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Leader Joinery Pty Ltd v Cosgrave Soutter [2016] ACTSC 210 (28 July 2016)

Last Updated: 17 August 2016

SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

MOSSOP AsJ:

Application

1. This is an application to set aside a statutory demand. The statutory demand is based upon to debts which arise out of the provision of accountancy services to the plaintiff by the defendant. Those debts are described in the schedule to the statutory demand as follows:

2. I will refer to these two invoices as being the first invoice and the second invoice. It is uncontroversial that the second invoice was in fact dated 28 August 2015 and that was made clear by the terms of the affidavit of Marcus Adam Cosgrave which was served with the statutory demand so that the error in the demand itself was not one creating any substantial injustice.

3. The first invoice was $26,345 and payments of $19,729 had been made, leading to the unpaid balance of $6,616. That invoice related to work done in the period from 14 May 2014 to 27 May 2015.

4. The second invoice related to work done in the period 1 June 2015 to 14 August 2015.

5. The services of the defendant were terminated by an email sent on 14 August 2015.

6. The proceedings were wrongly commenced by originating application rather than by originating process as required by the Corporations Rules in sch 6 of the Court Procedures Rules 2006 (ACT). However, no point was taken about that.

7. The application identifies that it is based upon the existence of a genuine dispute as to the debts. No reference is made in the application to any other ground. In particular no reference is made to there being an offsetting claim or the existence of some other ground for setting aside the demand.

Evidence relied upon

8. The plaintiff relied upon the affidavit of Shaun Terence Kenny dated 20 May 2015, but obviously executed on 20 May 2016. Mr Kenny is the director of the plaintiff.

9. The defendant relied upon the affidavit of Marcus Adam Cosgrave dated 20 June 2016. Mr Cosgrave is a partner in the defendant firm. It also relied upon the affidavit of Kuang Ng dated 9 June 2016. Ms Ng is an accountant employed by the defendant firm.

Statutory provisions

10. Section 459H(1) of the Corporations Act 2001 (Cth) (the Act) identifies that the section applies where:

... the Court is satisfied of either or both of the following:

(a) that there is a genuine dispute between the company and the respondent about the existence or amount of a debt to which the demand relates;

(b) that the company has an offsetting claim.

11. It is not necessary for the purposes of this case to set up the balance of the section. That contains amongst other things the formula by which a statutory demand is to be adjusted if an offsetting claim is demonstrated.

Test

12. The test to be applied pursuant to s 459H for the existence of a genuine dispute has been articulated in a number of well-known cases. The onus on a company seeking to set aside a statutory demand is not a heavy one: Greenway Hotel Pty Ltd v Parton [2004] ACTCA 13 at [27] (Greenway). It is not permissible on an application to set aside a statutory demand to decide which of the parties will ultimately be successful. All that needs to be decided is whether the challenge is so devoid of substance that no further investigation is warranted: Greenway at [57]. The reference to no further investigation being warranted should not, however, be taken as suggesting that a genuine dispute will be established if it might be seen as reasonable for the plaintiff to investigate its dispute or offsetting claim further. Rather, on an application the onus is on the plaintiff to demonstrate something akin to a serious question to be tried.

13. In Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, McLelland J said:

It is, however, necessary to consider the meaning of the expression ‘genuine dispute’ where it occurs in s 459H. In my opinion that expression connotes a plausible contention requiring investigation, and raises much the same sort of considerations as the ‘serious question to be tried’ criterion which arises on an application for an interlocutory injunction or for the extension or removal of a caveat. This does not mean that the Court must accept uncritically as giving rise to a genuine dispute, every statement in an affidavit ‘however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be’ not having ‘sufficient prima facie plausibility to merit further investigation as to [its] truth’ (cf Eng Mee Yong v Letchumanan [1980] AC 331 at 341), or “a patently feeble legal argument or an assertion of facts unsupported by evidence”: cf South Australia v Wall (1980) 24 SASR 189 at 194.

14. The formulation preferred by Northrop, Merkel and Goldberg JJ in Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd [1997] FCA 681; (1997) 76 FCR 452 is as follows:

In our view a ‘genuine’ dispute requires that the dispute be bona fide and truly exist in fact; the grounds for alleging the existence of a dispute are real and not spurious, hypothetical, illusory or misconceived.

15. In Re Morris Catering (Aust) Pty Ltd (1993) 11 ACSR 601, Thomas J emphasised that it is not the task of the Court, in a case such as this, to “examine the merits or settle the dispute”; and that “beyond a perception of genuineness (or lack of it) the court has no function. It is not helpful to perceive that one party is more likely than the other to succeed.”

16. In Solarite Air Conditioning Pty Ltd v York International Australia Pty Ltd [2002] NSWSC 411 at [23] Barrett J, after referring to these authorities, said:

It is appropriate to dwell for a moment on the guidance provided by these cases. The tests of “plausible contention requiring investigation”, “real and not spurious, hypothetical, illusory or misconceived” and “perception of genuineness (or lack of it)”, applied in the context of a summary procedure where “it is not expected that the court will embark on any extended inquiry”, mean that the task faced by a company challenging a statutory demand on the “genuine dispute” ground is by no means at all a difficult or demanding one. The company will fail in that task only if it is found upon the hearing of its s.459G application that the contentions upon which it seeks to rely in mounting its challenge are so devoid of substance that no further investigation is warranted. Once the company shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow. The court does not engage in any form of balancing exercise between the strengths of competing contentions. If it sees any factor that, on rational grounds, indicates an arguable case on the part of the company, it must find that a genuine dispute exists, even where any case apparently available to be advanced against the company seems stronger.

17. In TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd [2008] VSCA 70; (2008) 66 ACSR 67 Dodds Streeton JJA (with whom Kellam and Neave JJA agreed):

71. As the terms of s 459H of the Corporations Act and the authorities make clear, the company is required, in this context, only to establish a genuine dispute or off-setting claim. It is required to evidence the assertions relevant to the alleged dispute or off-setting claim only to the extent necessary for that primary task. The dispute or off-setting claim should have a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion, and sufficient factual particularity to exclude the merely fanciful or futile. As counsel for the appellant conceded however, it is not necessary for the company to advance, at this stage, a fully evidenced claim. Something ‘between mere assertion and the proof that would be necessary in a court of law’ may suffice. A selective focus on a part of the formulation in South Australia v Wall, divorced from its overall context, may obscure the flexibility of judicial approach appropriate in the present context if it suggests that the company must formally or comprehensively evidence the basis of its dispute or off-setting claim. The legislation requires something less.
72. As Barrett J recognised in Solarite Air Conditioning Pty Ltd v York International Australia Pty Ltd:

the task faced by a company seeking to set aside a statutory demand on the “genuine dispute” ground is by no means at all a difficult or demanding one. A rigorous curial approach is nevertheless essential to the effective operation of the statutory scheme.

73. As in the present case, the relevant issues are frequently presented and argued more extensively or with different emphases on appeal and it may be difficult to draw the line between, on the one hand, evidence which is of a quality and particularity sufficient to support a genuine dispute or off-setting claim, and, on the other hand, that which is not.

18. In order to satisfy the requirements of s 459G(3) the affidavit filed and served within the 21-day period must be one “supporting the application”. The Court can act on supplementary affidavits filed outside the 21-day period that expand on the grounds raised in an affidavit filed within the 21 days, but the Court cannot act on new grounds raised by an affidavit filed outside the 21-day period: Energy Equity Corporation Ltd v Sinedie Pty Ltd [2001] WASCA 419; (2001) 166 FLR 179; Jian Xing Knitting Factory v SCASA Pty Ltd (2004) SASC 152 at [18].

19. The affidavit filed in support of the application to set aside the statutory demand is in the form of an affidavit often filed in order to satisfy the requirements of s 459G so as to permit the commencement of proceedings within the 21-day period following service of the statutory demand, but which would need to be followed up by affidavits in admissible form in order to demonstrate the existence of a genuine dispute. Thus, while the affidavit is sufficient to support the jurisdictional requirements of identifying the grounds upon which the plaintiff relies, it does not because of that meet the requirement to establish a genuine dispute or offsetting claim. In Tokich Holdings v Sheraton Constructions (NSW) Pty Ltd (in liq) [2004] NSWSC 527; (2004) 185 FLR 130 at [20]- [21] (Tokich) White J recognised that material inadmissible as hearsay or opinion to establish a fact relevant to indebtedness might not be inadmissible to establish a fact relevant to whether there was a genuine dispute about indebtedness. His Honour referred to the decision of Young J in John Holland Construction & Engineering Pty Ltd V Kilpatrick Green Pty Ltd (1994) 14 ACSR 250 at 253 that where in a sizeable construction case correspondence between the parties may demonstrate a disputing of the figures one can then say, without looking at the evidence that backs up the figures, that there is a genuine dispute between the company and respondent about the amount of the debt.

20. However, White J also recognised that whether evidence in the form of a generalised summary is sufficient to establish a genuine dispute is a different question from whether the evidence is admissible for that purpose: Tokich at [25].

The plaintiff’s evidence and submissions in support of a genuine dispute

21. The affidavit of Mr Kenny identifies the following matters of chronology:

(a) The company engaged the defendant to provide accountancy services between July 2011 and 14 August 2015. Those services were also provided to a range of other entities associated with Mr Kenny.

(b) The engagement was terminated by email sent on 14 August 2015. That email included the statement that Mr Kenny was “very disappointed with the performance of [the] organisation”.

(c) An email in response was received from Mr Cosgrave on 17 August 2015 which defended in some detail the manner in which the firm had conducted itself.

(d) Mr Kenny replied to Mr Cosgrave on 26 August 2015 outlining some “issues” that Mr Kenny had discovered.

(e) The statutory demand was served at the company’s registered office on 2 May 2016.

22. The substance of the evidence said to demonstrate the existence of a genuine dispute was as follows:

Since 14 August 2015, the Company has engaged a new accountant. This accountant is currently reviewing the work undertaken by the defendant to further determine the loss sustained by the Company and me personally as a result the inaccuracies and inconsistencies in the work that has been performed by the defendant. I have identified the following initial issues with the work performed by the defendant:-

1. Errors with my personal tax returns with reference to a Line of Credit. The professional fees for the preparation of these taxation returns have been included in the invoice issues to the Company. Since instructing new accountants, these errors have been remedied and I have now cleared a debt with the Australian Taxation Office that was approximately $30,000.00 and I have received a refund of $12,500.00. I am concerned as to whether there have been other mistakes in the past on my tax returns that it is now too late to remedy.
2. The Business Activity Statement (BAS) reporting for the Company was incorrect and set up as “cash” when it ought to have been on an accrual basis. Furthermore, I have identified issues with a lot of the BAS submissions. Whilst the BAS was initially prepared by the Company, it was agreed and understood that the defendant would review the BAS before they were submitted to the ATO. I believe the Company has been charged for this services which was not satisfactorily performed.

100. In my position as Director of the Company, I requested that the defendant provide me with advice inr epsect of payment of wages instead of dividends. I also sought advice regarding a self-managed superannuation fund that I controlled. The advice I received was non-existent and as a result of this the Company was not performing to the best of its ability.

4. In relation to the self-managed superannuation fund, I was relying on advice from the defendant about transferring funds but there was a substantial delay in receiving any response, and as a result of this I took my own action and subsequently had to pay to have it rectified. At the time I requested the advice the Company’s account was paid in full and there were no outstanding fees payable to the defendant with reference to the self-managed superannuation fund.
5. The defendant has charged what I now understand to be an excessive amount for accounting fees and the defendant failed to disclose the estimated fees prior to undertaking any work. The defendant has not provided the Company with an invoice that details the cost of each individual item of work. This has been requested by the Company many times.
6. On or about 20 April 2016, the Company’s new accountant received the Company’s file in relation to a self-managed superannuation fund. This material was provided by the defendant approximately six (6) months after it was initially requested by the Company, despite this work clearly being paid for. The Company has had to instruct the new accountants to perform certain work in the meantime to ensure it is compliant with the superannuation fund.
7. The second invoice in dispute, issued to the Company and dated 28 August 2015, was dated two (2) weeks after I advised the defendant that its assistance was no longer required. The invoice includes costs for work that the Company had not received prior to advising the defendant that it no longer required it to perform any work on its behalf.
8. The Company, and me personally, are still investigating whether there is a potential claim against the defendant for negligence. This has yet to be determined.

23. Other paragraphs in the affidavit also raised the following matters:

(a) “The company has not entered into any Costs Agreement or financial agreement with the defendant about the estimated fees or costs associated with the work the defendant performed.”

