Re Beyond International Pty Limited

Before the Court is an application to set aside a statutory demand for $300,000 served on the plaintiff, Beyond International Pty Limited, by the defendant, 108 Media Limited. The application is made under s 459H for the Corporations Act 2001 (Cth). The statutory demand was served in respect of a debt said to be owing under a non-binding indicative offer signed on 20 July 2022 between the plaintiff and the defendant. There was no appearance by the defendant at the hearing of the application, and no reason was advanced for why the statutory demand should not be set aside.

The non-binding indicative offer sets out proposed terms by which the defendant would acquire 100% of the share capital of the plaintiff by a scheme of arrangement. Under a clause entitled “Cost Reimbursement”, the non-binding indicative offer provides for the payment of a break fee of $300,000 in the event that the plaintiff elects not to proceed with the transaction. The clause contains the following acknowledgment:

The plaintiff seeks to set aside the statutory demand on two grounds. First, it contends that there is a genuine dispute as to the existence of the debt. The dispute is put in various ways, but essentially, the plaintiff contends that, particularly when read with the acknowledgment, the clause relating to the payment of the fee required that payment would only be made if the defendant was ready, willing, and able to perform the agreement, which it was not. In particular, the plaintiff says that the defendant delayed unduly in commencing the conduct of legal due diligence and did not have the financing the defendant required in order to proceed with the transaction.

Second, the plaintiff submits that it has an offsetting claim arising from the defendant’s misleading and deceptive conduct. The relevant conduct involves making false representations before the non-binding indicative offer was signed concerning the financing available to the defendant and the defendant’s readiness to commence legal due diligence.

It is not necessary to set out all the representations relied on by the plaintiff. However, relevantly, a director of the plaintiff gives evidence that on 24 June 2022, he had a telephone call with Mr Abhi Rastogi, a director of the defendant, in which Mr Rastogi said:

As I have said, there are a number of other similar representations which were made by the defendant to the plaintiff. The plaintiff contends that if those representations had not been made it would not have agreed to pay the break fee.

It is only necessary for the plaintiff to establish that there is a genuine dispute concerning the existence of the debt. The dispute is genuine if it is real and not spurious, hypothetical, illusory, or misconceived. The threshold to establish a genuine dispute is not high: see Solarite Air Conditioning Pty Ltd v York International Australia Pty Ltd [2002] NSWSC 411 at [23] per Barrett J.

In my opinion, the plaintiff has clearly established that it satisfies that threshold in this case. It has advanced a good arguable case in relation to the correct interpretation of the relevant provisions of the non-binding indicative offer. It also appears to have a good arguable case that the defendant engaged in misleading and deceptive conduct in making representations concerning its willingness or ability to proceed with legal due diligence and the availability of funding. In those circumstances the statutory demand should be set aside.

In my opinion, it is appropriate to make an order that the defendant pay the plaintiff’s costs on an indemnity basis. There was no appearance by the defendant today to contest the application, notwithstanding that the defendant had ample opportunity to do so. Moreover, in an email dated 23 December 2022, Mr Rick Narev, who at that time acted for the plaintiff, set out the basis on which the debt was disputed. The reasons given at that time correspond to the reasons I have accepted justify setting aside the statutory demand. In those circumstances it is appropriate that the costs be payable on an indemnity basis.

The orders of the Court are: