (2011) 282 ALR 152; [2011] NSWCA 173 at [66] to [67] in support of the proposition that the extent of an obligation to use best endeavours is governed by what is reasonable in the circumstances.

15. [58]

    In respect of this, Gabriel submitted that, read objectively and in context, the only available construction of the Deed is that the plaintiffs were obliged to pay him $950,000 by 31 March 2019. This construction was supported by the plaintiffs’ post-contractual conduct as being inconsistent with the payment coming solely from the sale of the Kogarah Bay Property, and that the plaintiffs did not advance a plausible, alternative construction.

16. [59]

    The Court should rarely, if ever, be drawn into considering extrinsic evidence such as evidence of post-contractual conduct when considering a dispute as to the meaning of a contract on an application to set aside a statutory demand: In the matter of Acciona Infrastructure Australia Pty Limited [2019] NSWSC 1156 at [11]. In respect of the construction of the Deed of Settlement itself, where the dispute is as to the meaning of a contract then, determination of the meaning of a contract may be appropriate if a “patently feeble legal argument” is put forward: In the matter of Universal Property Group Pty Limited [2019] NSWSC 796 at [15]. However, as Barrett AJA cautioned in Creata (Aust) Pty Limited v Faull (2017) 125 ACSR 212; [2017] NSWCA 300 at [26]:

17. [60]

    Thus, where there are clearly arguable alternatives as to the meaning of a term and related questions of construction, this of itself gives rise to a genuine dispute within section 459H(1)(a) and no attempt should be made to determine the question in an application to set aside a statutory demand: Drillsearch Energy Limited v Carling Capital Partners Pty Ltd [2009] NSWSC 1192 at [47] per Barrett J. More recently in Grandview Ausbuilder Pty Ltd v Budget Demolitions Pty Ltd (2019) 136 ACSR 563; [2019] NSWCA 60, White JA held at [90] (emphasis added):

18. [61]

    Turning to the Deed itself, the overall scheme of the document is that the monies to be paid from Gabriel would come, at least in part, from the sale of the Kogarah Bay property, although clause 13 gave the Consortium the option, if it made the payments to Gabriel before the property was sold, to withdraw the property from sale. The bulk of the document is directed to the steps to be taken to place the property on the market, setting out the respective responsibilities of Gabriel and the Consortium to attend to the tasks which that involved. Much depended on Gabriel, who was in occupation of the property, attending to the preparation of the property for sale and then co-operating with the Consortium’s endeavours to sell it.

19. [62]

    The question is whether the sunset date provided in clause 26 was subject to, or independent of, the best endeavours obligations in clause 33. Did the phrase in clause 26, “Notwithstanding anything to the contrary in this Deed” satisfy the carve-out in clause 33, being “unless the context requires otherwise”? In determining this, regard might be had by a Court to not only these clauses but the whole document. In determining what the parties may have intended to achieve by their drafting, the Court may have regard to the need for Gabriel to attend to important tasks in preparing the property for sale before the Consortium could begin its efforts to sell it, and the importance of Gabriel’s continuing co-operation whilst those efforts were advanced. Failure by Gabriel to either perform his specific obligations or to co-operate generally may make it impossible for the Consortium to sell the property and thus deprive the Consortium of the ability to perform its obligation to pay Gabriel. Beyond this, and mindful of White JA’s caution in Grandview Ausbuilder to decide competing contentions as to contractual interpretation, it is sufficient to say that the question of construction has an element of rational controversy; it is arguable; the genuine dispute hurdle has been cleared. I do not think the plaintiffs’ contention in respect of the interaction between clause 23, clause 33 and the Deed overall is “patently feeble” or that it is “as plain as a pikestaff” that it has no basis.

20. [63]

    The plaintiffs submitted that the Consortium had used their best endeavours to make the payments under the Deed by no later than 31 March 2019, and Gabriel accepted that, if the obligation to pay the monies was subject to best endeavours, then there was genuine dispute about whether the plaintiffs had used their best endeavours. That being the case, the statutory demands must be set aside. However, in deference to the parties’ extensive submissions on the second matter, I will also deal with it.

21. [64]

    The plaintiffs relied on two matters that it was submitted constituted misleading and deceptive conduct within the meaning of section 18 of the Australian Consumer Law or alternatively were representations amounting to equitable fraud. This was said to be sufficient for the Deed to be liable to be avoided under section 243 of the Australian Consumer Law or rescinded in equity (Taheri v Vitek (2014) 87 NSWLR 403; [2014] NSWCA 209 at [71]–[76]) such that a genuine dispute arose as to the existence of the debt in the demands.

22. [65]

    The first such matter was the existence of the loan account. The plaintiffs submitted that, prior to executing the Deed, Gabriel represented that, as at the time of executing the Deed, there was a loan from Gabriel to the Gabriel Apostolakis Family Trust and the amount of $850,000 payable to Gabriel under the Deed was in repayment of that loan. Gabriel’s representation arose from Gabriel’s pleading in the 2018 proceedings that GA Management was indebted to him for $1,501,663.51; the affidavits served in those proceedings, on their face; and Gabriel pressing for clause 3 to be included in the Deed. Gabriel submitted that this issue was not genuine within the meaning of section 459H but was a late invention, unsupported by contemporaneous documents, protest or complaint. Nor was it pleaded in the defence filed in the 2019 Equity proceedings. Rather, it was one of the main issues in the 2018 Corporations List proceedings and resolved by the Deed.

23. [66]

    The plaintiffs first raised the issue of Gabriel’s loan account on 7 March 2019. Three detailed letters set out the Consortium’s concerns as to whether there was in fact a loan by Gabriel to the Gabriel Apostolakis Family Trust, and in what amount. It does not seem to me, from reading those letters or reviewing the general ledgers and financial statements, that the concerns expressed were a recent invention or disingenuous. It is true that the issue was not raised until three weeks before payment was due under the Deed but that does not detract from the fact that the dispute, once raised, was genuine and pre-dated the statutory demands. The issue was not pleaded in the defence in the 2019 Equity proceedings but had already been alluded to in correspondence.

24. [67]

    The other matter, in the plaintiffs’ submissions, was that it was apparent from the terms of the Deed that the Kogarah Bay property was to be sold to meet the obligations of the Consortium under the Deed to pay $950,000. However, at the time of executing the Deed, Gabriel did not inform the Consortium that there was no occupation certificate for the Kogarah Bay property. Gabriel had supervised the demolition and construction of the new house on the property and knew, or ought to have known, that there was no occupation certificate. By not informing the Consortium of this, Gabriel represented that there was an occupation certificate. The Consortium was relying on the funds from the sale of the Kogarah Bay property to make, either in whole or in part, the payments to Gabriel under the Deed and Gabriel knew this.

25. [68]

    In respect of this, Gabriel again submitted that this issue was not genuine but a late invention, unsupported by contemporaneous documents, protest or complaint and not pleaded in the defence filed in the 2019 Equity proceedings. There was no duty of disclosure in the circumstances: In the matter of Elsmore Resources Ltd (2016) 114 ACSR 297; [2016] NSWSC 856 at [91]–[94]. Gabriel was not the registered proprietor of the property, nor an officer of GA Management, control of which had passed to the plaintiffs. As directors of the registered proprietor, the plaintiffs are taken to have that knowledge in the absence of evidence to the contrary, which was not adduced.

26. [69]

    The latter arguments have an air of unreality, it seems to me, as Gabriel was a director of GA Management until recent times and, at the time when the dwelling on the Kogarah Property was demolished and another one built, Gabriel appears to have had conduct of that project. It is true that the plaintiffs only raised the issue of an occupation certificate on 28 March 2019 as a result of enquiries from potential purchasers. A review of the letter in question does not suggest that a request for an occupation certificate was made in order to concoct a dispute where there was none, but to make a practical request for a document being sought by those interested in purchasing a property which was proving hard to sell. As already mentioned, the Deed of Settlement apprehended that Gabriel would be paid, at least in part, from the proceeds of sale of the Kogarah Bay property and set out a detailed scheme by which this would be achieved. It might be thought that those working in property development would appreciate that the saleability of a property depends, in part, on whether any buildings on the land comply with the requirements of the Council and any applicable building codes. The absence of an occupation certificate confirming such compliance may impede the sale of the property or reduce its price.

27. [70]

    After the hearing, Gabriel sought leave to make further submissions on this issue. The plaintiffs did not oppose leaving being granted and I will proceed to consider these further submissions as well as the plaintiffs’ reply submissions, and Gabriel’s further submissions in reply. In short, Gabriel submitted that there was in fact no requirement for an occupation certificate for the Kogarah Bay property. The relevant date for determining the requirement for an occupation certificate was when the Kogarah Bay property was occupied, being May 2010. At the time, as earlier set out in this judgment section 109M(2)(b) of the Environmental Planning and Assessment Act provided that the requirement to get an occupation certificate did not apply to:

28. [71]

    The plaintiffs submitted that section 109M(1) provided that an occupation certificate was required before Gabriel and his wife moved into the Kogarah Bay property. The exception in subsection 109M(2)(b) did not apply as the occupation or use by Gabriel and his wife of the new house on the Kogarah Bay property was not more than 12 months after the date on which the new building was first occupied or used. Further, the issue was not whether an occupation certificate was now required by prospective purchasers of the Kogarah Bay property but whether Gabriel ought to have obtained an occupation certificate in May 2010, of which prospective purchasers of the Kogarah Bay property could now obtain a copy.

29. [72]

    To this, Gabriel noted the apparent agreement that there was no requirement for an occupation certificate when the Deed of Settlement was executed in July 2018, which was the relevant date of the alleged misleading and deceptive conduct. Whilst the plaintiffs referred to a hypothetical purchaser who may have been interested in the existence of an occupation certificate, the reality was that no hypothetical purchaser on or after July 2018 who would have any cause to be concerned about whether an occupation certificate had been obtained in 2010.

30. [73]

    I prefer the plaintiffs’ submissions in this regard. The saleability of the Kogarah Bay property depended upon the vendor, GA Management, being in possession of the necessary paperwork to satisfy an interested purchaser that the buildings on the property had all relevant approvals. Those approvals, including an occupation certificate, should have been obtained in 2010. The lack of such an occupation certificate would likely have the result that, in 2019, an interested purchaser might be not so interested.

31. [74]

    The suggestion by the plaintiffs that, by Gabriel representing that the loan account recorded monies owed by the Gabriel Apostolakis Family Trust to him, and by failing to inform the Consortium that there was no occupation certificate for the dwelling, may entitle them to have the Deed avoided under section 243 of the Australian Consumer Law or rescinded in equity seems to me to involve a plausible contention requiring investigation and amounts to a genuine dispute within the meaning of section 459H.

32. [75]

    The statutory demands must therefore be set aside. It is not necessary for me, therefore, to consider the plaintiffs’ alternate arguments in respect of offsetting claims or ‘some other reason’.

33. [76]

    For these reasons, I make the following orders:

    1. (1)

       Order pursuant to section 459H of the Corporations Act 2001 (Cth) that the statutory demand dated 1 April 2019 served by the defendant on AA Management Co Pty Limited be set aside.

    2. (2)

       Order pursuant to section 459H of the Corporations Act 2001 (Cth) that the statutory demand dated 1 April 2019 served by the defendant on Cabek Pty Limited be set aside.

    3. (3)

       Order pursuant to section 459H of the Corporations Act 2001 (Cth) that the statutory demand dated 1 April 2019 served by the defendant on CG Investment Corporation Pty Limited be set aside.

    4. (4)

       Order pursuant to section 459H of the Corporations Act 2001 (Cth) that the statutory demand dated 1 April 2019 served by the defendant on Creta Constructions Pty Limited be set aside.

    5. (5)

       Order pursuant to section 459H of the Corporations Act 2001 (Cth) that the statutory demand dated 1 April 2019 served by the defendant on EA Management Co Pty Limited be set aside.

    6. (6)

       Order pursuant to section 459H of the Corporations Act 2001 (Cth) that the statutory demand dated 1 April 2019 served by the defendant on GA Management Co Pty Limited be set aside.

    7. (7)

       Order pursuant to section 459H of the Corporations Act 2001 (Cth) that the statutory demand dated 1 April 2019 served by the defendant on Nation-Wide Incorporated Co Pty Limited be set aside.

    8. (8)

       Order pursuant to section 459H of the Corporations Act 2001 (Cth) that the statutory demand dated 1 April 2019 served by the defendant on Sebavo Investment Corporation Co Pty Limited be set aside.

    9. (9)

       Order that the defendant pay the plaintiffs’ costs of these proceedings.

    10. (10)

        Grant liberty to the parties, within seven days, to apply for any variation of Order 9.