Peter A Clarke

In this relatively short judgment Gordon J provdies a good summary of the relevant principles in setting aside a statutory demand and the hearing of an appeal from a Registrar.

Review of Registrars decision

The Federal Court review’s a decision as a hearing de novo.  On review further evidence can be adduced.  Gordon J said at [6]

6 The function of the Court, on review of a Registrar’s decision under s 35A(5) of the Federal Court Act, is to rehear the case and decide the facts for itself. It is a hearing de novo. That is to say, it is a complete rehearing at which the parties may adduce further evidence. It is for the Court to be satisfied of the matters prescribed by the Act and to exercise the discretion unfettered by the decision of the Registrar. The cases that make good those propositions include: Mazukov v University of Tasmania [2004] FCAFC 159 at [22]–[27]; and Martin v Commonwealth Bank of Australia (2001) 217 ALR 634 at [6] and [12] and Callegher v Australian Securities and Investments Commission (2007) 239 ALR 749 at [46].

Principles applicable in setting aside a statutory demand

To set aside a statutory demand the Court has to be satisfied there is a bona fide genuine dispute and the grounds of the dispute have to be real and not spurious.

7 The principles to be applied by the Court in determining an application to set aside a statutory demand are also not in dispute. The Court must be satisfied that there is a genuine dispute between Ultradrilling and West about the existence or amount of the debt to which the demand relates: s 459H(1)(a) of the Act. That issue is determined at the time the Court hears the application: Andi-Co Australia Pty Ltd v Meyers [2004] FCA 1358 at [16]. For a genuine dispute to exist, the dispute must “be bona fide and truly exist in fact”. The grounds for alleging the existence of a dispute must be “real and not spurious, hypothetical, illusory or misconceived“: Spencer Constructions Pty Ltd v G&M Aldridge Pty Ltd (1997) 76 FCR 452 at 464; see also John Holland Construction and Engineering Pty Ltd v Kilpatrick Green Pty Ltd (1994) 14 ACSR 250 at 253 and TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd (2008) 66 ACSR 67 at 79.

The Court looks to the affidavit to determine whether there are facts which support a claim to a genuine dispute.  The court should stop there and not test the facts or the merits.  It can be a fine line.  Gordon J said @ [8]:

8 The manner in which the Court approaches the task is also not in dispute. The Court does not resolve contested questions of fact or determine where the merits lie in any contest: Kortz Ltd v Data Acquisition Pty Ltd (2006) 155 FCR 556 at [40]. The Court determines only whether the supporting affidavits filed and served by West depose to facts from which the Court is able to conclude that a genuine dispute exists. As Young J said in John Holland Construction 14 ACSR at 253, something between mere assertion and the proof of the existence of the disputed debt is required: see also Micha International Pty Limited v Jong Seol Lee [2008] NSWSC 921 at [5] and Solarite Air Conditioning Pty Ltd v York International Australia Pty Ltd [2002] NSWSC 411 at [23].

While the court makes a distinction between working out whether the affidavit contains sufficient material to show there is a genuine dispute and working out the merits of the case the analysis by Gordon J is quite thorough and typical of courts considering the contending claims.  In my experience the court goes further than merely establishing there is a genuine dispute based on reasonable grounds but also tests that evidence to the extent it is able to when dealing with affidavit material.  So it is important to have a thorough affidavit both in terms of the factual basis for a claim and the quantum in dispute, especially if there is an offsetting claim. The affidavit should include all relevant dates and details of work done and not done.