Background
M Resources Trading Pty Ltd (MRT) and Australian Pacific Coal Ltd (APC) were involved in arrangements concerning a coal-mine joint venture. Under a technical services advisory agreement restated through a 2024 deed, APC became responsible for paying MRT a quarterly retainer of A$1 million per contract year. MRT later demanded A$1,074,006.85 and served APC with a statutory demand. The amount claimed was not disputed.
APC obtained orders at first instance setting aside the demand. It argued that the agreement was voidable because an APC director originally nominated by MRT’s parent had participated in a 2023 board decision approving related arrangements without declaring an alleged conflict. The primary judge found an arguable breach of fiduciary duty and also treated MRT’s alleged failure to follow the agreement’s dispute-resolution procedure as another reason to set aside the demand.
The Court’s Holding
The Court of Appeal unanimously allowed MRT’s appeal. Brown JA, with Mullins P and Bradley JA agreeing, held that APC had not established a genuine dispute about the debt. The debt arose under the agreement given effect by the 2024 deed, not the original 2023 agreement. The evidence showed that the 2024 deed was entered at APC’s request to satisfy a financier’s condition, and supplied no arguable basis for finding that the director breached a fiduciary duty in connection with that deed or that MRT knew of any breach.
The Court also held that the agreement remained effective unless and until rescinded. APC neither rescinded nor foreshadowed rescission within the 21-day statutory period; its later notice could not supply the missing ground. The dispute-resolution argument likewise was not raised in the timely supporting affidavit and, absent a genuine dispute, the contractual procedure was not engaged and furnished no “other reason” under s 459J of the Corporations Act 2001 (Cth). The Court set aside the primary judge’s orders, dismissed APC’s application, and ordered APC to pay MRT’s costs below and on appeal.
Key Takeaways
- The low threshold for a genuine dispute still requires a plausible, factually supported contention—not speculation or bare assertion.
- A nominee director’s appointment does not by itself establish a conflict of interest, particularly where the challenged debt arose from a later transaction unsupported by evidence of divided loyalty.
- A voidable agreement remains effective until rescinded, and a new ground raised after the statutory 21-day period cannot ordinarily support an application to set aside a statutory demand.
Why It Matters
The decision underscores the strict timing and evidentiary requirements governing applications to set aside statutory demands. A debtor must identify within the statutory period the material facts supporting the genuine dispute on which it relies.
It also clarifies that a contractual dispute-resolution clause does not independently justify setting aside a demand when no genuine dispute exists, and that courts must focus on the particular transaction creating the claimed debt rather than assume alleged defects in an earlier arrangement carried forward.