In the matter of Golden Robot Records International Pty Limited & Ors

These proceedings concern applications to set aside four creditor’s statutory demands (“Demands”) dated 12 May 2021 issued by the Defendant, National Australia Bank Limited (“NAB”) to each of the Plaintiffs, Golden Robot Records International Pty Ltd (“GRRI”), Scratches Records Pty Ltd (“Scratches”), Dippindot Investments Pty Ltd (“Dippindot”) and Australian Business Executive Investments Pty Ltd (“ABEI”).

I will first address the affidavit evidence. The Plaintiffs rely on an affidavit of Mark Alexander-Erber dated 8 June 2021 filed within the 21-day period after the Demands were served. Mr Alexander-Erber’s evidence is that he is the sole director and secretary of each of GRRI, Scratches, Dippindot and ABEI, and he refers to the nature of the business of those entities, which are involved in the music business. He sets out a lengthy account of the circumstances in which the companies commenced dealing with NAB from July 2020. Mr Alexander-Erber’s evidence is that he was not familiar with the internet banking system operated by NAB (Alexander-Erber 8.6.21 [52]) and he refers to having transferred money between the accounts of the several companies and then inadvertently placing one of the accounts in deficit. (I interpolate that any inadvertent deficit subsequently became advertent and extended to more than $1.55m, as I noted above).

Mr Alexander-Erber also sets out (Alexander-Erber 8.6.21 [58]) his understanding of the process for approval of payments and claims that he “did not understand there to be a due date in relation to when the repayment should be made” as this as never mentioned by the NAB employee. I will return below to the legal position in that respect. He also refers to bank statements for several entities and the process by which he transferred funds from the accounts of one company to another. I refer to Mr Alexander-Erber’s account of particular events in the chronology below.

By a further affidavit dated 6 August 2021, Mr Alexander-Erber contends that he was never provided with those Terms and Conditions for the relevant business accounts or overdraft facility and no NAB employee ever drew his attention to those Terms and Conditions and that he was not told that any interest would be charged on the overdrawn accounts and that he is unable to tell, from any of the Demands, which component of the total relates to interest and which relates to principal. The Plaintiffs also relied on a third affidavit of Mr Alexander-Erber which referred to his employment as chief executive officer of GRRI on 12 August 2020, before he was appointed as its sole director and secretary from 20 August 2020, and to his attending to the opening of the bank account for GRRI with NAB in that capacity. All parties accepted that nothing turned on the matters addressed in that affidavit.

NAB in turn relies on the affidavit dated 23 August 2021 of Ms Godwin, which indicates that GRRI holds a Business Everyday Account with NAB, ending with the number “9365” and exhibits a copy of the bank statements for that account to 30 July 2021; Scratches also holds a Business Everyday Account ending 5178 and exhibits a copy of the bank statements for that account ending 30 June 2021; Dippindot holds a Business Everyday Account ending 6296 and exhibits the bank statements for that account to 30 July 2021 and ABEI holds a Business Everyday Account ending 4094 and exhibits the bank statements for that account to 30 July 2021. Ms Godwin notes that the NAB Business Products Terms and Conditions, effective 28 July 2020, apply to those products and are publicly available on NAB’s website. Ms Godwin also refers to correspondence between NAB and Mr Alexander-Erber as director and secretary of each of the companies.

Mr Knackstredt sought to rely on a Jones v Dunkel inference arising from the fact that did not lead evidence from the NAB employee. It seems to me that inference has little weight in an application which is limited to determining whether a serious question arises as to a basis on which the Demands would be set aside. There would be little utility in calling that employee to seek to contradict Mr Alexander-Erber’s account of the conversations in an application of this kind, where the Court would not reach a credit finding as to which of Mr Alexander-Erber’s or the NAB employee’s accounts of the conversations, if they differed, was more plausible. NAB’s not calling the NAB employee’s evidence is therefore readily explicable by the lack of utility in its doing so.

Turning now to the chronology, each of GRRI, Scratches, Dippindot and ABEI established a Business Everyday Account with NAB in 2020. On 27 July 2020, Dippindot opened a Business Everyday Account with NAB (“Dippindot Account”). On 3 August 2020, ABEI opened a Business Everyday Account with NAB (“ABEI Account”). On 18 August 2020, GRRI also opened a Business Everyday Account with NAB (“GRRI Account”) and, on 29 September 2020, Scratches opened a Business Everyday Account with NAB (“Scratches Account”).

The Plaintiffs issued a notice to produce to NAB for the Terms and Conditions applying to the bank accounts held by the several companies which, as I noted above, provided in section 1:

Mr Alexander-Erber’s evidence (Alexander-Erber 8.6.21 [56]) is that, in early to mid-August 2020, he had a discussion with a named NAB employee (“NAB employee”) who advised that there was no issue once the money had been transferred back to the debited account “to even it out” and then advised:

Mr Alexander-Erber’s evidence (Alexander-Erber 8.6.21 [56]) is that the NAB employee then explained the process for overdrawing on the relevant accounts as follows :

Mr Knackstredt, who appears for the Plaintiffs, submits that:

Mr Alexander-Erber also refers (Alexander-Erber 8.6.21 [92]) to a further conversation with the NAB employee about 26 October 2020, when the NAB employee requested him to bring an account out of debit, because overdrawn accounts showed up in NAB’s internal reporting which went to management if they were not brought back into surplus within a specified period. His evidence is that conversation, continued as follows, in a manner that would plainly have indicated that what was being done was directed to concealing the transactions from oversight by NAB management:

In submissions, Mr Knackstredt acknowledges the NAB’s employee’s advice to Mr Alexander-Erber on 26 October 2020 that overdrawn accounts would be flagged in NAB’s internal reports, so it would “cause us issues” if they were not brought back into surplus within 21 days, and does not address the implication of that advice, that Mr Alexander-Erber was then on notice that the overdrawn accounts were, in effect, being concealed from NAB’s management by the process which was adopted.

Mr Alexander-Erber then refers (Alexander-Erber 8.6.21 [93]ff) to the multiple transfers between accounts, by which he created an increasing debit in respect of those accounts, which is now in excess of $1.55 million as I noted above. Mr Alexander-Erber also refers (Alexander-Erber 8.6.21 [183]-[184]) to a development in late December 2020 or early January 2021, when the NAB employee was on leave, Mr Alexander-Erber sought to undertake another transaction of this kind, and another NAB employee properly advised that he could not approve the transaction.

On 4 January 2021, Mr Alexander-Erber wrote to the NAB employee (Ex D1, 174) advising that

On 6 January 2021, the credit balance of the GRRI Account was $4.52 and GRRI then debited $478,900 to that account resulting in a debit balance of $478,895.48 (Ex D1, 6). Since 6 January 2021, no credits have been received to that account.

Prior to 8 January 2021, the balances of the Dippindot Account, the Scratches Account and the ABEI Account were in and out of credit and debit and, as at 8 January 2021, the credit balance of the Dippindot Account was $0.12; the credit balance of the Scratches Account was $0.45; and the credit balance of the ABEI Account was $0.21. On 8 January 2021, Dippindot debited the Dippindot Account in the sum of $478,888 resulting in a debit balance of $478,887.88; and Scratches debited $69,333 to that account resulting in a debit balance of $69,332.55; and, on 9 January 2021, ABEI debited $499,950 to that account resulting in a debit balance of $499,949.79. No credits have been received to the Dippindot Account or the Scratches Account since that time and there have been credits to that account of $450 on 25 January 2021 and $4,070 on 8 March 2021 to the ABEI account.

Also on 8 January 2021, Mr Alexander-Erber wrote to the NAB employee (Ex D1, 175) and advised that:

By an email dated 14 January 2021 (Ex D1, 178), Mr Alexander-Erber advised the NAB employee that:

On 21 January 2021, Mr Alexander-Erber sent a further email to the NAB employee (Ex D1, 180) advising that:

Mr Alexander-Erber gives evidence (Alexander-Erber 8.6.21 [197]) of a further conversation, in January 2021, where the NAB employee told him that he needed to bring the balances back into surplus, and that that employee could not continue the process of approving overdrawn amounts, there was a discussion of the possibility of NAB taking security on Mr Alexander-Erber’s assets and Mr Alexander-Erber referred to his having “the cars and the companies”. He also refers to dealings with third parties who he claims were late in payments to his companies and to further discussions with NAB in respect of the position.

On 4 February 2021, Mr Alexander-Erber sent a further email to the NAB employee (Ex D1, 181) stating that:

On 11 February 2021, the NAB employee sent an email to Mr Alexander- Erber (Ex D1, 182) following a meeting with Mr Alexander-Erber and Mr Byrnes and another NAB representative and advised that “it is critical that you clear the debt excess on your accounts as soon as possible”; noted Mr Alexander-Erber’s advice that “the payment timeline which has changed from 15th of Feb 2021 to now before 28th of Feb 2021”; and advised that “any credit funds you can pull together to put into any of those accounts in debit will also help immensely”. Mr Alexander-Erber responded (Ex D1, 182) that:

Mr Alexander-Erber also gives evidence of discussions with NAB’s solicitors from February 2021 and to his decision not to accept an offer made by NAB to resolve the relevant issues and to having brought the application to set aside the Demands. On 26 February 2021, NAB’s solicitors wrote to Mr Alexander-Erber (Ex D1, 188) noting the debit balance of the accounts and the fact that no substantive payments had been made to reduce the monies owed to NAB; and sought financial records from the Plaintiffs and any proposal by Mr Alexander-Erber to repay the account balances.

The Plaintiffs’ solicitors responded by letter dated 9 March 2021 (Ex D1, 191) and contended that

NAB’s solicitors responded by letter dated 16 April 2021 (Ex P1, 171-173; Ex D1, 193) advising that “NAB rejects there was any agreement or arrangement (including any so called “extensive authorisation process”) for the Group to overdraw its accounts and repay the overdrawn funds whenever it was financially able to do so”; referred to Mr Alexander-Erber’s advice to NAB during January and February “that the Group imminently stood to receive significant funds from overseas from which it would repay the outstanding balances on its accounts”; noted that “none of the payments promised were ever received by NAB” and that the foreshadowed payment of $25,000 had also not been received by NAB; and advised that NAB demanded the repayment of the overdrawn balances of the GRRI Account, the Scratches Account, the Dippindot Account and the ABEI Account by 30 April 2021.

On 12 May 2021, the debit balance of the GRRI Account with interest was $488,645.99. On that date, NAB issued the first of the Demands to GRRI, by which NAB demanded payment of that amount, described in the schedule to the Demand as the amount owing pursuant to a Business Cheque Account ending in 9365 as at 12 May 2021. That Demand was verified by the affidavit dated 12 May 2021 of Mr Peter Dick of NAB, who confirmed his belief that there was no genuine dispute about the existence or amount of the debt. As at that date, the debit balance of the Scratches Account with interest was $71,058.98; NAB issued the second Demand to Scratches, by which it demanded payment of that amount, described in the schedule as the amount owing pursuant to a Business Cheque Account ending in 5178 as at 12 May 2021; and that Demand was also verified by an affidavit of Mr Dick. Also as at that date, the debit balance of the Dippindot Account with interest was $488,512.59; NAB issued the third Demand to Dippindot, by which it demanded payment of that amount, described in the schedule as the amount owing pursuant to Business Cheque Account ending in 6296 as at 12 May 2021; and that Demand was verified by a third affidavit of Mr Dick. As at that date, the debit balance of the ABEI Account with interest was $505,602.04; NAB issued the fourth Demand to ABEI, by which it demanded payment of that amount against ABEI, described in the schedule as the amount owing pursuant to a Business Cheque Account ending in 4094 as at 12 May 2021, and that Demand was verified by a fourth affidavit of Mr Dick.

By an Originating Process filed on 8 June 2021, the Plaintiffs applied to set aside each of the Demands under s 459H(1)(a) and s 459J of the Corporations Act 2001 (Cth). By Interlocutory Process filed on 19 July 2021, NAB sought an order that the proceedings be dismissed under Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) r 14.28, relying on the fact that a single application was brought to set aside the several demands. NAB subsequently amended its Interlocutory Process and also sought an order that the proceedings be dismissed under r 13.4 of the UCPR, but indicated prior to the hearing that it no longer pressed that relief. It remains to determine the substantive application to set aside the Demand on its merits.

The Plaintiffs seeks to set aside the Demands under s 459H(1)(a) or s 459J of the Act on the basis that the “loan” by NAB to the Plaintiffs is not presently due and payable.

The Court has power to set aside a creditor's statutory demand under s 459H(1)(a) of the Corporations Act 2001 (Cth) where there is a genuine dispute between the company and the issuer of the demand about the existence or amount of the debt to which the demand relates. In Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452 at 464; (1997) 24 ACSR 353; [1997] FCA 681, the Full Court of the Federal Court observed that a genuine dispute must be bona fide and truly exist in fact, and the grounds for the dispute must be real and not spurious, hypothetical, illusory or misconceived. The threshold to establish a genuine dispute is not high, and it is necessary to bear in mind the observations of Barrett J (as his Honour then was) in Panel Tech Industries (Australia) Pty Ltd v Australian Skyreach Equipment Pty Ltd (No 2) [2003] NSWSC 896 at [18] that:

In TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd (2008) 66 ACSR 67; [2008] VSCA 70 at [71] (to which Mr Koch, who appears, for NAB, refers), the Victorian Court of Appeal observed that, in order to set aside a creditor’s statutory demand:

In Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd (2013) 85 NSWLR 601; [2013] NSWCA 344 (to which Mr Koch also refers) where the Court of Appeal, in summarising the case law applicable to offsetting claims, conducted a comprehensive review of the cases referable to establishing whether a genuine dispute was established. The Court emphasised that the evidence necessary for that purpose "need not conclusively prove or otherwise be incontrovertible or substantially non-contestable", and also observed (at [46]) that:

In Ligon 158 Pty Ltd v Huber (2016) 117 ACSR 495; [2016] NSWCA 330 at [8], Barrett JA summarised the applicable principles and approved my observations in Re Wollongong Coal Ltd (2015) 110 ACSR 134; [2015] NSWSC 1680 at [9]-[22], as follows:

A similar approach was adopted by the Court of Appeal in in Grandview Ausbuilder Pty Ltd v Budget Demolitions Pty Ltd (2019) 99 NSWLR 397; (2019) 136 ACSR 563; [2019] NSWCA 60. I have partly drawn on my summary of the relevant principles in Re Malosi Group Pty Ltd [2021] NSWSC 633 at [16]ff for the summary of these principles.

However, the better view is that the submission that the Plaintiffs’ debt is not due and payable should be addressed under s 459J(1)(b) of the Act rather than under s 459H(1)(a) of the Act for the reasons noted in my decision in Re Tuffrock Pty Ltd [2015] NSWSC 738 to which Mr Knackstredt refers, and on which I have drawn for the summary of the case law below. That section provides that the Court may set aside a creditor’s statutory demand if it is satisfied that there is some other reason that the demand should be set aside, and its application in this context has been recognised in NT Resorts Pty Ltd v Deputy Commissioner of Taxation (1998) 153 ALR 359; (1998) 16 ACLC 957; Midland Imports Pty Ltd v Asia Pacific International Pty Ltd [1999] NSWSC 12 at [27]; Re MK Group Phoenix Pty Ltd [2014] NSWSC 1467 at [40]; Streetwise v Higgins [2005] NSWSC 535 at [15]–[19]; Re Carbon Polymers Ltd [2013] NSWSC 376; Re Forza Plumbing Systems Pty Ltd [2013] NSWSC 1234; Re Tuffrock Pty Ltd above at [12]. A debt is due and payable when the time for payment has arrived and an unqualified obligation requiring immediate performance has arisen: Main Camp Teatree Oil Ltd v Australian Rural Group Ltd [2002] NSWSC 219 at [17]. There is an open question as to whether a plaintiff who seeks to set aside a creditor’s statutory demand under s 459J(1)(b) on the basis that the debt is not due and payable must establish that matter on the balance of probabilities: MNWA Pty Ltd v Deputy Commissioner of Taxation (2016) 117 ACSR 446; [2016] FCAFC 154.

In Re Essential Media and Entertainment Pty Ltd [2020] NSWSC 990 at [98]ff, Rees J summarised the applicable case law as follows:

Mr Knackstredt submits that there is no evidence of any loan agreement or terms governing the “alleged” debt; the reference to an “alleged” debt is here surprising where it could scarcely be thought that NAB was providing in excess of $1.55 million to the Plaintiffs by way of, for example, a gift, and the correspondence to which I refer above made clear that Mr Alexander-Erber knew that repayment was expected and had represented it would occur by various dates. Mr Knackstredt also submits that:

Mr Koch responds that each of the GRRI Account, the Scratches Account, the Dippindot Account and the ABEI Account are subject to terms and conditions governing the repayment of overdrawn balances and, as I noted above, cl 1.7 of the NAB Business Products Terms and Conditions provides for what is to occur if a Business Everyday Account is overdrawn. As I noted above, NAB’s Terms and Conditions provided that, if a company’s account was overdrawn without an approved overdraft limit, it must put the account in credit promptly and must pay NAB interest on the amount overdrawn at the overdrawn debit interest rate charged by NAB for the account from time to time. It appears that the Plaintiffs contend that they are not bound by that requirement, because no-one drew it to Mr Alexander-Erber’s attention.

Mr Koch also submits that, even if cl 1.7 of the NAB Business Products Terms and Conditions did not apply to the several accounts, then a cause of action for repayment of the money overdrawn from each of the accounts arose immediately upon the overdrawing of the accounts, relying on Ogilvie v Adams [1981] VR 1041 at 1043, observing that:

Mr Knackstredt fairly recognises that that decision is authority that, where a loan is found to exist and terms of repayment are absent, the loan is repayable on demand, and Mr Knackstredt accepts the correctness of that proposition. However, Mr Knackstredt submits that the principal debts that are claimed, being overdraft accounts withdrawn from four bank accounts, are not yet due and payable because the agreement does not require repayment at the time of the issue of the Demands and because a “reasonable demand” was not issued. Mr Knackstredt submits that there was an agreed term as regards repayment; the debts were to be repaid when the Plaintiffs were “in a position to do so”, relying on the representation by the NAB employee that the Plaintiffs, or each Plaintiff, or Mr Alexander-Erber, should “just bring the account back to a credit when you can.” Mr Koch responds that:

Mr Koch also relies on the representation by Mr Alexander-Erber on 4 January 2021, to which I referred above, that he would ensure that the funds to be received at the end of January were “primarily used to settle in full the overdraft on all the accounts and put them in a positive position up to approx. $250k each” and submits that this representation indicates that Mr Alexander-Erber (and thereby the Plaintiffs) were aware of the requirement that overdrawn amounts be repaid within a reasonable timeframe. It is not necessary to determine that matter given the finding I reach on other grounds below. Mr Koch also submits that, even if it is accepted that the NAB employee’s alleged statement to the effect of “just bring the account back to a credit when you can” was made (which I treat as arguable in an application of this kind) and such a statement can be construed as a term that “the debts were to be repaid when the Plaintiffs were in a position to do so”, such a term is illusory and void for uncertainty.

I will proceed on the basis that the Plaintiffs need only establish a serious question to be tried that the debts are not due and payable in order to set aside the Demands under s 459H(1)(a) (if it applies) or otherwise under s 459J(1)(b). It seems to me they cannot do so, because here the contractual term on which they rely is either too uncertain to be enforceable; or it applies a subjective standard for whether the Plaintiffs are able to repay the debt and is unenforceable under the case law; or it applies an objective standard that would be enforceable, but the Plaintiffs have led no evidence to raise any case that each of them, or the four of them collectively, or Mr Alexander-Erber, cannot objectively repay the debts, although plainly they have not done so. It is not necessary to decide between these propositions, where no arguable case is shown that would take the Plaintiffs outside them, and there is no reason to set aside the Demands whichever of them applies.

The first possibility is that the NAB employee’s representation to Mr Alexander-Erber that the Plaintiffs or each plaintiff or he could “bring the account back to a credit when you can” is too uncertain to take effect as a contractual term that avoids the relevant loans being repayable on demand. The case law requires that the language used in a contract be “certain in the sense that it provides a criterion by reference to which the rights of the parties may ultimately and logically be worked out, if not by the parties then by the courts”: Thorby v Goldberg (1964) 112 CLR 597 at 607; Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429 at 437; [1968] HCA 8; Braude v Kaye [2013] VSC 705 at [321]. A contract may be void for uncertainty where, inter alia, various meanings are open and it is impossible to say which one of them was intended: Brown v Gould [1972] Ch 53 at 61–2; Braude v Kaye above at [321]; Re Leslie Muir Holdings Pty Limited [2019] NSWSC 1519 at [37]ff. There is plainly a question whether the term on which the Plaintiffs rely is uncertain, where it does not define whether the standard of whether “you” can repay the loan applies to the particular company which went into overdraft, or the several companies which went into overdraft collectively or Mr Alexander-Erber, and does not define whether that was to be determined subjectively, by reference to whether Mr Alexander-Erber or the companies considered that he, or they, were able to repay that amount, or objectively. If that representation is too uncertain to have contractual effect, the debts are repayable on demand and there is no reason to set aside the Demands under s 459H(1)(a) or s 459J of the Act.

The first issue is whether the “you” referred to in that term refers only to the relevant company or the companies collectively or also to Mr Alexander-Erber. That issue is highlighted by the parties’ subsequent conduct which is likely to be admissible to establish the terms of what would be, on any view, an informal arrangement. In a subsequent conversation on 26 October 2020 (Alexander-Erber 8.6.21 [92]), Mr Alexander-Erber appears to have asserted the existence of an agreement that “I [apparently meaning Mr Alexander-Erber] could pay it [meaning the loans] back whenever I can”. On the other hand, a letter dated 9 March 2021 from the Plaintiffs’ solicitors to NAB’s solicitors appears to treat the question whether the Plaintiffs were in a financial position to repay the loans as to be determined only by the companies’ financial position, although it did not address whether that was to be done individually in respect of each company or collectively.

The second issue is whether that terms depends on an unfettered discretionary judgment of the Plaintiffs or Mr Alexander-Erber as to when they “can” bring the accounts back to credit and is unenforceable on that basis. Mr Knackstredt recognised that possibility and sought to distinguish the decision in Dynamic Window Systems Pty Ltd v Robinson [2016] VSC 152 at [22]-[26] that a creditor’s statutory demand should not be set aside where term for repayment which would have enabled a borrower to decide for itself when to repay, is void for uncertainty. The Courts have also considered the implications of such a term in several other cases, to which I now turn.

In Head v Kelk [1963] 63 SR (NSW) 340, the plaintiff claimed the repayment of moneys lent. The defendant pleaded that the money was lent upon the terms and conditions that the defendant would be bound to repay when he was financially able to do so and not before. The plaintiff was not successful with a demurrer to the plea in the defence on the ground that the agreement alleged in the plea did not constitute a contract as it was so vague and uncertain as to be unenforceable. In Bailes v Modern Amusements Pty Ltd [1964] VR 436, Sholl J held that a clause was unenforceable where it provided for repayment of loans when the company to which they were lent “considered that it was in a position to pay them” and distinguished cases including Head v Kelk, where it had been held that “‘objective but very generally worded conditions qualifying the obligation to pay a debt were valid and effective”. His Honour held that agreement imported an obligation to repay, at least on demand, with a condition purporting to limit the right to repayment and (at 441) that:

In Argyll Park Thoroughbreds Pty Ltd v Glen Pacific Pty Ltd (rec and mgr apptd) (1993) 11 ACSR 1 (on which Mr Koch relies) which related to an application to set aside a statutory demand, Drummond J similarly held that a term that loans were repayable only when the borrower’s directors believed that the borrower was in a position to repay was not an answer to a demand for the repayment of the loan. In that case, the plaintiff company claimed that it was a term of the loan that “the creditor company could not call for repayment, nor could it enforce payment of the loans from the borrower company if the debtor company lacked the capacity to pay the debt” and that “[t]he loans were only repayable in part or in whole when the directors of the debtor company felt the debtor company was in a position to make repayment in part or in whole.” Drummond J observed that:

In Universal Greening Pty Ltd v Sabine (1999) 17 ACLC 880; [1999] FCA 529 (on which Mr Koch also relies), again dealing with an application to set aside a creditor’s statutory demand, the alleged term was that monies would be repaid by it only when the borrower could afford to do so and Kenny J followed Argyll Park and held that the monies were repayable on demand. Her Honour observed (at [20], [22]) that:

The same view was taken by Owen J in Bell Group Ltd (in liq) v Westpac Banking Corp [No 9] (2008) 39 WAR 1; (2008) 70 ACSR 1; [2008] WASC 239 at [1887] in respect of an undertaking not to call for repayment of a loan until the debtor company was able to pay.

In Dynamic Window Systems Pty Ltd v Robinson above at [22]-[26], Efthim AsJ, in declining to set aside a creditor’s statutory demand, reviewed the case law and observed that:

The approach taken in these cases was then approved by a unanimous Court of Appeal in GoConnect Ltd v Sino Strategic International (in liq) [2016] VSCA 315, on which Mr Koch also relies, again in respect of an application to set aside a creditor’s statutory demand. The Court of Appeal observed, in relation to a term that provided that a company would repay “the loan or part thereof deemed appropriate” that:

Here, if the representation on which the Plaintiffs rely is analogous to that which was treated as unenforceable in Universal Greening Pty Ltd v Sabine above, The Bell Group Ltd (in liq) v Westpac Banking Corp (No 9) above and Dynamic Window Systems Pty Ltd v Robinson above, then the suggested contractual term is unenforceable, the debts are repayable on demand and no reason to set aside the Demands is established under s 459H(1)(a) or s 459J of the Act.

The third and only other possibility is that the representation on which the Plaintiffs rely applies an objective standard and is enforceable, but, in that case, the Plaintiffs have then led no evidence to raise any serious question to be tried that each of them or the four of them collectively or Mr Alexander-Erber cannot, on an objective standard, repay the debts owed to NAB by, for example, selling or raising funds on the security of their own assets or borrowing from other parties. Mr Knackstredt submits, and I accept, that it is not necessary in an application of this kind for the Plaintiffs to lead all the evidence on which they would rely in substantive proceedings to establish any inability to repay the amounts due to NAB on an objective standard. However, the obviously correct proposition that the Plaintiffs need not lead all evidence on which they would rely in substantive proceedings does not mean they can establish a serious question to be tried without leading any such evidence. That evidence might, for example, have included evidence in general terms as to their respective assets and liabilities, the assets and liabilities of Mr Alexander-Erber and any unsuccessful attempts which they had made, for example, to raise funds to repay the amounts due to NAB from third party lenders or associated entities, on an unsecured basis or on the security of their or Mr Alexander-Erber’s assets. No such evidence was led, even in the most general terms. I recognise that there are occasions on which Mr Alexander-Erber has asserted, in communications with NAB, that he or the Plaintiffs could not pay off the amount owed to NAB immediately and would need time to do so: for example, Alexander-Erber 8.6.21 [197], [202]. However, a bare assertion of that matter is not evidence supporting a serious question to be tried as to that matter.

Mr Koch also pointed out that, to the extent that there is other evidence of this matter, it provides no support for the proposition that the Plaintiffs or Mr Alexander-Erber could not raise funds to repay the monies due to NAB, although they have obviously not done so. By an email dated 21 January 2021 (Ex P1, 124-125; Ex D1, 180) Mr Alexander-Erber offered NAB security (which he ultimately did not provide) over a company which was said to own a “large collection of unencumbered classic car[s] in Sydney, NSW Value approx. $8.7 million (conservative)” or over his “main entity or trusts” which he then said had a value of approximately USD $30 million. That evidence plainly does not establish, and tends to undermine, any inability of the Plaintiffs to raise funds from that company or that “main entity or trusts” in order to repay the funds due to NAB. A spreadsheet provided by Mr Alexander-Erber to NAB (Ex P1, 169-171) sought to establish that the value of those cars was at least $7.729 million. Further emails dated 18 February 2021 (Ex P1, 179-185) in turn provided VIN number information as to an apparently impressive collection of classic cars. Numerous emails over the period refer to Mr Alexander-Erber’s expectation of the receipt of substantial funds from third parties which would have allowed the Plaintiffs to repay the monies; for example, an email dated 4 January 2021 from Mr Alexander-Erber to NAB referred to the expected receipt of $2.8 – 3.4m by the end of January 2021, although it appears those funds were not received by that date; he reconfirmed the expected receipt of those funds by an email dated 8 January 2021 (Ex D1, 174-175); by an email dated 11 February 2021, Mr Alexander-Erber referred to the expected receipt of funds between 15 and 28 February (Ex D1, 455); by email dated 16 February 2021, the NAB employee confirmed Mr Alexander-Erber’s advice in a telephone call that there had been no change as to the expected time of arrival of funds to clear the excess by 28 February (Ex D1, 184); and Mr Alexander-Erber’s further email dated 23 February 2021 to NAB (Ex P1, 192) refers to the receipt of the “big payment” next week. On 30 April 2021, the Plaintiffs’ solicitors advised NAB that the Plaintiffs would settle all overdrawn accounts by 30 June 2021, a matter which also does not indicate any incapacity to do so (Ex P1, 174).

Irrespective of whether this first issue is dealt with under s 459H(1)(a) of the Act or under s 459J(1)(b) of the Act, it does not seem to me to give rise to a serious question to be tried or to a seriously arguable case that the Demands should be set aside on some other basis, where the contractual term on which the Plaintiffs rely to avoid an obligation to repay on Demand is either too uncertain to have effect or, if it establishes an objective requirement as to the companies’ inability to repay the monies, the evidence is not sufficient to establish a seriously arguable case for that proposition. On each of the available views, there is also no seriously arguable case that the debts are not payable on demand and there is no basis to set aside the Demands under s 459H(1)(a) or 459J of the Act.

At least by 16 April 2021, NAB had required repayment of the amounts overdrawn by the Plaintiffs by 30 April 2021, allowing a 14 day period for repayment (Ex MAE-1, 171-173; Godwin, Ex LMG1, 193). Mr Knackstredt submits that that 14 day period was inconsistent with the express oral terms of the agreement, and relies on the proposition that a claim for payment cannot be made until a reasonable time after service of a demand, referring to Re Tuffrock Pty Ltd above at [17]. Mr Knackstredt submits that there is a plausible contention requiring investigation that the 14-day period provided by NAB in its letter of demand of 16 April 2021 was not reasonable in the history of the dealings between the parties.

Mr Koch responds that no arguable case is available that a demand was necessary for the debt to become due and payable and refers to Central City Pty Ltd v Montevento Holdings Pty Ltd [2011] WASCA 5 at [36] where Murphy JA (with whom Buss JA agreed) observed that:

Mr Koch submits that, under cl 1.7 of the NAB Business Products Terms and Conditions or because the term for which the Plaintiffs contend is illusory and void for uncertainty and the overdrawn amounts are immediately repayable, no demand was necessary to make the overdrawn amounts due and payable to NAB by the Plaintiffs. Mr Koch alternatively submits that, even if a demand was required, in the context of the history of the dealing between the Plaintiffs and NAB as set out in his submissions, a period of 14 days from 16 April 2021 was a reasonable period. I have also set out the chronology of events above.

It seems to me that this alternative basis to set aside the Demands is not seriously arguable, where, on any of the three possibilities noted above, the debt was payable on demand and Mr Alexander-Erber had been told long before, including by the NAB employee, that the debt had to be repaid. I note, for completeness, that, by the time the Demands had issued, the Plaintiffs had in any event had two further weeks to repay the amounts claimed.

Mr Knackstredt alternatively contends that interest is not payable, and seeks to set aside the Demands under s 459H(1)(a) of the Act on that basis. Mr Knackstredt also contends there is no evidence of any agreement for the charging of interest, and that the amounts claimed are wrong as they incorporate an unspecified amount of interest which ought not to have been included. Mr Koch responds that NAB was entitled to charge interest on overdrawn amounts and the Plaintiffs were aware at all relevant times that interest was being charged on overdrawn amounts.

It seems to me that the Plaintiffs’ claim that there is no basis for NAB to charge interest is not seriously arguable. The relevant bank statements made clear that each account is a Business Everyday Account (for example, Ex D1, 1ff) and the Terms and Conditions for NAB Business Products effective 28 February 2020 (Ex D1, 55ff) make clear that they apply to Business Everyday Accounts. Clause 1.7 of those Terms and Conditions in turn set out the basis on which interest was calculated and the account statements set out the amount of interest charged. Mr Alexander-Erber’s second affidavit dated 6 August 2021 is notable for the fact that he does not say that he was not aware of NAB’s Terms and Conditions that applied to the applicable accounts; the limited statements made in that affidavit that particular things did not occur do not, for example, say that he did not, as chief executive officer and director of the Plaintiffs, take the steps which his duties as a director would require to make himself aware of the Terms and Conditions that applied to the banking arrangements which he had entered on their behalf, by accessing them in their publicly available form. While Mr Knackstredt submits that Mr Alexander-Erber’s knowledge of those Terms and Conditions would not establish that they were part of the contract, it does not seem to me that that proposition is seriously arguable, given the well-established principles under which standard contractual terms and conditions that are known to a party may be incorporated into a contract by a course of dealing: see the comprehensive review of the authorities in JW Carter et al, Contract Law in Australia, 7th ed, 2018, [10.18].

Mr Knackstredt also submits that the Demands should be set aside under s 459J of the Act on the basis that it is “unclear” what component of each demand relates to interest, and he relies on Chains & Power (Aust) Pty Ltd v Commonwealth Bank of Australia (1994) 15 ACSR 544 at 550 in that respect. Mr Knackstredt accepts that the accounts exhibited to Mr Alexander-Erber’s and Ms Godwin’s affidavits disclosed that interest was debited, but submits that the Plaintiffs contend they do not know how interest has been calculated.

The Plaintiffs lead no evidence to establish that NAB’s calculation of interest is incorrect, and the fact that they may not subjectively understand it or be convinced that it is correct provides no basis to set aside the Demands: Re Tesrol Holdings Pty Ltd (2013) 97 ACSR 9; [2013] NSWSC 1534; WA Glass Pty Ltd v Auto Control Systems Pty Ltd [2021] WASC 187 at [22]-[23].

The Plaintiffs’ further claim that it is unclear what component of each demand relates to interest would amount, at best, to a defect in the Demands under s 459J(1)(a) of the Act and the Demands would only then be set aside if the Plaintiffs established that “substantial injustice” would be caused unless the Demands were set aside.

I recognise that, in Topfelt Pty Ltd v State Bank of NSW (1993) 47 FCR 226; 12 ACSR 381, Lockhart J set aside a creditor’s statutory demand which failed to specify the amount of interest claimed by the creditor, and observed (at 395-397) that a creditor that issued such a demand should “tell the debtor companies in clear terms what amounts are due, whether they include interest or not, and if so, the amount”. However, that decision was distinguished by Sackville J in Chains and Power (Aust) Pty Ltd v Commonwealth Bank of Australia above and it seems to me that it should also be distinguished, both as to the facts and in principle. As a matter of fact, it was obvious both that the Demands were directed to the balance of the overdrawn amounts in the accounts and that those amounts included interest as recorded in the account statements, and the amount of interest debited was disclosed by those account statements. I have not neglected the Plaintiffs’ contention that they lost access to the electronic versions of those statements when the accounts were frozen, but they had had that access up to that point. As a matter of principle, in Chains and Power (Aust) Pty Ltd v Commonwealth Bank of Australia above, Sackville J declined to set aside the demand where, as here, it was for a specific amount that included an interest component up to the date of the demand; his Honour rightly observed (at 551) that the legislation did not require a separate specification of interest, and pointed to the practical difficulties that would arise from such a requirement, and observed that such a requirement would be inconsistent with the legislative purpose of focussing on the “commercial justice of the matter”. I agree with his Honour’s approach, and would not set aside the Demands on this ground for the same reasons.

It also seems to me that there is no injustice, still less substantial injustice, to the Plaintiffs in that respect, where cl 1.7 of NAB’s Terms and Conditions specifies the basis on which interest was to be charged; the account statements disclosed the amount of interest charged and how the balance on the accounts had accumulated; the Plaintiffs have had the opportunity to recalculate that interest on that basis and have not sought to do so; and they do not seek to establish that the interest charged was incorrect.

For these reasons, the proceedings are dismissed with costs.