In the matter of Srini Associates Pty Ltd

1. [1]

   HER HONOUR: This is an application by the plaintiff, Srini Associates Pty Ltd, to set aside a statutory demand under section 459G of the Corporations Act 2001 (Cth) on the basis of:

2. [2]

   Srini relied on the evidence of its director, Sateesh Muvva. Votraint relied on the evidence of director Margarete Ainsworth, book keeper Kellie Saunders and legal representatives Warren Jiear, Francesca Aguinaldo and Darrin Edwards. In addition, Votraint relied on evidence by directors of two other companies relevant to Srini’s allegations, being Kjerulf Ainsworth (a director of The Thistle Company of Australia Pty Ltd, the company which assigned a lease to Srini) and Srikanth Tarigopula (a director of Durga Associates Pty Ltd, the company to whom Srini sub-licensed the premises). Although various directions were made by this Court for the plaintiff to file evidence in reply, no further affidavits were served.

PRINCIPLES

1. [3]

   There is no dispute as to the principles. Drawing on my judgment in In the matter of Essential Media and Entertainment Pty Ltd [2020] NSWSC 990 at [77] to [81], the threshold to establish a genuine dispute about the existence of a debt is a relatively low one. Black J conveyed the principles in In the matter of Gorji Property Investment Pty Ltd [2018] NSWSC 1671 at [14]:

2. [4]

   In Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd (2013) 85 NSWLR 601; [2013] NSWCA 344, the Court of Appeal (Beazley P, Meagher and Gleeson JJA) said in the context of an offsetting claim, at [30]:

3. [5]

   It is not for the Court to engage in an assessment of a deponent’s credit on an application such as this: Britten-Norman at [46]. What is called for is an assessment of the kind described by McLelland CJ in Eq in Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 787 (approved in Britten-Norman at [46]) (citations omitted):

4. [6]

   In TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd [2008] VSCA 70; (2008) 66 ACSR 67, Dodds-Streeton JA, with whom Neave and Kellam JJA agreed put the test in the following terms, at [71]:

5. [7]

   Often cited is the judgment of Thomas J in In the matter of Morris Catering (Australia) Pty Ltd (1993) 11 ACSR 601 at 605, which provides useful guidance:

6. [8]

   Drawing on my judgment in In the matter of Granite Power Ltd [2019] NSWSC 1491 at [31]-[32], where the dispute relied upon to set aside a statutory demand is the meaning of the contract, determination of the meaning may be appropriate if a “patently feeble legal argument” is put forward: In the matter of Universal Property Group Pty Ltd [2019] NSWSC 796 at [15]. However, as Barrett AJA (with whom Gleeson and White JJA agreed) cautioned in Creata (Aust) Pty Ltd v Faull [2017] NSWCA 300; (2017) 125 ACSR 212 at [26], “where the question of construction has any element of rational controversy to it, the Court must exercise particular restraint.” Barrett AJA adopted the statement of principle by Gleeson JA in In the matter of Litigation Insurance Pty Ltd [2017] NSWSC 334 at [31]:

7. [9]

   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 Ltd 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) 99 NSWLR 397; [2019] NSWCA 60, White JA held at [90] (emphasis added):

FACTS

1. [10]

   Margarete Ainsworth is the sole director and shareholder of Votraint. Votraint owns land in Bundaberg, on which is constructed a service station.

The lease

1. [11]

   In 2012, Votraint leased the land to The Thistle Co for 20 years (the Lease), with three options for a further term of ten years each. The rent was $312,000 per annum plus GST, with the rent to increase by 4% each year. The permitted use under the Lease was operation and management of the service station.

2. [12]

   Ms Ainsworth’s son, Kjerulf Ainsworth, was then sole director of The Thistle Co, of which Votraint was a 25% shareholder. The other 75% shareholder was Arx Capital (Australia) Pty Ltd. Kjerulf Ainsworth was the sole director and shareholder of Arx Capital, holding the shares non-beneficially. That is, Ms Ainsworth was not a director of The Thistle Co, being a company in which Votraint was a minority shareholder.

3. [13]

   Clause 2.1 of the Lease, when read in conjunction with the Reference Schedule, provided:

4. [14]

   Clause 2.2 of the Lease, “Method of payment of Rent”, provided, “The Tenant must pay the Rent by the method referred to in Item 4(c)”, being direct deposit into the Landlord’s bank account or as directed by the Landlord. The Tenant was obliged to pay Outgoings, expenses and interest on overdue payments: clauses 3, 4.1 and 4.2. In addition, clause 4.3 provided: (emphasis added)

5. [15]

   Schedule 2 to the Lease contained rules for interpretation, including an entire agreement clause: clause (l) of Schedule 2 provided that the agreement “does not include any other collateral or implied agreement or terms which are not expressly included or incorporated in this Lease (and any agreement for lease which gave rise to the Lease) whether arising through representations preceding this Lease or during negotiations relating to this Lease.”

Sale of service station business

1. [16]

   Sateesh Muvva is the sole director and shareholder of Srini. Mr Muvva said, “As part of its business and together with other companies in what I refer to as the Srini Group, Srini buys service station sites, renovates or develops the sites, operates service station businesses and sells or sub-leases the sites.”

2. [17]

   In June 2015, Mr Muvva was interested to buy the Bundaberg service station business (the Business) from The Thistle Co. In evidence is a series of emails from June 2015 to January 2016 between Mr Muvva and the general manager of The Thistle Co, Tim O’Donovan, negotiating the purchase. On 10 June 2015, Mr O’Donovan gave Mr Muvva the sales figures for May 2015. Mr Muvva said that, in September 2015, Mr O’Donovan called him and encouraged him to buy the Business. According to Mr Muvva, Mr O’Donovan said, “It is making good margins (8 to 10 cents), it has high volume, big tanks and near new facilities … there is no immediate competition. The only thing you got is a depot behind you and a closed down service station just down the road which will never trade again. … Trust me, you won’t see a better margin.” Mr Muvva said he relied heavily on what Mr O’Donovan said to him.

3. [18]

   On 1 October 2015, Mr Muvva sent an email to Mr O’Donovan, “As spoken over the phone, I totally understand your INTERNAL Arms length lease: 4% INCREASE EVERY YEAR IS TOO HIGH.” Mr Muvva sought to change the annual increase to a standard CPI increase and sought confirmation that all outgoings would be paid by the landlord. Mr O’Donovan replied that it was not correct to refer to the lease as “internal”, noting “the landlord is a totally different entity” albeit known to The Thistle Co. Mr O’Donovan offered to request a reduction in the annual increase in rent from the landlord and also said that it was not his understanding that outgoings were to be paid by the landlord.

4. [19]

   Further negotiations ensued. Mr Muvva says that on 4 November 2015, he called Mr O’Donovan, who assured him that it was a good business and “you will never go wrong. You can trust me – the margins are great, there are good volumes and the business is never going to face competition.” Ultimately, Mr O’Donovan advised that the landlord would agree to hold the rent at existing levels for a year, being $28,121.82 a month plus GST, and thereafter increase the rent with CPI.

Amendment of lease

1. [20]

   On 5 December 2015, Ms Ainsworth signed an amendment to the Lease, in anticipation of the assignment of the lease to Srini. The provisions of the Lease that provided for a 4% increase in rent each year were deleted. Clause 2.8 was inserted instead, which provided for annual CPI increases. Further, clause 2.8(c) provided:

2. [21]

   On 14 January 2016, Srini entered into an Agreement for Sale of Business with The Thistle Co, agreeing to buy the Business for $500,000. Clause 5 of the contract was an ‘entire agreement’ clause such that the parties warranted that they did not rely on any prior representations.

3. [22]

   On 4 February 2016, Mr Muvva asked Mr O’Donovan to “please send the last year 2014-2015 financials (proper ones) also last 12 months system generated sales. Nothing to do with our settlements.” On 9 February 2016, the amendments to the Lease were registered. On 12 February 2016, the sale was completed. On 12 February 2016, Votraint, The Thistle Co, Srini and Mr Muvva executed a Deed of Consent to Assignment of Lease, whereby Srini took an assignment of the Lease.

4. [23]

   After completion of the sale of the Business and assignment of the Lease, Ms Ainsworth was appointed a director of The Thistle Co on 10 March 2016, as her son left Australia to reside overseas. Ms Ainsworth said she was involved in Votraint’s consideration and consent to the assignment of the Lease but was not involved in negotiations for the sale of The Thistle Co’s business.

5. [24]

   There followed a series of invoices rendered by Votraint, and forwarded by Ms Saunders to Srini, for monthly rent. Rent and outgoings were not paid in a timely manner from the outset. In October 2016, Mr Muvva complained by email to Ms Ainsworth and Ms Saunders, copied to Mr O’Donovan, that he could not afford the rent anymore as someone had opened a store nearby, “I am happy to give the site back”. No mention is made in this email of any representations which it is now said were made by Mr O’Donovan. In November 2016, Votraint served a statutory demand and Mr Muvva agreed to “clear up the debt up to date”. Further emails in June 2017 indicate that rent and outgoings remained unpaid.

A sub-licence

1. [25]

   Unbeknownst to the Landlord, in January 2018, Durga began occupying the site and operating the Business. According to Mr Tarigopula, a director of Durga, in December 2017 or January 2018, Mr Muvva offered to let Mr Tarigopula and fellow director Srikanth Munnany take over the Business and Lease as repayment of monies which Mr Muvva owed them. This was an oral agreement. On 19 January 2018, Durga took over operation of the Business “and paid the agreed monthly rent in the amount of $30,934.00 to Srini”.

2. [26]

   In evidence are bank statements for Durga and Srini’s bank accounts, which show that from February 2018 on, substantial amounts were frequently transferred from Durga to Srini for fuel and rent. Srini has admitted these transfers. By Mr Tarigopula’s calculations, from June 2018 to February 2021, Durga paid rent of $1,022,100.

3. [27]

   By March 2018, the outstanding rent owed by Srini to Votraint was some $386,000. In October 2018, outgoings remained unpaid, with correspondence from Votraint now emanating from its solicitors. On 24 October 2018, Votraint’s solicitor gave Mr Muvva a detailed explanation of how the rent was being calculated.

District Court proceedings

1. [28]

   On 12 November 2018, Votraint filed a Statement of Claim in the District Court of Queensland, seeking to recover unpaid rent and outgoings of $427,015.90 from Srini and Mr Muvva, where Mr Muvva was guarantor of Srini's obligations. On 21 December 2018, Srini and Mr Muvva filed a Defence, admitting that Srini owed $166,734.17 but otherwise disputing the claim on the basis inter alia that:

2. [29]

   According to Ms Ainsworth, Srini “paid a substantial amount of the arrears at that junction, substantially reducing the amount then due”. However, the proceedings “stalled”. No step having been taken in the District Court proceedings for over two years, no step may now be taken without leave of the Court: Rule 389(2) of the Uniform Civil Procedure Rules 1999 (Qld). There is no suggestion that such leave will be sought.

3. [30]

   Mr Muvva says that he has not been contacted in relation to the District Court proceedings since August 2019, until recently. Mr Muvva says that the proceedings are still on foot and Srini and he actively maintain their defence to the claim. Srini submitted that it had the option of pressing for a resolution in the Queensland District Court Proceedings. By refusing to pay rent, Srini "put itself in legal jeopardy in order to bring the issue to a head", which I understand to be a suggestion that Srini was being courageous or noble in withholding rent. Notwithstanding the risk said to have thereby been taken by Srini, it was said that Votraint "cannot say such an approach impeaches the genuineness of the dispute".

4. [31]

   On 8 August 2019, Votraint’s solicitors served a Notice to Remedy Breach of Covenant, requiring the payment of rental arrears in the sum of $597,194.05 as particularised in a detailed schedule. By cover letter, Votraint’s solicitors carefully explained how the rent had been calculated having regard to the provisions of the Lease, and its amendment. In addition, Votraint’s solicitors provided a copy of the outstanding invoices. Mr Muvva said Srini had not been provided with any invoices since August 2019.

5. [32]

   On 20 January 2020, apparently also unbeknownst to the landlord, Srini and Durga entered into an Agreement for Sale of Business, pursuant to which Durga agreed to purchase the Business for $500,000. That was the same price for which Srini purchased the Business from The Thistle Co. Mr Tarigopula said the money was paid by way of a set-off against the money that Srini and Mr Muvva owed Durga, Mr Tarigopula and Mr Munnangy.

6. [33]

   By June 2020, Durga had transferred $3,964,860 to Srini for fuel and rent. Srini has admitted these transfers but has not admitted that the payments were for fuel and rent.

7. [34]

   On 4 March 2021, the landlord served a further Notice to Remedy Breach of Covenant, seeking the payment of rental arrears in the sum of $1,203,475.00, although the notice did not attach the invoices. One cannot help but observe that, although Srini was receiving rent from Durga, it was not paying rent to Votraint. According to Ms Ainsworth, no payment was made in answer to the notice.

Queensland Supreme Court proceedings

1. [35]

   On 10 May 2021, Votraint commenced possession proceedings in the Supreme Court of Queensland. In support of the application, Mr Edwards deposed that rental arrears now stood at $1,237,223.56. The Originating Application and supporting affidavit were served on Srini on 11 May 2021 by email to Mr Muvva and delivery to Srini’s registered office in New South Wales. By these means, Mr Tarigopula also came to learn of the proceedings and how much money Srini owed Votraint. He instructed solicitors to communicate with Votraint with a view to formalising Durga’s occupation of the site.

2. [36]

   The possession proceedings were listed for hearing on 18 May 2021 before Bowskill J. Srini did not appear. Senior counsel for Votraint informed her Honour that "[t]here have been some telephone discussions with a solicitor who's indicated that they're not instructed to appear today". (As described in more detail by Mr Edwards in these proceedings, he had received a telephone call from a solicitor, Mr Lawson, who said he had received instructions to act but required proof of personal service on Srini, otherwise he would be seeking an adjournment. Mr Edwards forwarded affidavits of service to Mr Lawson, who then advised that his firm would not be appearing for the defendants and he had no further instructions.)

3. [37]

   Before her Honour, Votraint read three affidavits of service. Discussion ensued as to whether, in seeking to have the matter heard on 18 May 2021, Votraint was complying with the Service and Execution of Process Act 1992 (Cth), which requires 21 days’ for interstate service. Her Honour expressed concern in making orders at a hearing which was taking place sooner than the 21 day period, noting the sizeable amount of unpaid rent and the length of time for which the rent has been outstanding. Votraint pressed for orders to be made given the costs incurred in adjourning the hearing to a later date and suggested that any orders be stayed to comply with the 21 day requirement. Her Honour was persuaded to proceed in that manner and made the following orders: (emphasis added)

4. [38]

   In making those orders, her Honour delivered ex tempore reasons, relevantly stating as follows: (emphasis added)

5. [39]

   Whilst Srini pointed out that Bowskill J did not enter judgment against the Srini in the amount of $1,237,223.56, her Honour was obviously satisfied on the evidence that Srini was in default under the Lease and owed rent to the Landlord in that amount.

6. [40]

   On 19 May 2021, Votraint’s solicitors sent a copy of the orders to Mr Muvva. In addition, Votraint issued the statutory demand the subject of these proceedings. The sum stated as being due and payable is the same figure recorded in the orders of Bowskill J as constituting the default under the Lease entitling Votraint to an order for possession of the Premises. Mr Muvva admits that Srini owes $478,151.97, being invoices issued to September 2019 but not since then.

7. [41]

   Srini took no step to set aside, or otherwise to disturb, the orders made by Bowskill J. Those orders thus became operative at 9am on 1 June 2021. On 31 August 2021, Votraint and Durga entered into a three-month lease in respect of the Premises.

8. [42]

   In November 2021, Ms Saunders realised that the invoices which she had been preparing and sending to Srini were incorrect as she had omitted to take into account CPI increases. Votraint’s solicitor also noted that the outstanding rent claimed in the statutory demand did not include default interest. On 23 November 2021, Votraint served revised invoices from 13 February 2016 to 31 May 2021, said to reflect annual CPI increases under the Amended Lease. By Ms Saunders’ calculations and those of Votraint’s solicitor Mr Jiear, Votraint is entitled to $2,122,843.23 as at 23 November 2021, being an amount in excess of that in the demand.

9. [43]

   On 24 November 2021, Srini “reject[ed]” the invoices on the basis that the invoices did not comply with the A New Tax System (Goods and Services) Act 1999 (Cth) and thus did not constitute tax invoices. The invoices were said to be issued in breach of clause 4.3(b) of the Lease. The rental amounts sought to be recovered were disputed “and has been since 2018, including as in accordance with the Queensland District Court proceedings”. Srini offered to consent to an application for leave to resume those proceedings and to an increase in the jurisdiction of the District Court to hear the matter or for the matter to be transferred to the Supreme Court of Queensland. This course was said to overcome Srini’s objection to the statutory demand being an abuse of process.

GENUINE DISPUTE

1. [44]

   Srini disputes the amount claimed in the statutory demand on four bases. First, notwithstanding Clause 2.1 of the Lease, a practice is said to have developed whereby rent was only payable on receipt of a tax invoice. After June 2018, it is said that the invoices were sent to Votraint's solicitors but not to Srini. As invoices were never served, so it is said that no rent is payable. This is said notwithstanding numerous e-mails from the landlord's solicitors with expansive details of rent and outgoings then outstanding and the basis of the calculations for the amount sought.

2. [45]

   I am not satisfied that this ground gives rise to a genuine dispute as to the debt. First, it is at odds with the express terms of the Lease, clause 2.1 of which simply provides, “The Tenant must pay the Rent to the Landlord”. Further, clause 4.3(a) imposed upon the Tenant an obligation to "pay to the Landlord an amount equal to any GST for which the Landlord is liable on any supply by the Landlord under this Lease, without deducting or set-off of any amount". While clause 4.3(b) obliged each party making a taxable supply to issue a tax invoice within a prescribed period, the Tenant's obligation to pay GST to the Landlord was not expressed to be, and was not impliedly, conditional upon the receipt by the Tenant of a tax invoice. Srini's obligation to pay GST was not conditional upon the receipt of any invoice.

3. [46]

   Indeed, I do not understand Srini to say that the Lease means otherwise. Rather, it was suggested that a practice has arisen which provides for something other than the express terms of the Lease. It was submitted that the practice has given rise to an implied term to the effect that rent is not payable until a tax invoice has been rendered. However, having regard to the well-established law for the implication of implied terms set out in BP Refinery (Westernport) v Hastings Shire Council (1977) 180 CLR 266, a term will not be implied where it is inconsistent with the express terms of the Lease nor where it is not necessary for the business efficacy of the arrangements. The implied term suggested by the plaintiff would be inconsistent with the express terms of the Lease nor would it be necessary for business efficacy.

4. [47]

   Such a practice is also at odds with the contemporaneous documents, which include emails from Ms Saunders and Votraint's solicitors from time to time reminding Mr Muvva and his employee, Rony Augustine, that the obligation to pay rent does not depend on the issue of an invoice. Votraint has also, from time to time, demanded the payment of rent from Srini. And so far as I can see, Srini has not suggested in the correspondence that it is not obliged to pay or cannot pay the rent because of the absence of an invoice.

5. [48]

   Turning to the second suggested genuine dispute, Srini says that the Lease provided for CPI increases after the first anniversary of the amended lease. In fact, the landlord did not apply a CPI increase to the invoice. As I understand the argument, it is thereby suggested that the landlord undercharged the rent, and there is a genuine dispute that the rent claim should have been more. Whilst I have heard many applications to set aside a statutory demand, this is the first time I have heard a debtor complain that the genuine dispute is that the debtor is obliged to pay more than the amount claimed in the statutory demand. I do not think it is a reasonable construction of section 459H of the Corporations Act to suggest that a genuine dispute extends to the fact that the amount claimed is not enough. In any event, it would be no reason to reduce the amount claimed in the statutory demand on that account.

6. [49]

   The third genuine dispute is said to be that the tax invoices are not payable because they are addressed to "Srini Group" rather than Srini Associates Pty Limited. It is thereby said that Srini cannot claim a tax credit and that the tax invoices do not comply with section 29-70 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth).

7. [50]

   As already mentioned, clause 2.1 and 4.3 of the Lease makes plain that the obligation to pay rent is separate and independent of the issue of a tax invoice. In any event, section 29-70 of the A New Tax System (Goods and Services Tax) Act provides that a tax invoice must contain enough information to enable various matters to be clearly ascertained, including the recipient's identity or the recipient's ABN. It is perfectly apparent from Mr Muvva's affidavit that Srini was part of the Srini Group: see [16]. The contemporaneous documents, being emails and correspondence, emanated from and were sent to the Srini Group. In addition, the invoices referred to the leased premises and the landlord, albeit addressed to the Srini Group. I note also that, aside from a pleading in the District Court that Voltraint was not entitled to recover GST in the absence of a tax invoice, there is no mention in the correspondence of a suggestion that the rent could not be paid because the tax invoices were addressed to the wrong entity. It cannot be seriously argued that the invoices did not contain enough information to enable the recipient to identify who it was that was obliged to pay the rent. This suggested dispute is not plausible.

8. [51]

   The fourth suggested genuine dispute is that the figure in the statutory demand, being the figure advanced before Bowskill J, departed from the invoices which historically had been rendered in that it included CPI adjustments. That may well be so, although I rather understood that CPI adjustments were not added until November 2021: see [42]. But the question is whether there is a genuine dispute as to whether the amount claimed in the statutory demand is owing.

9. [52]

   Where the Lease provided for CPI increases, the fact that the landlord had failed to previously include the whole of its entitlement in invoices rendered to that point does not have the consequence that, when a statutory demand was issued which captured the landlord's entitlement, there is a genuine dispute as to that entitlement. As clause 2.8(c) provided, once the Landlord adjusted the Rent for CPI, the Tenant was obliged to pay any shortfall within 14 days. This fourth suggested genuine dispute does not meet the requirements as articulated in the authorities.

OFFSETTING CLAIM

1. [53]

   Notwithstanding the entire agreement clause in the Agreement for Sale of Business, Mr Muvva says that, in entering into the agreement with The Thistle Co, he and Srini relied on seven representations by The Thistle Co. First, The Thistle Co had sold fuel at the service station at an average price of 8 to 10 cents a litre above the cost it paid, on an average volume of 461,000 litres of fuel sold per month. Second, Srini would in future sell fuel at the same, or similar, margin and volume. Third, The Thistle Co was paying rent of some $33,000 a month, including GST, pursuant to an arms-length commercial registered lease. Fourth, there was no direct competition for the service station. Fifth, a derelict Caltex service station nearby would not in the future recommence trading in competition with the service station. Sixth, Votraint made a capital investment in The Thistle Co but was otherwise independent of, and had no influence over, The Thistle Co. Seventh, The Thistle Co was not in a position to negotiate any variation of the Lease with Votraint.

2. [54]

   Srini contends that these representations were misleading and deceptive, contrary to sections 18 and 20 of the Australian Consumer Law. Srini contends that Votraint “as the parent company of Thistle and in circumstances where it exercised full control” was knowingly involved in the conduct of The Thistle Co. I note that at the time the representations are said to have been made:

3. [55]

   Srini asserts that Ms Ainsworth acted as a shadow or de facto director of The Thistle Co during the relevant time and Voltraint knew or ought to have known the representations made by The Thistle Co were misleading and an inducement for Srini to enter into the Agreement for Sale of Business and that Voltraint was knowingly involved in the conduct of The Thistle Co. Srini submitted that Mr Muvva raised his concerns regarding the representations made during the sale of the business with Ms Ainsworth by email in October 2016. Thus, it was said that this was not an ambit or frivolous claim raised solely to set aside the statutory demand. (As earlier mentioned, the email does not suggest that any representation had been made by Mr O’Donovan, this being a good opportunity to raise the matter. Instead, Mr Muvva simply said that he was unable to pay the rent.)

4. [56]

   To the extent that it is suggested that any loss suffered by Srini was reduced by the payment of rent from Durga, Srini submitted that the evidence as to the rent paid contained inconsistencies between Mr Tarigopula's affidavit, his diary entries and bank statements. Further, to the extent that Srini had received $500,000 for selling the business, that was said to be subject to obtaining the Landlord's consent to an assignment of the Lease, such that Srini may be obliged to repay the $500,000 and, potentially, also damages. To this, Votraint rejoined that any entitlement which Durga had to request repayment of $500,000 would be caused by Srini’s failure to pay the rent, which led to re-possession of the site.

5. [57]

   Having reviewed the evidence before the Court on this application, it is not necessary for me to comment on the strength of any case Srini may have against The Thistle Co. The question is whether there is an offsetting claim against Votraint. I have struggled to see how a claim for misleading and deceptive conduct can be brought against Votraint. One cannot ignore the fact that there were separate corporate entities involved. There is nothing in the contemporaneous documents which would support a contention that Ms Ainsworth, notwithstanding her lack of any official involvement in The Thistle Co at the time, somehow exerted influence over that company. Indeed, the contemporaneous documents point in the other direction and also point away from the suggestion lately made that there were representations made by Votraint.

6. [58]

   Even if Votraint could plausibly be said to have had knowledge of the falsity of the alleged representations and the purpose for which they had been made during the negotiations between The Thistle Co and Srini, the mere fact of such knowledge could not suffice to constitute knowing involvement in The Thistle Co's allegedly misleading or deceptive conduct. As a majority of the High Court noted in Yorke v Lucas (1985) 158 CLR 661 at 670; [1985] HCA 65, while the intent necessary to be knowingly involved in a contravention of what was then section 52 of the Trade Practices Act 1974 (Cth) is "based upon knowledge of the essential elements of the contravention", one must still, in order to be so knowingly involved, be a "participant" in the relevant contravention. The assertions contained in Mr Muvva's evidence do not suggest any participation by Votraint in the allegedly misleading or deceptive conduct of The Thistle Co.

7. [59]

   Nor for that matter is there any evidence capable of raising a plausible contention that any of the representations attributed to The Thistle Co were false, or, in the case of the representation concerning the possibility of a future revival of the derelict Caltex service station, made without reasonable grounds. Mr Muvva does not proffer any evidence capable of casting doubt upon the correctness of that representation. He does not advance any allegations concerning the margins and volumes actually achieved by Srini in selling fuel at the Bundaberg site. The evidence affords no basis for a plausible contention that the Lease did not answer the description of an arm's length transaction. Having alleged the falsity of the representation said to have been made by The Thistle Co that the derelict Caltex service station previously trading at 2 Kendall Street, Bundaberg East would not in the future recommence trading in competition with the Business, Mr Muvva does not depose that trade actually recommenced. There is an email Mr Muvva addressed to Mrs Ainsworth on 5 October 2016 which refers to "some one (sic) opened the store 300 meters (sic) away to us on BOURBONG road" but it is not clear whether that is the same service station or some other service station as the Caltex service station was said to be on Kendall Street.

8. [60]

   It must also be noted that no proceedings have been commenced by Srini against The Thistle Co, Mr O'Donovan or Votraint in respect of the suggested misleading or deceptive conduct, notwithstanding that the limitation period fast approaches.

9. [61]

   More importantly, even if there was a plausible misleading and deceptive conduct claim against Votraint, there also needs to be sufficient evidence before the Court to assess what the value of that claim might be, such that it exceeds the statutory demand or requires the amount demanded to be reduced. Mr Muvva says that Srini would not have entered into the Agreement for Sale of Business absent the representations. Instead, it would have purchased another service station business and earned profits of some $20,000 a month, being a similar profit said to have been earned by Srini at service stations purchased in Kiama and Warrawong at about the same time. Srini suggests that it has suffered a loss and damage as a consequence of some $1.76 million, which is said to be continuing. Alternatively, Srini claims to have suffered loss and damage in the sum of $500,000, being the purchase price paid.

10. [62]

    An affidavit under section 459G may read like a pleading and may raise a ground of dispute in a form which is inadmissible to prove the facts giving rise to the dispute, which facts may be proved in a later affidavit served outside the 21 day period in proper form: Graywinter Properties Pty Ltd v Gas & Fuel Corp Superannuation Fund (1996) 70 FCR 452 at 459; Hansmar Investments Pty Ltd v Perpetual Trustee Co Ltd [2007] NSWSC 103; (2007) 61 ACSR 321 at [34] per White J. Beyond the assertions as to the suggested loss in Mr Muvva’s affidavit served within the 21 days prescribed by the Corporations Act, Srini has not adduced any evidence in proper form outside the 21 day period to establish the suggested loss to the requisite, albeit low, standard required on an application such as this. There is simply no evidence supporting the claim beyond the bald assertion contained in Mr Muvva's affidavit. There being no evidence, the application to set aside the statutory demand on the basis of an offsetting claim fails.

ABUSE OF PROCESS

1. [63]

   Finally, Srini says that the issuing of the statutory demand was an abuse of process. Srini relied on Createc Pty Ltd v Design Signs Pty Ltd [2009] WASCA 85; (2009) 71 ACSR 602, where Martin CJ (Owen and Miller JJA agreeing) stated:

2. [64]

   Srini submitted that at Votraint did not seek an order for judgment for unpaid rent, nor disclose the suggested dispute as to the calculation of rent, the existence of the District Court proceedings or Srini’s filed Defence. Srini submitted that the Queensland District Court proceedings are the appropriate forum for the dispute. This is not negated by the judgment and orders of Bowskill J as her Honour did not enter judgment against the Plaintiff in the amount of $1,237,223.56, nor is the statutory demand based on her Honour's orders. The defendant’s service of the statutory demand was said to be a clear attempt to avoid the obligation of establishing its entitlement to the claimed amount in a court of appropriate jurisdiction. The Court can objectively conclude an improper purpose in doing so, even if the defendant may have some other subjective purpose in mind. I draw no such conclusion.

3. [65]

   It is apparent that debt recovery proceedings were commenced some time ago in the District Court proceedings. It appears from Ms Ainsworth's evidence that in response to that claim, Srini paid a substantial amount of the outstanding debt. It is certainly the case that Votraint, if it so wished, could seek to prosecute its claim for unpaid debt by revitalising the District Court proceedings. But I do not agree that there is an obligation to do so if the amount claimed in the statutory demand cannot seriously be disputed. The real issue before the Court today is whether there is a genuine dispute as matters stand today. As I have already found, there is not. I am not satisfied that there is an abuse of process. The Landlord has not used the statutory demand to enforce payment of a debt which it knew to be genuinely disputed.

4. [66]

   For these reasons, I make the following orders:

   1. (1)

      Dismiss the Originating Process dated 8 June 2021.

   2. (2)

      Order the plaintiff to pay the defendant’s costs of these proceedings.