(b) “I believe that the defendant has performed work it was not instructed to do and was not commercially sensible to do. For example, calculations in relation to CGT exemption and liability where the accounting fees far exceeded any gain to the Company.”

(c) In relation to the promises made by Mr Kenny or other representatives of the company to pay the outstanding invoice of 27 May 2015, the affidavit states “[t]hose promises were made prior to speaking to my new accountant at which time I became increasingly concerned about the work performed by the defendant for the Company and me personally.” The references to promises were references to correspondence from the solicitor for the defendant to the solicitor for the plaintiff identifying specific occasions when Mr Kenny or other representatives of the company had acknowledged the existence of the debt arising from the first invoice and made a promise to pay it.

(d) The affidavit states “the Company requested on many occasions that the defendant provide information about the precise nature of the work performed. The defendant refused or otherwise failed to provide information to the Company or myself, and as a result the Company instructed the new accountants to perform the work required by the Company.”

24. The plaintiff’s submissions as to what the evidence demonstrated were as follows:

The applicant submits that the evidence it has filed, being the affidavit of Shaun Terence Kenny dated 20 May 2016 (the Director of the applicant), provides sufficient particularity to allow the Court to make a determination. The Affidavit of Shaun Terence Kenny dated 20 May 2016 annexes lengthy exchanges of correspondence between the applicant and the respondent which particularise the dispute and in the applicant’s submission, distinguish the applicant’s claim from being merely spurious, or a bluster or assertion.

The defendant’s evidence and submissions

25. The defendant relied upon the affidavit evidence of Mr Cosgrave and Ms Ng and made submissions directed to each of the subparagraphs of paragraph 12 in Mr Kenny’s affidavit. It is most efficient to address that evidence and the defendant’s submissions as part of my consideration of the individual grounds put forward in the affidavit.

26. Insofar as the plaintiff’s evidence and submissions might be alleged to give rise to an offsetting claim, the defendant pointed to the requirements of r 2.2(3) of the Corporations Rules which requires that an originating process must state each section of the Corporations Act 2001 (Cth) under which the proceeding is brought.

27. The originating application did not identify the relevant provision and, in so far as it identified the basis for the application, it was that there was “a genuine dispute”.

28. The defendant submitted that an offsetting claim will fail where there is insufficient evidence for the Court to determine the quantum of the claim and relied upon the decision in Royal Premier Pty Ltd v Taleski [2001] WASCA 48 at [57].

Assessment of evidence and submissions

29. The submissions made by the plaintiff extended beyond submissions targeted only at whether or not there was a genuine dispute as to the existence or amount of the relevant debts. They extended to a contention that there was some “other reason” to set aside the demand under s 459J. Some of the evidence in Mr Kenny’s affidavit was suggestive of an offsetting claim as opposed to a genuine dispute about the existence of the underlying debts. Counsel for the plaintiff did not make any application to amend the originating application. I have, however, for the purposes of deciding this application considered whether, by reason of s 459J or an offsetting claim, there might be a basis for setting aside the statutory demand or reducing the amount which has been substantiated. In considering whether an offsetting claims exists the test is similar to whether there is a genuine dispute. One must ask is there a serious question to be tried as to whether the person on whom the demand has been served has an offsetting claim: Ozone Manufacturing Pty Ltd v Deputy Commissioner of Taxation  SASC/2006/91 .html" title="View Case" class="autolink_findcases_inserted">[ 2006] SASC 91 ; (2006) 94 SASR 269 at  [42]  ff. Having regard to the conclusions that I have reached, it is not necessary to decide:

(a) whether or not it is open on the present application to raise these additional matters having regard to the terms of the originating application and the affidavit in support,

(b) whether it is possible to address them in the absence of an amendment to the originating application; and

(c) whether, if an amendment, was sought leave should be granted to make that amendment.

30. The defendant has raised as a general matter relevant to the characterisation of the complaints made in the affidavit of Mr Kenny the fact that, in relation to the first invoice, the company acknowledged the its liability for the debt on a number of occasions. Those occasions were set out in the letter of 19 April 2016 from the solicitor for the defendant to the solicitor for the plaintiff. The making of those statements was acknowledged by Mr Kenny in his affidavit of 20 May 2016. They were as follows:

(a) an email from Mr Kenny dated 29 July 2015 stating “I will find a way to pay you”;

(b) an email from Mr Kenny dated 14 August 2015 stating “I will pay them as I have always done”;

(c) an email from Kim Day (who I infer was an employee of the plaintiff) dated October 2015 stating “... We reject [the second invoice]. We will not be paying for this invoice and all payments will cease once we have paid the balance of $9016 for [the first invoice]”;

(d) an email from Kim Day dated 28 October 2015 stating “we have agreed to finalise [the first invoice] which has a balance of $9016 and we will keep our commitment.”; and

(e) an email from Kim Day dated 5 November 2015 stating “we again reiterate, that we will only be paying the balance owing on [the first invoice]”.

31. I note that there is evidence that payments of $1200 were made to reduce the amount owing in relation to the first invoice and, noting that the difference between $9016 and $6616 is $2400, find that subsequent to these communications two payments of $1200 were made in relation to the first invoice.

32. In my view these statements are significant for the purposes of characterising the genuineness of any dispute in relation to the first invoice. While it is certainly possible that matters giving rise to a genuine dispute emerged subsequently to the communications, the existence of those communications which effectively acknowledge the debt, means that the matters giving rise to a genuine dispute must be examined in the context of the earlier acknowledgement of the debt.

33. I will address each of the matters raised by the plaintiff’s evidence.

Errors in personal tax returns re line of credit: 12(a)

34. The defendant submitted that this complaint relates to the preparation of the personal tax returns which do not relate to the amount the subject of the statutory demand which are liabilities of the company. The affidavit of Mr Cosgrave exhibits the tax invoices issued to Mr Kenny for the preparation of his personal tax returns (exhibit MAC 6). I accept the submissions of the defendant that the matters alleged here could not relate to the liabilities of the company which are the subject of the demand.

BAS set up for cash/no review : 12(b)

35. Mr Kenny alleges that the BAS reporting was set up as cash when it should have been on an accrual basis and that the BAS returns should have been reviewed before submitted to the ATO. The defendant contended that this was an error of the plaintiff rather than the defendant. In so far as Mr Kenny alleges that the BAS statements were lodged incorrectly, the defendant points to the evidence in Exhibit MAC 7, which is an email communication demonstrating that BAS statements have been correctly reported and lodged on an accrual basis.

36. The evidence does not provide a factual basis for any assertion by the plaintiff that the manner in which the MYOB system was set up was the responsibility of the defendant. That appears to be inconsistent with the terms of the letter of engagement which indicated that the defendant was not responsible for reviewing or verifying any financial statements provided to it via manual cash books or prepared on accounting software such as MYOB and which recognised the possibility of discrepancies existing between information disclosed in quarterly BAS returns and in the annual financial statements.

37. It is also inconsistent with the evidence in Ms Ng’s affidavit that on only three occasions was the defendant asked to prepare or lodge BAS statements, namely in September 2012, June 2013 and September 2013. Each of these occasions was prior to the period to which the invoices relate. The evidence does not provide an arguable basis for concluding that the services that were provided by the defendant were not of a standard that would be provided by a reasonable accountant. Nor, most fundamentally for the purposes of establishing a genuine dispute or offsetting claim, does it provide a basis for concluding that there is an arguable case that the defendant suffered a loss as a result of any incorrect set up or from the lodgement of the BAS on an accrual rather than a cash basis.

Advice regarding wages or dividends: 12(c)

38. The defendant contended that no particulars are provided of the complaints in relation to wages versus dividends or a self managed superannuation fund that Mr Kenny controlled.

39. I accept the defendant’s submission. On the basis of the limited evidence provided, it is not possible to even say that the complaint is in relation to services provided to the company, as opposed to Mr Kenny personally or the corporate trustee of the superannuation fund of which Mr Kenny was a director. Further, it is clear that significant advice was given in relation to the non-compliance by the SKL Super Fund with the requirements of the Superannuation Industry (Supervision) Act 1993 (Cth) and the steps that were necessary in order to rectify that non-compliance: see Exhibits MAC 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20. The evidence is not as clear in relation to the issue of a “payment of wages instead of dividends”, but the vagueness of the complaint makes it impossible to determine that there is a plausible contention that would result in the amounts not being owed to the defendant.

Advice regarding self managed superannuation fund: 12(d)

40. The defendant pointed to the absence of any particulars being provided as to when the advice was sought, expected or when it was provided. Similarly there are no particulars provided as to how the advice given to Mr Kenny or the self-managed superannuation fund might give rise to a claim or dispute with the defendant. I accept those submissions. The evidence of Mr Kenny is so vague as to be impossible to determine whether it has any merit. Further, because it fails to identify the entity which might be affected by the delay in providing, or the inadequacy of, any advice given, it is impossible to say that the evidence gives rise to a genuine dispute in relation to amounts payable to the defendant (as opposed to some dispute in relation to amounts payable by Mr Kenny or the trustee of the superannuation fund).

Excessive amount of fees/non disclosure/no detailed invoice: 12(e)

41. The defendant contended that no basis is identified for Mr Kenny’s “understanding” that the fees were excessive or that there was some failure to disclose the estimated fees prior to undertaking any work. In relation to the alleged absence of invoices detailing each individual item of work, the defendant pointed to the invoices annexed to the statutory demand in the affidavit of Mr Cosgrave. Finally on the disclosure point, it submitted that no facts are identified which would give the plaintiff a cause of action based on any such failure.

42. I accept the submissions of the defendant. There is no challenge to the original retainer agreement. There is no factual basis laid for asserting that the amount charged was inconsistent with that agreement or otherwise excessive.

43. Similarly, in relation to the invoice details, while the invoices do not identify separately the amount of time spent on each individual piece of work, they do identify the work undertaken in detail and the overall hours spent and time charged by the accountants who did the work. There is no fact disclosed by the evidence which would indicate that the form in which the plaintiff was invoiced was contrary to the terms of the retainer agreement or, even if it was, that the plaintiff has for that reason any entitlement not to pay the amount charged or has suffered any loss as a result. Indeed, following the provision of a detailed invoice on 28 August 2015 the evidence does not disclose any further request from Mr Kenny for additional itemisation. The correspondence from the company’s solicitor makes a complaint in general terms about a refusal to provide a detailed report of the work that had been performed, which does not identify what it was about the detailed invoices provided that was deficient.

Late receipt by new accountants of file re self managed superannuation fund: 12(f)

44. The defendant submitted that the assertion is incorrect on its face because the invoice the subject of the statutory demand includes charges for this work which remains unpaid.

45. There are several reasons why this aspect of Mr Kenny’s affidavit does not give rise to a genuine dispute as to the debts (or an offsetting claim or other reason):

(a) There is evidence that by the letter dated 15 April 2016 certain documents were provided by Mr Cosgrave to the company’s new accountants (Exhibit MAC 24 page 27). Those documents were headed SKL Super Fund. There is no evidence that these were company documents as opposed to documents related to the superannuation fund the trustee of which was a separate company. Therefore any complaint of delay is not a complaint which on its face would relate to the relations between the company and the defendant, as opposed to the trustee of the superannuation fund and the defendant.

(b) The complaint made by Mr Kenny appears to be a delay in providing certain information to the company “despite this work clearly being paid for”. The submissions of the defendant appeared to take the point that item 2 in the first tax invoice relates to “SMSF services (2015/Additional Breaches/Wind Up etc...)” and included charges for a net balance of $2758 plus GST. The description of the work done makes it clear that what was charged for in that invoice related to erroneous deposits into the company’s account and the rectification procedures required. To the extent that what is alleged by Mr Kenny relates to this work, then it is the subject of one of the invoices which remains unpaid. Where any amount remains unpaid it is clear having regard to the terms of the retainer identified in the letter of engagement dated 17 August 2011 (Exhibit MAC 3) that the defendant had an entitlement to “retain all documents owned by you”.

(c) Given that the work was clearly done prior to the termination of the retainer agreement, the only conceivable basis for there being a genuine dispute is that there was an obligation to pass on certain material, that this obligation was breached even though fees were outstanding, and that a loss has been suffered by the plaintiff as a result. There was no evidence or submissions directed to the first two points. So far as the third point is concerned, the high point of the evidence is that “as a result the Company instructed the new accountants to perform the work required by the Company” with no details of that work or how much it cost. In those circumstances the plaintiff has provided insufficient evidence to establish a genuine dispute arising in relation to any particular amount under this heading and, for the same reason, cannot establish an offsetting claim.

Second invoice received after termination: 12(g)

46. On this point the defendant submitted that the fact that the plaintiff subsequently terminated the engagement does not provide a basis for establishing a genuine dispute.

47. The invoice in question relates to work done between 1 June 2015 and 14 August 2015. That is work done during the period when the defendant was still undoubtedly retained by the plaintiff. The fact that the invoice was only raised and sent to the plaintiff after the retainer was terminated does not provide a basis for disputing the amount charged. The retainer agreement had been operating for many years and the defendant remained instructed to carry out necessary services until it was notified of the termination of that agreement.

Potential claim for negligence: 12(h)

48. The defendant pointed to the absence of any particulars of negligence. In my view, the fact that a party is “still investigating whether there is a potential claim” is insufficient to establish a genuine dispute (or an offsetting claim).

Costs agreement about estimated fees: 13

49. This ground was not specifically addressed in the defendant’s submissions. However, the plaintiff has not identified any obligation to estimate fees or costs and hence has not identified any arguable basis for avoiding the liability pursuant to the invoices. The terms of the original retainer agreement, dated 17 August 2011, do not include any obligation to provide fee estimates.

Work not instructed or not commercially sensible; (13)

50. This ground also was not addressed in the defendants written submissions. In my opinion, the “belief” that the defendant has performed work that it was not instructed to do and was not commercially sensible to do doesn’t contain sufficient particulars to identify any genuine dispute or offsetting claim. The example given, namely CGT exemption and liability does not identify when the work was undertaken or provide any factual basis for a submission that the defendant was not instructed to do that work or that there is some other basis for a dispute about the fees incurred or an offsetting claim.

Failure to provide information about nature of work performed: 17

51. Even if established, this would not provide a basis for a genuine dispute as to the liability or establish an arguable offsetting claim. Further, as I have pointed out above, the invoices at least in the form that they were provided on 28 August 2015, provided significant details about work done, time spent and by whom, even if there is no individual breakdown of the time spent on each individual task.

Conclusion

52. As will be apparent from the above, I am not satisfied that the evidence relied upon by the plaintiff is sufficient to establish either a genuine dispute as to the amounts claimed in a statutory demand or an offsetting claim for the purposes of s 459H.

Alternative ground

53. The plaintiff also sought to rely on s 459J(1)(b) of the Act. That is a ground which has not been raised by the terms of the application. There is nothing in the affidavit of Mr Kenny which raises this ground.

54. Section 459J provides:

459J Setting aside demand on other grounds

(1) On an application under section 459G, the Court may by order set aside the demand if it is satisfied that:

(a) because of a defect in the demand, substantial injustice will be caused unless the demand is set aside; or

(b) there is some other reason why the demand should be set aside.

(2) Except as provided in subsection (1), the Court must not set aside a statutory demand merely because of a defect.

55. The plaintiff submitted that the limits of the discretion under s 459J(1)(b) have not been defined: Hoare Bros Pty Ltd v Deputy Commissioner of Taxation (1996) 62 FCR 302 at 317. It submitted that in Moutere Pty Ltd v Deputy Commissioner of Taxation [2000] NSWSC 379; (2000) 34 ACSR 533 (Moutere) the court held that where a creditor has issued a statutory demand to coerce a company into paying a disputed debt this may be considered as a justification for setting aside the statutory demand under s 459J.

56. The plaintiff’s submissions were:

The respondent was made aware on 14 August 2015 at the time of the Engagement was terminated that the applicant was dissatisfied with the services performed by the respondent. The applicant and respondent have engaged in lengthy correspondence regarding the Dispute but have not been able to resolve the matter. This correspondence is in evidence before this Court.

The applicant submits that issuing of Statutory Demand was an attempt by the respondent to coerce the applicant into making payment and that this was not an appropriate mechanism to utilise. The applicant submits that it was available to the respondent to commence proceedings in the ACT Magistrates Court by way of Originating Claim and for this matter to be determined accordingly.

57. In Moutere Austin J said at [53] ff:

53. Another contention is that the Commissioner's officers did not adequately or properly consider the plaintiff's request for remission of penalties. I have held that a dispute about the remission of penalties is not a dispute about the existence or amount of the debt constituted by the penalties, in light of the Hoare Bros case. In that case the Full Court rejected an argument that since the company had lodged objections and was pursuing an application to the Administrative Appeals Tribunal, and since there was a genuine dispute between the parties as to the subject matter of the objections, the trial judge was bound to exercise his discretion under subparagraph (b) in favour of the company. A fortiori, the Court cannot be bound to exercise its discretion under subparagraph (b) in the present case, where no objection has been lodged, and the time limit for objections to be lodged has long since expired.
54. Subparagraph (b) nevertheless has an important role to play in circumstances such as the present, as the Full Court's remarks in the Hoare Bros case (at 4174) indicate. The policy underlying s 459H is that the statutory demand procedure should not be used to coerce a person to pay a disputed amount. A statutory demand is not an instrument of debt collection. By analogy, the Commissioner should not use the statutory demand procedure to apply coercive pressure to a taxpayer who genuinely objects to the Commissioner's decision. To do so would be to take unfair advantage of those provisions of the taxation legislation (such as ss 14ZZM and 14ZZR of the TAA) which say that an amount owing in consequence of the Commissioner's decision is recoverable, notwithstanding that an objection has been lodged against the decision.
55. If the Commissioner decides not to await the outcome of the objection, the proper course will often be for him to take proceedings for recovery of the debt rather than to summon up the spectre of liquidation by issuing a statutory demand. If the Court forms the view that the Commissioner has acted oppressively or unfairly by issuing a statutory demand in such circumstances, the appropriate course is for the Court to set the demand aside under s 459J(1)(b). By doing so the Court does not deny that the debt is recoverable although an objection has been made, but it thereby insists that the statutory demand procedure should not be used to apply pressure for payment of an amount which might ultimately be found not to be payable.
56. In the present case however, the plaintiff's disagreement with the Commissioner's decision on remission of penalties does not warrant the setting aside of the statutory demand under subparagraph (b). The Commissioner notified the plaintiff of his decision on remission of penalties by letter dated 16 December 1998, after the promised schedule of disputed amounts had not been sent to him. He served the statutory demand on 14 January 1999, and the schedule was sent only on 19 March 1999. The plaintiff's solicitor's letter of that date urged the Commissioner to review his decision with respect to penalties, but in light of the history of the matter which I have outlined, it is not surprising that he has adhered to his original decision. There is no evidence that any notice of objection was lodged against that decision under Part IVC of the TAA.
57. It would have been open to the Commissioner to take proceedings for recovery of the debt, rather than to issue a statutory demand at that stage. However, this is not a case where the Commissioner's decision to opt for a statutory demand rather than debt recovery can be regarded as unconscionable or unfair or an abuse of process.

58. The plaintiff placed particular reliance upon what was said in paragraph [54]. However, in my view, care must be taken not to read what is said there outside the context in which the statements were made. It can be seen that the decision in Moutere was one which arose in a particular statutory context, namely the provisions of the Taxation Administration Act 1953 (Cth) which make tax liabilities payable even where objections have been lodged. It does not stand for a general principle that a statutory demand should be set aside for “some other reason” in circumstances where no genuine dispute or offsetting claim has been proven just because the existence of the demand may have a coercive effect. Inevitably, there is an element of coercion involved in taking steps towards a winding up of a company in circumstances where it has failed to pay debts in relation to which there is no genuine dispute or offsetting claim. However, that is not the point at which the decision in Moutere was directed.

59. Similarly, the fact that a claim might have been able to be brought in the Magistrates Court is not “some other reason” for setting aside the statutory demand in circumstances where a genuine dispute or offsetting claim is not been proven.

Conclusion

60. In my view it is clear that the evidence put on by the plaintiff in relation to the existence of a genuine dispute does not reach the standard required by the authorities referred to above. There may well be a dispute between the plaintiff and defendant, but it is not a “genuine dispute... about the existence or amount of a debt”. Recognising that the bar is a relatively low one, whichever of the smorgasbord of verbal formulae is adopted, the matters raised by the plaintiff fall short of establishing a genuine dispute. The matters raised in the affidavit of Mr Kenny lack precision, do not have sufficient prima facie plausibility to merit further investigation, appear, because of their imprecision, to be mere bluster or assertion and do not demonstrate sufficient factual particularity to exclude the merely fanciful or futile.

61. Further, even if it was open to the plaintiff to rely upon an offsetting claim or “some other reason” those grounds would not, for the reasons which I have outlined, provide a basis for reducing or setting aside the statutory demand. Therefore the proceedings must be dismissed.

Orders

62. The order of the Court is:

1. The proceedings are dismissed with costs.