In the matter of Platypus Impact Housing Australia Limited

By this application under section 459G of the Corporations Act 2001 (Cth) the plaintiff, Platypus Impact Housing Australia Ltd (PIHA), seeks to set aside the statutory demand dated 28 September 2023, which was issued by the defendant, Jack Elsegood, to PIHA on 4 October 2023 pursuant to s 459E of the Corporations Act demanding payment of the amount of $200,000.

PIHA is a registered charitable organisation that aims to develop affordable housing. PIHA is not a registered Community Housing Provider (CHP) but works alongside CHPs in relation to particular developments.

From 4 October 2021, Colin Curran became the Chief Executive Officer of PIHA. Mr Curran provided two affidavits in support of the application.

From 4 October 2021 until his resignation on 10 March 2023, Mr Elsegood was a director of PIHA. Mr Elsegood was also a real estate agent of Domain Residential Northern Beaches Pty Ltd. Mr Elsegood did not read any of the affidavits which were filed and served in support of his opposition to the application and did not tender any of the documents contained in the exhibits to those affidavits. Instead, he tendered a small number of documents in support of his case.

I permitted PIHA to tender an excerpt of the affidavit of Mr Elsegood affirmed 11 November 2023 in support of the application.

PIHA admits the existence and the amount of the debt of $200,000 owing by PIHA to Mr Elsegood for the repayment of a loan but says that it has an offsetting claim against Mr Elsegood within the meaning of s 459H(1)(b) and (5) of the Corporations Act which provide the basis for the setting aside of the statutory demand. Whether there is such an offsetting claim is the principal issue that I am required to determine.

Mr E Ball appeared as counsel for PIHA, instructed by McLachlan Thorpe. Mr F Assaf SC with Mr B Hord appeared as counsel for Mr Elsegood, instructed by Legacy Legal.

There was a relatively short cross-examination of Mr Curran on limited issues (T46–63).

Mr Curran was previously a bankrupt between 20 October 1997 and 24 July 2001 and between 7 March 2011 and 6 April 2014. According to the records maintained by the Australian Securities and Investments Commission (ASIC), Mr Curran was also a “person disqualified from managing corporations” under s 206B(3) of the Corporations Act between 7 July 2010 and 6 July 2013.

Mr Curran placed his curriculum vitae in evidence. In Mr Curran’s curriculum vitae he described himself as “2009 – 2013 Retired”, which covers the period in which he was bankrupt and a “person disqualified from managing a corporation” by ASIC . As the word “retired” is commonly understood, Mr Curran was not “retired” in that period. Mr Curran was evasive at first in cross-examination on this topic (T48.5–10):

When confronted with the evidence of his bankruptcy and disqualification, Mr Curran readily admitted to them (T48.12–49.46). The topic of his “retirement” was then raised again in the following exchange (T50):

While I consider that Mr Curran was not entirely candid in this exchange, I consider that the entry on his CV as “retired” was probably borne of his embarrassment at being made a bankrupt and disqualified by ASIC. I think it is entirely plausible that Mr Curran felt that he was forcibly “retired” in that period.

But I do not consider Mr Curran’s answers on that topic undermine his credit generally on the subjects on which he came under attack during cross-examination during the hearing. Mr Curran rejected the proposition that he was prone to make things up as and when it suited him (T50.49–51.8). I conclude that Mr Curran did his best to give his answers honestly. This is especially the case when none of his evidence about the relevant events was the subject of challenge from any competing version from Mr Elsegood or anyone else who might have been called by Mr Elsegood.

On 18 November 2020, CCD Developments Pty Ltd was registered. Since then, the directors of CCD Developments have been Christopher Zenonos, Daniel Cuda and Constantinos Vorkas. The equal shareholders of CCD Developments are companies associated with each of Messrs Zenonos, Cuda and Vorkas.

There are two adjoining parcels of land located in Nikenbah, Hervey Bay, Queensland, the registered proprietor of which was Betty Joan Christensen – one parcel located at 238–272 Maryborough Hervey Bay Road, Nikenbah (Stage I Christensen Ridge development land) and the second located at 44 Chapel Road, Nikenbah (Stage II Christensen Ridge development land).

I will refer to the Stage l Christensen Ridge development land and the Stage II Christensen Ridge development land collectively as the Christensen Ridge development land.

When Betty Joan Christensen died, control of dealing with the Christensen Ridge development land passed to her personal representatives, Joan Hiscock and Bevan Christensen.

At some time prior to September 2021, CCD Developments entered into call option deeds with Joan Hiscock and Bevan Christensen to purchase both parcels of the Christensen Ridge development land, subject to development approval (CCD Call Options).

On 4 October 2021, PIHA was registered as an unlisted Australian public company limited by guarantee and Mr Curran became its Chief Executive Officer for which services he is paid. Also on that date, the initial directors of PIHA were appointed, being Ian Hopkins (who was and remains the Chair of PIHA), Hari Krishna Sallakonda (a real estate agent from Legend Real Estate) and Mr Elsegood. None of the directors of PIHA receive remuneration. The proceedings at the PIHA board meetings were confidential and none of the development opportunities raised at those meetings were made available to the public.

Mr Elsegood’s role with PIHA was to source opportunities and to consider the merit of these opportunities as well as those that were introduced by others. Mr Elsegood was asked to source funds and investments for PIHA as well as source and pursue potential joint venture partners to assess projects coming to fruition. The directions Mr Curran gave Mr Elsegood were to assist with and run feasibility studies on sites and projects, pursue joint venture partners and investors, negotiate bulk purchases of apartments with numerous developers, and to cold call developers, agents and brokers to source deals.

PIHA has only undertaken housing developments in New South Wales and Queensland.

The development process generally followed by PIHA involves these steps:

In about September 2021, James Doyle (a real estate agent) telephoned Mr Curran and told him about an opportunity to purchase 100 residential allotments from a larger parcel of land of 230 residential allotments to be developed on the Stage I Christensen Ridge development land. Mr Doyle told Mr Curran that CCD Developments had an option to purchase the land from the registered proprietors, who were the personal representatives of Betty Joan Christensen, subject to development approval.

On 18 January 2022, Mr Doyle sent an email to Mr Curran to which he attached photographs and a link to a video of the Stage l Christensen Ridge development land.

On 22 March 2022, Mr Curran introduced the Stage l Christensen Ridge development land opportunity at a PIHA board meeting at which Messrs Hopkins, Sallakonda and Elsegood were also present. Ms Toni David took the minutes of the meeting, which state:

At about this time, Mr Curran called Mr Elsegood and told him there was a potential deal in Nikenbah, Hervey Bay, which he subsequently knew to be the Christensen Ridge development land. Mr Elsegood was driving to Yeppoon at the time. At the request of Mr Curran, Mr Elsegood went to Nikenbah to inspect the site to conduct some due diligence. Mr Elsegood concluded that the Christensen Ridge development land was attractive for an investment. Mr Elsegood attended to the initial due diligence, including considering values, sales projections, costs of the development and a feasibility study.

About one month later, Mr Curran had a telephone call with Mr Doyle in which he said that, subject to board approval, PIHA preferred to purchase the whole Stage l Christensen Ridge development land rather than just 100 hundred residential allotments within it. Mr Doyle subsequently told Mr Curran that he had contacted CCD Developments to see if they were interested in selling the entire Stage l Christensen Ridge development land, for a price of $15.5 million including GST.

The Stage II Christensen Ridge development land had the potential for 310 residential allotments. The development approval application was, however, not ready to be lodged for the Stage ll Christensen Ridge development land. The price of the Stage ll Christensen Ridge development land was about $20.77 million, subject to a price reduction if the development approval was for less than 310 residential allotments.

On 1 April 2022, Mr Doyle sent an email to Mr Curran which attached a plan for the Christensen Ridge development land.

At about this time, Mr Elsegood flew up to inspect the Christensen Ridge development land.

In August 2022, Mr Curran told the PIHA directors that the initial deposit under the anticipated sale contract in respect of the Stage l Christensen Ridge development land would be $100,000 and the initial call option fee under the anticipated contract for put and call options for the Stage II Christensen Ridge development land was a further $100,000.

At the same time, Mr Elsegood said to Mr Curran that he would loan PIHA the $200,000 from his share of the sale of the Domain rent roll, but ultimately that transaction did not proceed.

On about 20 August 2022, Mr Curran asked Gregory Pace, a real estate salesperson and personal acquaintance of Mr Curran, to advance $200,000 as a loan to PIHA for both the initial deposit and the initial call option fee, with interest of 3% per month. Mr Curran told Mr Pace that Mr Elsegood would pay him $200,000 within about a month from the sale of his share in the Domain rent roll and that PIHA would then pay $200,000 to Mr Elsegood after the successful settlement of the anticipated sale contracts for the Christensen Ridge development. Mr Pace agreed to that proposed course.

On about 22 August 2022, Mr Curran telephoned each of the PIHA directors in turn to inform each of them that Mr Pace had agreed to loan $200,000 to PIHA. In Mr Curran’s telephone call with Mr Elsegood, Mr Elsegood confirmed that the arrangement was acceptable and would give him time to sell his share of the Domain rent roll.

On 22 August 2022, Mr Pace electronically transferred $200,000 into Mr Curran’s bank account, who then transferred that amount to PIHA in increments across three transactions on 22 and 23 August 2022.

On 29 August 2022, the PIHA board met by video with Messrs Curran, Hopkins, Elsegood and Sallakonda present. The minutes of the meeting were taken by Ms David. During the course of the meeting it was noted that the initial deposits of $100,000 for each stage of the Christensen Ridge development had been paid by PIHA, exchange was expected before 31 August 2022 and the PIHA board proposed to appoint Mr Pace as a consultant.

On 25 August 2022, CCD Nikenbah Pty Ltd was registered with Messrs Zenonos, Cuda and Vorkas as the directors and companies associated with them as the equal shareholders. As a result, CCD Developments and CCD Nikenbah had the same directors and the same shareholders.

On 28 August 2022, CCD Developments and CCD Nikenbah entered into nomination agreements pursuant to which CCD Developments nominated CCD Nikenbah to exercise the call options in the CCD Call Options.

On 2 September 2022, CCD Nikenbah and PIHA exchanged a contract for the sale of the Stage l Christensen Ridge development land for the sale price of $15.5 million including GST (Stage l Sale Contract), with the initial deposit of $100,000 payable that day and the balance of the deposit of $400,000 payable five days after the unconditional development approval was obtained in respect of that land.

On 2 September 2022, CCD Nikenbah and PIHA exchanged a put and call option deed for the Stage II Christensen Ridge development land for the total sale price of $20.5 million including GST (Stage ll Option Deed), with the initial call option fee of $100,000 payable that day and the balance of the call option fee payable of $400,000 when the Stage l Sale Contract settled.

Performance of the Stage l Sale Contract and the Stage ll Option Deed depended on the CCD Call Options and also the obtaining of an unconditional development approval by 30 March 2023.

On 2 September 2022, PIHA transferred $200,000 into the trust account of the solicitors acting for CCD Nikenbah, $100,000 of which was the initial deposit under the Stage l Sale Contract and $100,000 of which was the initial call option fee under the Stage II Option Deed.

On 3 September 2022, Mr Curran telephoned Mr Elsegood and informed him about the exchanges of the Stage l Sale Contract and the Stage II Option Deed and that each contract could be terminated if an unconditional development approval was not obtained by 30 March 2023.

On 13 September 2022, Gadens sent an email to Mr Curran, which was copied to Messrs Hopkins, Sallakonda and Elsegood, summarising the terms of the Stage l Sale Contract and the Stage II Option Deed and confirming that the $200,000 had been transferred.

Between about 26 September 2022 and 21 October 2022, Mr Elsegood made a total of six bank transfers to Mr Pace in the sum of $200,000 in accordance with the arrangements made on about 20 August 2022. These transfers gave rise to the $200,000 debt owing from PIHA to Mr Elsegood which is the subject of the statutory demand.

On 29 September 2022, a meeting of the PIHA board took place by video which was attended by Messrs Hopkins, Elsegood, Sallakonda and Curran, with the minutes taken by Ms David. At the meeting it was resolved that PIHA would pay a 5.5% commission to each of Messrs Elsegood and Sallakonda to act as agents in the sale of the Christensen Ridge development land and it was noted that Mr Pace had been appointed as a consultant to PIHA.

On 18 October 2022, Mr Elsegood and Mr Curran flew from Sydney to the Sunshine Coast where they met Mr Pace and then they all drove to Hervey Bay to visit the Christensen Ridge development land. On 20 October 2022, Mr Elsegood and Mr Curran flew back from the Sunshine Coast to Sydney.

On 18 November 2022, PIHA created a document titled “Feasibility: Christensen Ridge, Hervey Bay - 18 November 2022” which forecasted a total profit after tax of $34,375,235 for the Stage I Christensen Ridge development land. Mr Curran was cross-examined about this amount but did not resile from it (T60–63).

On 23 November 2022, CCD Developments obtained development approval in relation to the Stage l Christensen Ridge development land.

On 10 December 2022, Mr Elsegood sent an email to Mr Curran which attached a Heads of Agreement between PIHA and what was described as “[a]n entity comprising Trevor Groeneveld, Biagio Abignano and (Jacks Entity) or their nominees (‘Developer’)” which had been signed by Messrs Elsegood and Sallakonda on behalf of PIHA and also by Messrs Groeneveld and Abignano. In summary, the Heads of Agreement provided for the joint development of the Stage I Christensen Ridge development land.

Mr Elsegood had sourced Mr Groeneveld and Mr Abignano as joint venture partners to assist with the acquisition and development of the Christensen Ridge development land, which he progressed to the Heads of Agreement.

On 10 December 2022, Messrs Curran and Elsegood had a meeting at which Mr Curran told Mr Elsegood that he had breached his fiduciary obligations to act in the best interests of PIHA by entering into the Heads of Agreement and that Mr Curran intended immediately to seek legal advice from Shaun McGushin of Ash Street Law.

On 15 December 2022, Mr McGushin sent an email to Mr Elsegood, which was copied to Messrs Curran and Hopkins, which stated that Mr Elsegood clearly has a conflict of interest in his role as a director of PIHA because he has a material personal interest in the “Developer” and the proposed development of the Stage I Christensen Ridge development land. Amongst other things, Mr McGushin stated that the Heads of Agreement had not been agreed by PIHA and had not been approved by the PIHA board as required under its constitution, that no PIHA board meeting had been held and that PIHA was not bound by the Heads of Agreement. Mr McGushin further said that because of Mr Elsegood’s material personal interest, he was not able to be present at the PIHA board meeting to consider the matter or vote in relation to it. Mr McGushin concluded by saying that notwithstanding this and without prejudice to PIHA’s rights, PIHA was still prepared to consider proceeding with the development but on terms that needed to be agreed.

Mr Curran was cross-examined about PIHA still being prepared to consider proceeding with the development under the Heads of Agreement. He said it would have to be on terms that needed to be agreed, which was why the Heads of Agreement did not go ahead, and that there needed to be a proper meeting and agreement of the board of PIHA, which is the process of PIHA as a public company and a charity (T57).

In mid-December 2022, Mr Curran asked Mr Doyle to arrange for surveys of 50 residential allotments of the Stage I Christensen Ridge development land, so that solicitors could prepare put and call, and sale, contracts to enable PIHA to proceed to sell the residential allotments “off the plan”.

Between January and March 2023, PIHA exchanged about 25 contracts for put and call options over residential allotments of the Stage I Christensen Ridge development land with a 5–10% deposit, subject to registration of the new title in respect of the respective residential allotments.

PIHA also exchanged a heads of agreement subject to finance approval on 70 residential allotments of the Stage I Christensen Ridge development land for about $27 million with a CHP.

Sometime in 2022, PIHA retained Stephen Hodgkinson to apply for funding approval for it in respect of the Christensen Ridge development land. Subsequently, Mr Hodgkinson sought funding approval from Balmain Commercial and Benchmark in respect of the Christensen Ridge development land, which progressed to an advanced stage.

On 9 January 2023, the owners of the golf driving range neighbouring the Stage I Christensen Ridge development land, Hayley Brooks and Stephen Taylor, filed a notice of appeal in the Queensland Planning and Environment Court against the development approval which CCD Developments had obtained for the Stage I Christensen Ridge development land (DA Appeal).

In March or April 2023, Mr Curran believes that CCD Developments approached Ms Hiscock and Mr Christensen as vendors of the Stage I Christensen Ridge development land to extend the time for obtaining the unconditional development approval beyond 30 March 2023.

On 15 February 2023, Mr Elsegood sent an email to Mr Hopkins, amongst others, in which he said he had funded the two option deeds for the Christensen Ridge development land for $200,000 in total and that he now found himself in a “poor cash flow position” with a number of debts to both the Australian Taxation Office and ASIC. Mr Elsegood requested repayment of those funds, saying “I simply cannot wait any further”.

On 16 February 2023, Mr Hopkins sent an email to Mr Elsegood in reply saying that the $200,000 was contributed as equity for which the return is assumed to come from the project. Mr Hopkins also stated:

On 16 February 2023, Mr Elsegood responded by email to Mr Hopkins, copied to Messrs Curran and Sallakonda, stating that the funds for the option fee were loans, not equity, and that he intended to still have funds to contribute into the joint venture entity. Mr Elsegood also said:

On 16 February 2023, Fraser Coast Projects Pty Ltd was incorporated, with Messrs Zenonos and Cuda as directors and companies associated with each of them as equal shareholders. Unlike CCD Developments and CCD Nikenbah, Mr Vorkas was not included in the management and ownership of Fraser Coast.

On 10 March 2023, Mr Elsegood tendered his resignation as a director of PIHA to avoid any conflict between PIHA and a joint venture company to enter into an arrangement with PIHA to develop the Christensen Ridge development land.

On 14 March 2023, Mr Pace became a director of PIHA.

On 15 March 2023, the PIHA board comprising Messrs Hopkins, Sallakonda and Pace resolved to accept Mr Elsegood’s resignation as a director with effect from 10 March 2023.

On 22 March 2023, Fraser Coast, Ms Hiscock and Mr Christensen entered into new call option deeds for the Stage I Christensen Ridge development land and the Stage II Christensen Ridge development land, with a purchase price of $6.35 million plus GST and $6.6 million plus GST respectively (Fraser Coast Call Options). The terms of the Fraser Coast Call Options permitted Fraser Coast to nominate a third party to exercise the call option.

At the time that the Fraser Coast Call Options were executed, Mr Curran was not aware of them.

On 30 March 2023, no unconditional development approval for the Christensen Ridge development land had been obtained. This meant that the condition precedent to the Stage I Sale Contract and the Stage II Option Deed had not occurred.

On 30 March 2023, Mr Curran flew from Sydney to Hervey Bay where he met Simon Power, a civil contractor, with whom he visited the Christensen Ridge development land along with Mr Doyle. On 31 March 2023, Mr Curran returned to Sydney.

On 11 April 2023, Mr Zenonos sent an email to Mr Curran, copied to Mr Cuda, which referred to an earlier discussion, stated that Fraser Coast was looking to nominate PIHA as the buyer for the Stage I Christensen Ridge development land and attached the draft nomination agreement and the Fraser Coast Call Option that had been signed for each of the Stage I Christensen Ridge development land and the Stage II Christensen Ridge development land. Mr Zenonos set out a summary of the Fraser Coast Call Options saying (quoted below exactly as written):

This demonstrates that PIHA was aware of Fraser Coast’s involvement with the Christensen Ridge development land from that time.

On 23 April 2023, Mr Curran sent an email to Mr Hopkins and Warren Denny of Piper Alderman (solicitors for PIHA) which forwarded the email received on 11 April 2023 from Mr Zenonos. Mr Curran said that he had spoken to Mr Zenonos the previous day, and that Mr Zenonos had said that if PIHA did not sign the new nomination deed they would sell to another party. Mr Curran commented (quoted below exactly as written):

On 25 April 2023, Mr Cuda on behalf of CCD Developments sent an email to Mr Denny advising that the Stage I Sale Contract was terminated as the Stage I call option deed had come to an end and the Stage II Option Deed was terminated as the Stage II call option deed had also come to an end. Mr Cuda said that the initial deposit under the Stage I Sale Contract and the initial call option fee under the Stage II Option Deed would be refunded to PIHA.

On 26 April 2023, Mr Denny forwarded to Mr Curran the email of 25 April 2023 from Mr Cuda.

On 26 April 2023, on the instructions of Mr Curran, Mr Denny sent a letter to the directors of CCD Nikenbah, Fraser Coast and CCD Developments stating that PIHA considered there was no proper basis to terminate the Stage I Sale Contract and the Stage II Option Deed. The letter alleged that CCD Nikenbah was in breach of its implied duty to act in good faith, CCD Nikenbah deprived PIHA of the intended benefit of those contracts, CCD Nikenbah was in breach of its implied undertaking to use all reasonable endeavours to enable fulfilment of the conditions contained in those contracts and that Messrs Zenonos and Cuda had engaged in unconscionable conduct by entering into the Fraser Coast Call Options.

On 26 April 2023, Mr Curran rang Mr Hodgkinson to tell him that CCD Developments had wrongly terminated the Stage I Sale Contract and the Stage II Option Deed, but that PIHA intended to undo that purported termination and he wanted Mr Hodgkinson to continue to arrange funding approval in respect of the Christensen Ridge development land.

On 4 May 2023, Mr Curran met Mr Zenonos for lunch in Parramatta. Mr Curran says that at the lunch Mr Zenonos threatened not to sign a contract for PIHA to acquire put and call options for a development in Ipswich if Mr Curran did not agree that Fraser Coast should have the Christensen Ridge development, free of any legal proceeding. Mr Curran also said that Mr Zenonos then offered to pay $2 million to PIHA for Fraser Coast to have the Christensen Ridge development land and not sue it or any of its directors. Mr Curran also said that Mr Zenonos caused him to understand that Fraser Coast had nominated Nikenbah Developments Pty Ltd under the Fraser Coast Call Options and that settlement would be on the purchase price of $15.5 million including GST.

Messrs Curran and Zenonos then agreed that Mr Elsegood could join them. Mr Elsegood then met Messrs Curran and Zenonos at another venue. There is no evidence about what took place in the meeting between Messrs Curran, Zenonos and Elsegood at the other venue.

On 5 May 2023, Mr Curran met Mr Elsegood at the Richmond Club in Richmond, New South Wales. Mr Elsegood then handed Mr Curran a document which Mr Curran understood to be a series of the following demands made by Mr Elsegood to Mr Curran:

Mr Curran says that he rejected these demands, having formed the view that Mr Elsegood was asking Mr Curran to assist him in breaching fiduciary obligations to PIHA. Mr Elsegood submits that this purported breach of fiduciary duty can only be a reference to Mr Elsegood’s involvement in Nikenbah Developments. Mr Elsegood also says that these “demands” were specifically referable to Mr Elsegood’s ongoing role in the Christensen Ridge development land with Nikenbah Developments and Fraser Coast. But there was no mention of either entity at the meeting on 5 May 2023, which is unsurprising in the case of Nikenbah Developments, as it had not even been registered as a company at that time. For this reason, I find that PIHA was not aware of Mr Elsegood’s involvement with Nikenbah Developments at that time.

In cross-examination (T59.1–29), it was put to Mr Curran that his statement that he formed the view that Mr Elsegood was asking Mr Curran to assist him in his breaches of fiduciary obligations to PIHA was not a view that he formed in May 2023. It was also put to Mr Curran that he included this in his evidence to try to corroborate an offsetting claim for the purposes of responding to the statutory demand. Mr Curran rejected these suggestions. I accept his rejection, particularly in light of there being no contrary version of the meeting which challenges the recollection of Mr Curran.

On 11 May 2023, Nikenbah Developments was registered. The directors of Nikenbah Developments are Messrs Groeneveld and Abignano and one of its shareholders is Elsegood Holdings Australia Pty Ltd, a company of which Mr Elsegood is the sole director, secretary and shareholder. Elsegood Holdings is recorded as holding 10,600 D class shares in Nikenbah Developments, out of Nikenbah Developments’ total paid up capital of $100,000.

On 26 May 2023 at 6:54am, Mr Zenonos received an email which attached a notice of discontinuance of the DA Appeal.

On 26 May 2023 at 10:54am, Mr Zenonos sent an email to Messrs Groeneveld, Abignano and Elsegood, copied to Mr Cuda, which forwarded them the notice of discontinuance of the DA appeal and said as follows:

On 26 May 2023 at 3:24pm, Mr Groeneveld sent an email to Messrs Zenonos, Abignano and Elsegood, copied to Mr Cuda, which stated:

All of these three emails of 26 May 2023 are contained in the same email string within one document (together, 26 May emails). Mr Elsegood took objection to the admission of the 26 May emails into evidence. I consider that the 26 May emails should be admitted into evidence for the reasons set out in detail under the heading “Admissibility of the 26 May emails” below.

On 26 May 2023, PIHA created a document titled “Feasibility: Christensen Ridge, Hervey Bay – 26 May 2023” which forecasted a total profit after tax of $14,000,317 for the Stage I Christensen Ridge development land. This was considerably reduced from the total profit after tax of $34,375,235 which had been forecast as at 18 November 2022 (which is referred to above). Mr Curran was cross-examined about this reduction, accepting that he did not refer to the 23 May 2023 forecast in his affidavit (T63.1–13).

On 24 July 2023, by leave of the court, Mr Vorkas brought proceedings in the name of CCD Developments and CCD Nikenbah in the Federal Court of Australia against Messrs Zenonos and Cuda and Fraser Coast in relation to the Christensen Ridge development land (CCD Proceedings). In the CCD Proceedings, it was alleged that each of Messrs Zenonos and Cuda breached the statutory and fiduciary duties they owed to CCD Developments and CCD Nikenbah by:

In the CCD Proceedings, it was alleged that Fraser Coast was a person involved in the breaches of statutory duties and knowingly assisted Messrs Zenonos and Cuda in their breaches of fiduciary duties as part of a dishonest and fraudulent design.

On 18 August 2023, Fraser Coast withdrew the caveat on the title to the Stage I Christensen Ridge development land it had lodged on 5 June 2023.

On 18 August 2023, Ms Hiscock and Mr Christensen transferred title to the Stage I Christensen Ridge development land to Nikenbah Developments.

In about August 2023, Mr Curran telephoned Mr Hodgkinson and told him he could no longer see any realistic prospect of PIHA taking control of the Christensen Ridge development land and asked him to immediately stop any work to obtain funding approval for PIHA in respect of it.

On 4 October 2023, the statutory demand was served on PIHA.

On 19 October 2023, the solicitors for PIHA wrote to the solicitors for Mr Elsegood stating that PIHA relied on three of the grounds in ss 459H and 459J of the Corporations Act, being that there was a genuine dispute about the existence or amount of the debt to which the statutory demand related, PIHA had an offsetting claim and there was some other reason why the demand should be set aside. In the letter, the basis of the alleged offsetting claim was said to be breaches of Mr Elsegood’s directors’ duties owed to PIHA under ss 182 and 183 of the Corporations Act and breaches of his fiduciary obligations to PIHA in preferring his own interests to PIHA’s interests in relation to the Stage I Christensen Ridge development land. It was asserted that:

The letter of 19 October 2023 attached an ASIC search of Nikenbah Developments dated 21 August 2023. Mr Elsegood says that this demonstrates that PIHA was aware of Mr Elsegood’s involvement with Nikenbah Developments at that time. I agree that I can infer that from 21 August 2023, PIHA was aware of that fact.

The solicitors for PHIA concluded the letter by demanding that Mr Elsegood withdraw the statutory demand by 4:00pm on 20 October 2023, failing which PIHA would file and serve an application in this court to set aside the statutory demand.

This was the first time that PIHA raised an alleged claim against Mr Elsegood in relation to his involvement with Fraser Coast and Nikenbah Developments.

Mr Curran admitted in cross-examination that the statement contained in the 19 October 2023 letter, that there is a genuine dispute between PIHA and Mr Elsegood about the existence or the amount of the debt owed to Mr Elsegood, was wrong (T51.43–53.4).

Mr Curran asserts that PIHA’s wasted expenditure on the Christensen Ridge development land totals $225,913.08, including legal costs, commissions, variable expenses, joint venture agreement costs and conveyancing costs.

There is no evidence that PIHA has commenced proceedings against Mr Elsegood in any forum in connection with the purported offsetting claim, which Mr Curran deposed on 23 October 2023 that PIHA intends to pursue.

In cross-examination, Mr Curran maintained that at the time of the letter of 19 October 2023 and since (T53.20–54.16 and T55.1–36):

I accept this evidence.

The profit and loss statement of PIHA for the year ended 30 June 2022 demonstrates that it made a loss of $58,762.66. The profit and loss statement of PIHA for the year ended 30 June 2023 demonstrates that it made a loss of $230,002.94. In each of those years, the balance sheet of PIHA reveals that PIHA had a deficiency of assets to liabilities of $58,762.66 and $288,765.60 respectively.

The 26 May emails referred to above were the subject of challenge to their admissibility by Mr Elsegood.

On the argument about admissibility, PIHA relied on the affidavit of Jesse Samuel Gibson (a solicitor for PIHA) sworn 19 April 2024 (Gibson affidavit) to establish that:

PIHA also relied on the terms of a notice to produce dated 22 November 2023 (Notice to Produce) which was issued to Mr Elsegood seeking the production of documents falling within the following categories (noting the misspelling of “Nikenbah” as “Nikenbar”):

PIHA also relied on the terms of the two affidavits of Mr Curran.

In summary, in opposition to the admissibility of the 26 May emails, Mr Elsegood contended as follows:

PIHA’s argument in response ran as follows:

During the hearing (T10.43–11.44) I gave Mr Elsegood an opportunity to cure any prejudice to him by the admission of the 26 May emails into evidence by seeking an adjournment of the hearing on terms that PIHA pay the costs thrown away of doing so. I adjourned the hearing for five minutes to enable Mr Elsegood to provide instructions. At the resumption of the hearing, I was told that Mr Elsegood had made the decision to press on whilst maintaining that the only way to cure the prejudice to him was to reject the tender of the 26 May emails.

In my opinion, the 26 May emails fell within the categories required to be produced by Mr Elsegood under the Notice to Produce. The 26 May emails were emails to Mr Elsegood during the period from January to June 2023 concerning or relating to Nikenbah Developments’ shareholders agreement. The email of 26 May 2023 at 10:54am explicitly states:

As a result, the document containing the 26 May emails should have been produced by Mr Elsegood in November 2023. Instead, the 26 May emails did not come to the attention of PIHA until 1 February 2024 when Mr Vorkas produced documents to PIHA in response to the Subpoena. This explains a significant amount of the delay in PIHA indicating that the 26 May emails were sought to be relied upon as evidence by PIHA in these proceedings.

As for the delay between 1 February 2024 and 19 April 2024 (when the Gibson affidavit was sworn with the 26 May emails annexed to it), I do not consider that Mr Elsegood has been prejudiced by that delay. The purpose of the Gibson affidavit is to set out the provenance of the 26 May emails. The 26 May emails are contained in Mr Elsegood’s own document. The suggestion that Mr Elsegood may have taken a different tack in his evidence if he had known that the 26 May emails would be relied upon is not supported by any reasoned argument. Mr Elsegood made the forensic choice not to go into evidence at the hearing. Mr Elsegood did not state any basis for why he might have taken a different course if he had known that the 26 May emails would become evidence in the proceedings. I also gave Mr Elsegood the opportunity to adjourn the hearing to cure any prejudice that he considered he may suffer by reason of the 26 May emails becoming evidence in the proceedings and on terms that PIHA would have to pay the wasted costs. Mr Elsegood decided not to apply for an adjournment.

As for the application of the Graywinter principle, it has its origins in Sandberg J’s observations in Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452; (1996) 21 ACSR 581 concerning the requirements under the statutory regime established by s 459G of the Corporations Act.

Section 459G of the Corporations Act provides:

In Re ABA Villawood Place Pty Ltd [2023] NSWSC 952, Black J at [31] stated that the essential requirement of s 459G that the Graywinter principle emphasises is:

The authorities concerning the Graywinter principle (which I will outline and discuss in greater depth below) indicate that the threshold requirement is:

The principal authorities addressing the scope and operation of the Graywinter principle are set out below.

In NA Investments Holdings Pty Ltd v Perpetual Nominees Ltd (2010) 79 ACSR 544; [2010] NSWCA 210, the Court of Appeal of this court considered whether an affidavit in support of an application under s 459G in fact supported that application. In that case, the affidavit was directed to an offsetting claim, but also served to put in evidence the document (a facility agreement) upon which the debtor company ultimately wished to advance a particular construction, which was at the heart of the alleged dispute. After listing the many cases that had discussed the Graywinter principle (at [78]), Lindgren AJA (with whom Beazley JA and Handley AJA agreed) at [86] stated:

In Hopetoun Kembla Investment Pty Ltd v JPR Legal Pty Ltd (2011) 286 ALR 768; 87 ACSR 1; [2011] NSWSC 1343, Ward J (as her Honour the President then was) at [35]–[38] said:

In Infratel (No 1), Black J considered the Graywinter principle as it applied to an affidavit made in support of the application to set aside a statutory demand which was challenged on the basis that it did not quantify the amount of the costs and expenses said to form part of the offsetting claim. In Infratel (No 1), Black J collected the authorities on what is sufficient to meet the Graywinter principle for the quantification of an offsetting claim, saying at [29]–[31]:

In Infratel (No 2), Young JA (with whom Hoeben JA and Ward J agreed) at [36]–[37] and [42] concluded that Black J’s reasoning in Infratel (No 1) was unarguably correct.

Mr Elsegood argued that Mr Curran’s affidavit in these proceedings was in the same category as the affidavit in Infratel (No 1), which Black J described as an affidavit which:

PIHA argued that the decision in Infratel (No 1) must be read in the light of the subsequent observations of the West Australian Court of Appeal in Pravenkav.

In Pravenkav, the issue was whether the initial supporting affidavit must contain evidence sufficient to permit the court to quantify an offsetting claim. The court at [44]–[54] conducted a review of Infratel (No 1) and Infratel (No 2) (including the authorities on which Infratel (No 1) was based) and at [55] also reviewed the following intermediate appellate decisions to discern the proposition for which they stood:

In Pravenkav, the court concluded at [56] that these intermediate appellate court authorities are consistent with the proposition that the amount of the offsetting claim for the purposes of s 459H is to be decided at the date of the hearing of the application to set aside and not at some earlier time. Further, the court concluded at [64]–[65]:

In my view, the tender of the 26 May emails does not transgress the Graywinter principle for several reasons.

First, the absence of the 26 May emails from the affidavit of Mr Curran sworn 23 October 2023 is obviously explained by the fact that the 26 May emails were not in the possession of PIHA until 1 February 2024.

Secondly, the affidavit of Mr Curran sworn 23 October 2023 at [112]–[113] makes it very clear that the offsetting claim against Mr Elsegood is alleged to be that Mr Elsegood breached his director’s duties and his fiduciary obligations owed to PIHA. While this is expressed as a loss of profits of around $34.375 million and a wasted expenses claim of about $226,000, I do not think that the Graywinter principle prevents PIHA from supplementing this evidence in respect of an offsetting equitable claim which, if brought, provides for PIHA to make an election between equitable compensation and an account of profits when judgment on the liability for that claim is given.

The law on this proposition is clear, deriving from the following authorities.

In United Australia Ltd v Barclays Bank Ltd [1941] AC 1; [1940] 4 All ER 20 (a case concerned with an election between actions in tort and assumpsit), Viscount Simon LC stated at 18–19 (emphasis added):

In Tang Man Sit v Capacious Investments [1996] AC 514; [1996] 1 All ER 193, Lord Nicholls of Birkenhead (delivering the advice of the Privy Council) at 521 said:

These principles have been applied by Australian courts in relation to the choice to be made between equitable compensation and an account of profits. In GM & AM Pearce & Co Pty Ltd v Australian Tallow Producers [2005] VSCA 113, Warren CJ (with whom Chernov JA and Dodds-Streeton AJA agreed) at [56] held (footnotes omitted):

This principle has been repeatedly applied in other Australian courts, including in BCEG International (Australia) Pty Ltd v Xiao (2022) 162 ACSR 601; [2022] NSWSC 972, Rees J at [416]; Amcor Ltd v Barnes [2021] VSCA 6, Ferguson CJ, Beach and Whelan JJA at [297]; Du v Georgiadis [2020] VSCA 306, Kyrou, McLeish JJA and Macaulay AJA at [32]; Edwards v Liquid Engineering 2003 Pty Ltd (2008) 77 IPR 115; [2008] FCA 970, Gordon J at [76].

In the affidavit of Mr Curran sworn 23 October 2023, PIHA put forward evidence within the 21 day statutory period to outline the quantum of the offsetting claim expressed as equitable compensation. In accordance with Pravenkav, I am to assess the quantum of the offsetting claim at the time of the hearing. I consider that PIHA is entitled to supplement that evidence with further evidence in the form of the 26 May emails which were subsequently obtained by PIHA to demonstrate the quantum of the offsetting claim should an election be made to seek an account of profits instead. Given that this election would not have to be made until the time that judgment on the liability of that claim is given, I do not think that PIHA should be limited on this application to only being able to express the quantum as though it had already made an election to seek equitable compensation.

In accordance with the application of the Graywinter principle as expressed in Infratel (No 1) at [29], I think that this is a case in which Mr Curran’s affidavit within the statutory period states that the amount of that claim is greater than the amount of the debt, and even if this does not provide further indication of the quantum of that claim, it will be sufficient to allow further evidence in the form of the Gibson affidavit to be led outside the 21 day period to supplement the evidence contained in the initial affidavit. Or to use the words expressed in Kerslake at [10], in an offsetting claim case, all that is needed in the initial affidavit is some indication that the offsetting claim is of a magnitude that can sensibly be compared with the amount of the statutory demand. This was done in the present case.

Finally, I do not consider that the 26 May emails were tendered in breach of the implied undertaking to the court pursuant to which Mr Vorkas had possession of them. PIHA obtained the 26 May emails from the production by Mr Vorkas in answer to the Subpoena. Mr Vorkas was therefore compelled to provide them to the court. The documents provided in answer to the Subpoena were ultimately produced to the court during the hearing on the authority of Mr Vorkas (T8).

For these reasons, I consider that the 26 May emails should be received into evidence and I accept their tender by PIHA.

Section 459H(1) of the Corporations Act is in the following terms:

Section 459H(5) provides that “offsetting claim”:

In Re Libdy Developments Pty Ltd [2023] NSWSC 647, Williams J at [10]–[11] collected the applicable principles from the authorities for determining whether there is a genuine “offsetting claim” within s 459H(1)(b) of the Corporations Act as defined in s 459H(5), saying (footnotes omitted):

PIHA submits that the crux of its offsetting claim against Mr Elsegood is that he has obtained for himself valuable benefits in the Christensen Ridge development land in circumstances where he came into the opportunity to obtain those benefits by reason of his being and working as a director of PIHA. It is said that the benefits Mr Elsegood obtained are analogous (if not equivalent) to a secret commission, albeit one bestowed on him after his resignation as a director. PIHA contends that Mr Elsegood occupied a fiduciary position and was therefore prohibited, without the informed consent of PIHA, from:

PIHA relies on these principles derived from Chan v Zacharia (1984) 154 CLR 178; [1984] HCA 36, Deane J at 198–199; Warman International Ltd v Dwyer (1995) 182 CLR 544; [1995] HCA 18, Mason CJ, Brennan, Deane, Dawson, and Gaudron JJ at 557; Howard v Commissioner of Taxation (2014) 253 CLR 83; [2014] HCA 21, French CJ and Keane J at [33].

PIHA contends that Mr Elsegood’s conduct in obtaining benefits in and from the Christensen Ridge development land violated the “no profit” rule, and also contravened s 183(1) of the Corporations Act which states that a person who obtains information because they are or have been a director of a corporation must not improperly use the information to gain an advantage for themselves or someone else.

PIHA says that Mr Elsegood as a fiduciary cannot unilaterally absolve himself of liability by resigning from his office as a director in order to take a benefit for which he should otherwise account, relying on Streeter v Western Areas Exploration Pty Ltd (No 2) (2011) 278 ALR 291; [2011] WASCA 17, Murphy JA, (McLure P and Buss JA agreeing) at [370]–[371], citing Green & Clara Pty Ltd v Bestobell Industries Pty Ltd [1982] WAR 1, Canadian Aero Services Ltd v O’Malley [1974] SCR 592, Ex parte James (1803) 8 Ves 337; 32 ER 385, Lord Eldon at 390–1, and Phipps v Boardman [1964] 1 WLR 993; [1964] All ER 187, Wilberforce J at 1012.

PIHA also says that it does not matter whether or not PIHA would or could otherwise have taken the opportunity comprising the Christensen Ridge development land but for Mr Elsegood’s conduct, citing Vadori v AAV Plumbing (2010) 77 ACSR 616; [2010] NSWSC 274, Ward J (as the President then was) at [200] to the effect that in applying the no conflict and no profit rule it does not matter whether:

PIHA emphasises the low and undemanding threshold for the determination of whether it has an offsetting claim under s 459H of the Corporations Act — it needs to be arguable on the facts before me so I can determine the basis for it, how it is calculated and that it is not fanciful. The offsetting claim is said to be the breaches of fiduciary duties and statutory directors’ duties owed by Mr Elsegood to PIHA, giving rise to many remedies (constructive trust, equitable compensation, account or inquiry) and for statutory compensation under s 1317H of the Corporations Act. In particular, PIHA says that many of these remedies will depend either on the production of further evidence that is peculiarly within the possession or knowledge of Mr Elsegood or subsequent procedures being ordered following a successful final hearing on the merits of the claim.

PIHA says that the breaches of duty alleged against Mr Elsegood are genuine and not spurious. PIHA contends that all it need do is indicate some basis upon which the court could presently quantify the offsetting claim, even though further quantification might await a final hearing on the merits.

PIHA submits that the evidence which enables me to be satisfied that the amount of the offsetting claim against Mr Elsegood for his breaches of duties exceeds the $200,000 amount sought by the statutory demand is as follows:

PIHA says that in considering the genuineness of the claim, it must be considered that by its very nature it is a claim in which PIHA lacks a great deal of knowledge because it involves secret commissions and secret profits. PIHA says that it has done its best with the information it has to quantify the claim. PIHA points to the fact that Nikenbah Developments did not acquire the Christensen Ridge development land until 18 August 2023, so there was not much time between the acquisition of that benefit by Mr Elsegood and the issuing of the statutory demand. PIHA also says that, as Mr Curran explained during cross-examination, PIHA is mindful to wait for the progress of the CCD Proceedings, the facts of which are heavily bound up and related to these proceedings, before commencing the claim against Mr Elsegood. This gives one explanation as to why there has been a short but explicable delay.

PIHA made it clear that it is not pressing the “loss” case against Mr Elsegood because it accepts that there is a gap in the evidence between the termination of the Christensen Ridge development land with CCD Developments and Nikenbah Developments arriving on the scene. PIHA emphasised that it is only seeking to claim against Mr Elsegood to obtain the benefits that he has received in breach of his duties.

Finally, PIHA offered an undertaking to the court that PIHA would commence the proceedings against Mr Elsegood within 28 days of an order being made to set aside the statutory demand.

Mr Elsegood argued that the offsetting claim is not genuine, that it is a fiction recently invented in response to the service of the statutory demand and that this fact alone is significant for determining the genuineness or otherwise of the offsetting claim. Mr Elsegood says that the claim has not been advanced in good faith, referring in particular to the decisions in Grandview and Access Solutions International Pty Ltd v Taglieri [2015] VSC 494, Randall AsJ at [55], the latter of which is to the effect that to be genuine, the offsetting claim must be demonstrated to have a sufficient objective existence and prima facie plausibility to distinguish it from an assertion and that an offsetting claim made after the statutory demand is issued suggests that the alleged offsetting claim is not genuine and that the subsequent steps are a contrivance to give weight to an unmeritorious claim.

Mr Elsegood says that there has been a failure on the part of PIHA to pursue the offsetting claim which has been known about since at least 4 May 2023, when Mr Curran met Mr Zenonos, and then on 5 May 2023, when Mr Curran met Mr Elsegood alone. Further, Mr Elsegood says that there was no evidence that a claim against Mr Elsegood was raised in any form, prior to the letter of 19 October 2023, in response to the statutory demand and there is no evidence that PIHA has commenced proceedings against Mr Elsegood in any forum for the purported offsetting claim.

Mr Elsegood also says that the lack of genuineness is also supported by PIHA having prevaricated and been inconsistent in the arguments that have been put and advanced in response to the statutory demand. Mr Elsegood detailed these prevarications and inconsistencies as follows:

Mr Elsegood says that I should characterise these various claims as ambit claims which undercut the genuineness of them.

Mr Elsegood also says that the financial position of PIHA makes it clear that it is a loss-making enterprise and so should be characterised as a desperate claim made by a company in a desperate financial situation.

Mr Elsegood submits that the purported offsetting claim is void of fundamental integers and is pure assertion. It is said by Mr Elsegood that PIHA does not identify the role of Mr Elsegood in the purported scheme; the other participants in the scheme; where, when or how the scheme was hatched; whether the scheme was recorded in writing or whether it was entirely oral; how the scheme was executed; how the scheme caused PIHA to lose the opportunity to develop the Stage I Christensen Ridge development land; and how participation in the scheme was a breach of Mr Elsegood’s director’s duties and fiduciary duties.

Mr Elsegood says that PIHA was given multiple opportunities to participate in the Christensen Ridge development land, which it refused, while Mr Elsegood had been open and transparent about his engagement with the other parties and they only proceeded after it was clear that PIHA could not take up the opportunity.

Mr Elsegood said that if I was satisfied that the statutory demand should be set aside this is an appropriate case in which I should impose a condition under s 459M of the Corporations Act in making an order under s 459H, so that PIHA must commence proceedings in a court of competent jurisdiction in respect of the offsetting claim within 28 days of this judgment. Mr Elsegood says that the non-fulfilment of the condition where a conditional order is made setting aside the statutory demand means that the statutory demand will continue to stand. Mr Elsegood cited the approach taken in Asia Pacific Glass Pty Ltd v Sindea Trading Co Pty Ltd (No 2) (2003) 47 ACSR 737; [2003] NSWSC 845, Barrett J at [13] and Asia Pacific Glass Pty Ltd v Sindea Trading Co Pty Ltd [2003] NSWSC 334, Barrett J at [24].

In essence, PIHA alleges that:

The claim for breach of fiduciary duties proposed to be brought by PIHA against Mr Elsegood is one which appears to come within the well-known principles established in Chan and Warman, which are summarised in the following passage from Howard by French CJ and Keane J at [33] (footnotes omitted):

This claim has its statutory counterpart in s 183(1) of the Corporations Act, which states:

The remedies pressed by PIHA are ones which would have Mr Elsegood account for the profits he has made, either by way of an account of profits for breach of fiduciary duties or compensation under s 1317H of the Corporations Act for breach of s 183(1). As I stated above, the oft-cited principle stated in GM & AM Pearce means that as a plaintiff, PIHA would ultimately have to elect between equitable compensation and an account of profits, but for the moment the claim is pressed only as one for an account of profits.

As stated in Streeter, the fact that Mr Elsegood had resigned as a director of PIHA on 10 March 2023 does not absolve him from liability to account for profits he subsequently made in respect of a claim for breach of fiduciary duties arising from an opportunity which came to his attention while he was a director of PIHA but which he did not act upon until a later time. The fact that PIHA did not take up the opportunity of the Christensen Ridge development land is no answer to a claim for breach of fiduciary duties either, relying on the principle as expressed in Vadori.

Applying the variously expressed tests for a genuine offsetting claim as stated in Grandview, and noting the low threshold imposed by these tests, in my consideration the proposed claim by PIHA is one which:

In relation to the contentions by Mr Elsegood that the claim is not “genuine”, in my assessment Mr Elsegood has not made out that case for these reasons.

First, the suggested delay in PIHA raising the claim is adequately explained. Nikenbah Developments did not acquire the Stage I Christensen Ridge development land until about 18 August 2023. PIHA (either itself or through its solicitors) conducted an ASIC search of Nikenbah Developments on 21 August 2023, at which time it became aware that Mr Elsegood had an indirect financial interest in Nikenbah Developments. There is no evidence that PIHA had any idea about the suggested payment of $400,000 to Mr Elsegood for his involvement in Nikenbah Developments until the 26 May emails were produced to PIHA on subpoena by Mr Vorkas on 1 February 2024. Those emails should have been produced by Mr Elsegood in November 2023 but were not. As a result, there is an explanation as to why PIHA did not raise the prospect of a claim against Mr Elsegood until after the statutory demand was served on 4 October 2023, when PIHA’s solicitors responded to it in writing on 19 October 2023.

Secondly, while PIHA has not brought the claim against Mr Elsegood, I believe Mr Curran’s evidence that PIHA has taken steps to advance the claim and that PIHA has been waiting for the result in the CCD Proceedings before any action is started against Mr Elsegood.

Thirdly, while there have been prevarications by PIHA in relation to the nature of its claim and the quantum of it, I consider that PIHA made plain at the hearing before me the elements of the claim that it intends to bring and the range in the quantum it seeks. PIHA was clear that, at the very least, the quantum of the claim would be the $400,000 suggested in the 26 May emails to have been paid to Mr Elsegood.

Fourthly, I do not consider that the seemingly poor financial position of PIHA is a matter which undermines the genuineness of the offsetting claim. There are a myriad of ways in which a company can bring a claim even though its financial condition may suggest that it does not have the ability to fund that claim. It may have solicitors who are prepared to act on a “no win, no fee” basis. It may obtain third party litigation funding. While PIHA will obviously need to address the means by which it will bring the claim, in light of the undertaking that PIHA has given to the court to bring any claim within 28 days, it will need to be in a position to do that quickly or otherwise risk the statutory demand remaining in place.

I have determined that PIHA has a genuine offsetting claim which exceeds $200,000, which provides the basis stated in s 459H(1)(b) of the Corporations Act for me to make an order under s 459H(3) of the Corporations Act setting aside the statutory demand.

I am, however, persuaded by Mr Elsegood that this is an appropriate case in which I should make an order under s 459M of the Corporations Act that the order under s 459H to set aside the statutory demand should be made on the condition that PIHA commence court proceedings against Mr Elsegood within 28 days. The description used in Asia Pacific Glass v Sindea Trading Co [2003] NSWSC 334, by Barrett J at [24] is apt to apply to this case:

While PIHA indicated that it was prepared to give an undertaking to the court to commence proceedings against Mr Elsegood within 28 days of an order I make setting aside a statutory demand and did not consent to such a condition of that order, I consider that the condition should be imposed. This is particularly so in a case in which PIHA has expressed a significant range for the quantification of the offsetting claim and there are suggested doubts about whether PIHA has the financial capability to bring the proceedings.

Imposing the condition would also have the effect of providing Mr Elsegood with a means by which he could obtain the immediate practical benefit of the statutory demand being effective if PIHA did not meet the condition rather than having to seek to enforce any undertaking by a contempt application.

In Asia Pacific Glass v Sindea Trading Co (No 2) (2003) 47 ACSR 737; [2003] NSWSC 845, Barrett J at [13] and [16] said:

These paragraphs were approved in Re Wabbits Pty Ltd [2018] NSWSC 532, by Gleeson JA at [32]–[33].

I have determined that if PIHA does not meet the terms of the condition I intend to impose, then PIHA will lose the beneficial effect of the order setting aside the statutory demand such that the statutory demand will continue to stand.

For the reasons stated above, I propose to make the following orders: